Determinants of Foreign Portfolio Inflows: Analysis and Implications for China

Abstract

In emerging markets, a number of factors like GDP growth, market efficiency and higher earnings expectations play a vital role in attracting stable and smooth foreign investment. This work is intended to explore the determinants of FPI in China and compare the results with determinants of FPI in India explored by Garg and Dua (2014). We have applied multiple-regression model for ten years’ data ranging from 2001 to 2010. The results indicate that external debts are the most significant determinant of FPI for China. We concur with Garg and Dua (2014) that GDP growth, FDI and exchange rate are among the significant determinants of FPI. Our findings suggest that China needs to sustain its economic growth in order to attract more FPI.