Research On The Influence Of Economic Policy Uncertainty On The Divestment Of Foreign Investment

China has a long history of enhancing the quality of China’s economic development by attracting and utilising foreign investment and through technology spillovers.However,as global uncertainty rises and domestic economic policy uncertainty increases foreign investors’ confidence in investing in China has had an impact.2021,according to an investment report by A.T.Kearney Consulting China’s ranking in attractiveness to foreign investment is slipping and the country’s Foreign Direct Investment Confidence Index(FDICI)has fallen from third place in 2017 to the current 12 th place,a drop of nine places in just four years.In fact,since the global financial crisis in 2008,uncertainty about China’s economic policies has continued to rise,while the amount of foreign direct investment has grown relatively slowly.This means that rising economic policy uncertainty makes it difficult for foreign investors to make accurate judgments about China’s investment development prospects,and foreign investors may resort to disinvestment based on risk control and cost reduction factors.In recent years,there has been a rise in international trade trade protectionism unilateralism,with some even raising the slogan of reverse globalisation.The global supply chain has been affected by the epidemic,and many developed countries have put forward the slogan of having manufacturing industries relocate back to their own countries.Although domestic production capacity and logistics recovered at a faster pace during the epidemic,and various production and economic growth rates have also returned to pre-epidemic levels,with the rise in domestic labour and land costs,China’s increasing emphasis on environmental conservation,along with the eventual elimination of the demographic dividend advantage.However,with the rise in labour and land costs,the abolition of the demographic dividend and the subsequent focus on environmental conservation,a large number of foreign companies in the manufacturing sector have chosen to relocate their businesses or shift their investments to new developing countries such as Southeast Asia.The Ministry of Commerce,the Foreign.Exchange Bureau and the People’s Bank of China have also introduced a series of economic measures to ensure the smooth operation of the economy,but frequent changes in policy may also increase the uncertainty of economic policy.How to maintain the continuity of foreign investment in China and increase the attractiveness of foreign investors to reduce the possibility of foreign disinvestment has become an issue that cannot be ignored.Based on the existing literature,this thesis examines the relationship between economic policy uncertainty and foreign disinvestment in the manufacturing industry in China,which has far-reaching implications for China in terms of improving its industrial structure and further enhancing its attractiveness to foreign investors.This thesis begins by reviewing the literature on economic policy uncertainty and the drivers of domestic and international foreign disinvestment.Second,it clarifies beliefs about how economic policy uncertainty affects foreign disinvestment.The existence of economic policy uncertainty will affect the intention and scale of foreign direct investment by foreign investment agents.This is followed by a portrayal of the characteristic facts of both based on domestic and international research reports.Then,through the method of empirical analysis,the impact of economic policy uncertainty on foreign disinvestment in the manufacturing industry is measured in conjunction with the economic policy uncertainty index.The index is based on data from China’s publicly traded manufacturing companies from 2004 to 2017.The empirical analysis of this thesis is divided into three main parts: the first part is to include economic policy uncertainty and foreign disinvestment in the same model,and then investigate the impact of economic policy uncertainty on foreign disinvestment in China,and conclude that an increase in economic policy uncertainty in China does lead to an increase in foreign disinvestment behaviour in China.The second part is to test the robustness of the regression results by replacing the measure,replacing the logit model with a probit model,and adding control variables.The results find that the effect of economic policy uncertainty on foreign disinvestment in China’s manufacturing industry remains significant.The third part is the heterogeneity analysis by dividing the data of China’s manufacturing enterprises according to east-west region,high or low technology content,export or not,and the period divided by the financial crisis in 2008.It is found that the eastern region is more vulnerable to economic policy uncertainty than the central and western regions,and the sensitivity to economic policy uncertainty varies between firms with different technological content.Export behaviour is also more affected by policy uncertainty than non-exporting firms.Moreover,the impact of economic policy uncertainty on disinvestment is more pronounced after the financial crisis than before.