This paper aims to explore how two typical models of regional economic cooperation—institutional cooperation represented by the ASEAN Free Trade Area (AFTA) and functional cooperation represented by the China-Europe Railway Express (CRE)—influence FDI flows through different mechanisms

and to analyze their geoeconomic effects and challenges. The research employs literature review

case study analysis

and comparative analysis to systematically review relevant theories and empirical studies

providing a deep examination of the development processes

operational mechanisms

and FDI characteristics of the two cooperation models. The main findings are: First

institutional cooperation reduces institutional transaction costs through rule integration

primarily attracting market-seeking and resource-seeking FDI

and promotes regional production network integration; functional cooperation reduces physical transportation costs through infrastructure connectivity

primarily attracting efficiency-seeking and strategic asset-seeking FDI

and improves cross-border supply chain efficiency. Second

the two models are complementary within China's "Dual Circulation" strategy: the ASEAN Free Trade Area facilitates industrial transfer and enhances internal circulation within the region

while the China-Europe Railway Express expands Eurasian markets and strengthens external circulation. Third

a two-way promotion mechanism exists between FDI and geoeconomic cooperation

but both face common challenges such as geopolitical risks

operational sustainability

and inclusive development. The study argues that institutional and functional cooperation jointly optimize China's positioning in global value chains

balancing its dual role as an FDI recipient and an outward investor. To address challenges

a "institution + function" dual-driven cooperation model should be constructed

FDI layout should be optimized

and risk prevention and control systems should be strengthened to achieve high-quality and sustainable regional economic cooperation.