Disaster Risk and Foreign Direct Investment in China

Multinational corporations (MNCs) actively consider natural disaster risk when deciding whether to invest in different Chinese provinces. This study finds that severe disasters deter investment, but proximity to other MNC subsidiaries—especially those from the same home country—helps mitigate this risk, supporting business continuity and strategic location choices.​

The Role of Governance and Resilience

Regions with stronger governance and effective disaster management tend to recover foreign investment more quickly after a disaster. MNCs are sensitive not only to the frequency and intensity of disasters, but also to local institutional quality, emphasizing that sub-national variations guide their risk assessments and location strategy.​

Strategic Lessons for Global Investors

For business leaders, the takeaway is that disaster resilience and institutional strength are central to sub-national investment decisions in emerging economies. Firms can better manage risk by building proximity-focused portfolios and prioritizing regions with proven disaster response capacity.