The impact of the US-China tensions on FDI dynamics in emerging economies

• We investigate the role of the US-China tensions in FDI. • We use panel data from 1993 to 2022 in 14 emerging economies. • We employ the PMG-ARDL model. • Higher economic growth and REER increase FDI. • The US-China tensions deter FDI inflows. Utilising panel data of 14 emerging economies from 1993 to 2022, we employ the Pooled Mean Group-Panel Autoregressive Distributed Lag (PMG-ARDL) model to analyse the effects of economic growth, regulatory quality, exchange rate stability, and geopolitical risks alongside the US-China Tension index on foreign direct investment (FDI) inflows. We find that robust economic growth and stable exchange rate increase FDI. Along with geopolitical risks and regulatory quality, the US-China Tensions deter FDI. These findings highlight firms' shifting investment patterns in emerging markets under risks.