sentence from Economists

Dear zoezhuyan

I'm happy to respond.

Let's work from the inside out. The word "why" is a relative adjective. This means
(a) it begins a subordinate clause
(b) because it's an adjective, it's never the subject of the clause
Here's the diagram of that part:
China's = possessive, modifies noun "moves"
overly = adverb, modifies "cautious"
cautious = adjective, modifies noun "moves"
moves = noun, plural, subject of clause
to encourage FDI = infinitive phrase, modifies noun "moves"
disappoint = plural verb, main verb of clause
The subject, "moves," is plural, and the verb, "disappoint," is also plural.
This entire clause is a substantive clause, a clause that takes the place of a noun.

The word "which" is a relative pronoun. This means
(a) it begins a subordinate clause
(b) it always plays a noun-role in the clause: subject, direct object, or object of a preposition
Here it is the subject.
. . . which is why . . .
Here, "which" is the subject of the clause, "is" is the verb, and the "why"-clause takes the role of what is called the predicate nominative. In the sentence "P is Q," the role of Q is called the predicate nominative.

You are 100% correct: this sentence does one thing that always would be considered incorrect on the GMAT. It uses the word "which" to refer to the action of the verb in the main clause, the verb "delivers." This would never be correct on the GMAT, but in real spoken English, this often passes as correct. Apparently, it's correct enough for the Economist magazine. Please understand that the grammar standards of the GMAT are very high, and few writers outside of academia adhere to such standards. In particular, any publication that depends on its readership for money cannot afford the luxury of such high grammatical standards.

Does all this make sense?

Have a good day, my friend.
Mike