A Study Of The Impact Of Economic Policy Uncertainty On Chinese Corporate Cross-border Investment

As the largest developing country and the second largest economy in the world,China is taking an increasingly significant share of the world’s outward direct investment.At a time when the domestic economy is undergoing structural transformation and building an open economy,it is of more practical value to examine the cross-border investment behavior of Chinese enterprises and the related influencing factors.However,the current international political and economic situation is complex and volatile,with trade frictions between various countries and regions exacerbating the volatility of international trade and investment.In order to maintain smooth economic operation and achieve economic growth as well as various economic and political goals,countries have enacted different types of economic policies to realize the impact of public policies on economic activities,which has also gradually increased the uncertainty brought about by the world’s economic policies.Firms are micro-market actors and the makers and performers of cross-border investment decisions.It is of practical significance to study how fluctuations in macroeconomic policy uncertainty are transmitted to the firm level,and how firm operators perceive uncertainty and make decisions on cross-border investment behavior on this basis.This paper examines the impact of economic policy uncertainty on firms’ cross-border investment behavior,and investigates whether changes in uncertainty in the economic policy environment in China and the host country of investment affect Chinese firms’ OFDI behavior by building a linear probabilistic panel fixed effects model to analyze the investment behavior of Chinese A-share listed firms in China’s major OFDI countries from 2000 to 2020.The findings suggest that(1)Domestic economic policy uncertainty affects firms’ cross-border investment behavior,with domestic cross-border investment decreasing when Chinese economic policy uncertainty rises,while the opposite increase in host country economic policy uncertainty has a facilitating effect on Chinese firms’ cross-border investment.(2)Firms’ management expectations are the transmission mediators of firms’ cross-border investment behavior in the face of economic policy uncertainty.(3)Business risk moderates firms’ cross-border investment decisions under policy uncertainty,and positively moderates policy uncertainty in both home and host countries.(4)Firms’ outbound investment behavior is not only influenced by the macro environment,but also by the nature of firm ownership and the high or low financing constraints.For non-state owned enterprises and firms with low financing constraints,they are more likely to make outbound investments in the face of China’s economic policy volatility,and in terms of investment host countries,Chinese firms’ investments in the US are more significantly facilitated by policy uncertainty in China,while non-US countries’ The dampening effect of fluctuations in policy uncertainty is more pronounced for Chinese firms.Therefore,this paper makes the following policy recommendations for China’s OFDI.Firstly,we should pay attention to the stability of the policy environment and strive to maintain policy stability when formulating and implementing policies so that enterprises can better formulate their outbound investment strategies and maintain the stability of their strategies.Secondly,we should establish a multi-level capital market to reduce the difficulty of corporate financing and lower corporate financing constraints,so as to make it easier to obtain financing payments for better cross-border investment.