Research On The Impact Of Financing Constraints On Chinese SMEs’ Foreign Direct Investment Decisions

With the rapid development of the world economy,China’s economy has always maintained strong resilience and potential to advance steadily.Since the "going out" strategy was officially elevated to a national key development strategy in 2000,China’s pace toward the world has gradually accelerated.Among them,foreign direct investment has played an important role.It not only stimulates national employment,promotes national technological innovation,and makes up for the shortage of domestic resources,but also greatly improves the operating efficiency of Chinese enterprises,becoming an important means for Chinese enterprises to compete and cooperate economically in the international market.Since 2020,the world economy has been shrinking under the severe impact of the new crown pneumonia epidemic,international relations have been further tense,and the foreign trade situation of various countries has been severe.However,my country’s foreign direct investment has turned around against the wind,not only achieving a positive and steady growth trend,but also the flow rate.It ranks first in the world,accounting for 20.2% of the global share.Looking at the development situation of my country’s foreign direct investment over the years,although the overall development is good and generally maintains an upward trend,China’s "going out" process is still lagging behind compared with "bringing in",and the key factor leading to this phenomenon is the Financing constraints ubiquitous in firms.At present,the development of my country’s financial system is not perfect,including the financial system structure of regulatory agencies and financial institutions.There are still many barriers in the establishment of laws and rules and regulations.The biggest problem facing Chinese enterprises that support foreign direct investment is financing.Especially my country’s small and medium-sized enterprises,due to their own particularities,have suffered many unfair treatment in the credit market,so they generally face financing constraints of varying degrees,such as too single financing channels,proliferation of informal financial institutions,and financing volume.Small and long-term lack of stable funding sources,etc.,thus lack of funds for foreign direct investment,hindering the expansion of overseas business,limited to the domestic market,and may eventually be eliminated by the market due to backward technology or ineffective management.Therefore,from the perspective of three different financing methods(endogenous financing,debt inancing and commercial credit),this paper will discuss how financing constraints affect the decision-making of Chinese SMEs in foreign direct investment.The differences in the impact of small and medium-sized enterprises in different regions finally put forward relevant suggestions that are beneficial,desirable and comprehensive to the overseas investment of small and medium-sized enterprises in my country.Through literature review,this paper adopts a combination of qualitative and quantitative analysis methods,and through empirical test analysis,from the perspective of theory and practice,it discusses the impact of my country’s small and medium-sized enterprises on foreign direct investment decisions under three different financing constraints.Happening.First of all,based on the actual research and data sorting,the research background and research significance are explained,and at the same time,the domestic and foreign research results are sorted out and evaluated according to different research directions.Secondly,from a multi-dimensional perspective,it explores and expounds the influence of financing constraints on SMEs’ OFDI decisions,and tries to build an influencing mechanism and put forward research hypotheses.Thirdly,from the background of domestic and foreign financial development,this paper expounds the current situation of financing constraints of small and medium-sized enterprises in my country.Then,select the 2015-2020 data of China’s manufacturing SMEs as a sample,use three variables of endogenous financing constraints,debt financing constraints and commercial credit constraints as financing constraint indicators,build models and conduct corresponding empirical tests on the research hypotheses,including The regression analysis of the whole sample and the sub-sample is carried out.The sub-sample analysis is an empirical test based on differences in enterprise ownership and regional differences.In addition,this paper further analyzes the interaction between debt financing constraints and commercial credit constraints.The impact of investment decisions.Finally,based on the conclusions drawn from the theoretical and empirical analysis in the article,corresponding policy suggestions are put forward.The research results show that: First,three different financing constraints restrict the decision-making of Chinese SMEs in foreign direct investment to varying degrees.Second,there is a certain interaction between the debt financing constraints and commercial credit constraints faced by small and medium-sized enterprises in my country,and the inhibitory effects of the two are in the same direction.Third,small and medium-sized enterprises with high total factor productivity are relatively less constrained by endogenous financing constraints and debt financing constraints.Fourth,the restraining effect of debt financing constraints on OFDI decision-making of state-owned listed SMEs is smaller than that of non-state-owned listed SMEs.Fifth,the restraining effect of debt financing constraints on small and medium-sized enterprises in the eastern coastal areas is relatively low,while internal financing constraints and commercial credit constraints have a relatively large impact on them.The innovations of this paper are mainly reflected in: First,based on theory and practice,the financing mode is divided into three types,namely endogenous financing,debt financing and commercial credit,and research on the decision-making of my country’s SMEs in foreign direct investment under the corresponding financing constraints influence level.Second,considering that the interaction between external debt financing constraints and commercial credit constraints may change the mechanism by which SMEs’ FDI decisions are affected by financing constraints,preliminary explorations are made in this aspect,so as to provide Chinese SMEs with benefits that are beneficial to foreign investment.Suggestions on the transformation and upgrading of direct investment.