The Impact of ASEAN’s digital economy development level on China’s foreign direct investment

Abstract

This study investigates the impact of the development level of digital economy of six ASEAN countries such as Singapore、Malaysia、Thailand、Vietnam、Indonesia、Cambodia on China's foreign direct investment. On this basis, the study introduces the Digital Economy Development (DEL) index, derived from four key components: business and institutional environment, digital infrastructure construction, digital innovation capability, and digital information technology application.For the impact of the development level of digital economy on foreign direct investment, the extended gravity model with the digital economy development level is used as the framework. The entropy method is used to measure the digital economy development level selected in this study to evaluate the overall situation of digital economy development in ASEAN countries. The findings indicate that a 1% enhancement in host country's digital economy, as measured by the DEL index, corresponds to a notable 8.44% improvement in China's foreign direct investment stock. When examining the effects of each component of the DEL index, all four elements significantly contribute to the expansion of China's foreign direct investment. Notably, the business and institutional environment and the digital infrastructure construction components emerge as particularly influential factors in driving this expansion.