Do trade openness, digital technology, and governance quality attract FDI? A provincial panel analysis from China

This study examines the determinants of foreign direct investment (FDI) inflows across 31 Chinese provinces from 2010 to 2023 (N = 434), employing a panel dataset drawn from the National Bureau of Statistics, the Ministry of Commerce, and the Fan Gang Marketization Index. We investigate the roles of trade openness, ICT infrastructure, R&D expenditure, human capital, and governance quality in shaping FDI intensity, measured as FDI inflows as a percentage of provincial GDP. Using pooled OLS, province fixed-effects, and first-difference estimators alongside mediation analysis and regional heterogeneity decomposition, we find that trade openness and ICT penetration are the most robust and significant drivers of FDI (β = 0.728 and 2.161 respectively, p < 0.001), while governance quality, proxied by the Fan Gang Marketization Index, and education, measured as university enrolment per capita, exert significant mediated effects. Regional heterogeneity is pronounced: the ICT–FDI nexus is strongest in Eastern provinces (β = 6.908, p < 0.001), whereas Western and Central provinces exhibit a more governance-sensitive investment climate. The Breusch–Pagan test confirms heteroskedasticity, and robust standard errors are applied throughout. These findings extend Dunning's OLI framework by empirically operationalising dynamic location advantages in a digital economy and provide actionable policy guidance for sustaining FDI resilience in China's post-pandemic, geopolitically contested investment environment.