The Impact Of Overseas Financial Branches On China’s Outward Foreign Direct Investment

With the in-depth implementation of China’s "going out" strategy and the continuous promotion of the "Belt and Road" construction,the scale of China’s outward FDI has grown rapidly,but there is still a large gap between China and other developed countries in terms of stock and quality.Foreign direct investment is an activity with high capital demand,high risk and long term,which requires high ability of enterprises to allocate financial resources globally,and due to various legal and policy restrictions in host countries,enterprises generally face financing constraints in the process of foreign direct investment.The internationalization of Chinese financial institutions has been accelerated in recent years,which can provide financing support for Chinese enterprises going abroad while enhancing their international competitiveness.In this context,it is important to study the impact of overseas financial branches on enterprises’ OFDI,which is in line with the "capital financing" and "smooth trade flow" in the "Belt and Road" initiative.It is important for the development of Chinese enterprises’ outward foreign direct investment and the high-quality development of "One Belt,One Road".Based on the above analysis,this paper firstly systematically compares the literature on the establishment of Chinese overseas financial branches and the factors influencing Chinese OFDI,and then outlines the influence mechanism of overseas financial branches on Chinese OFDI based on the financial function theory and the new trade theory,taking into account the current development of Chinese overseas financial branches and Chinese OFDI.Then the paper constructs a trade gravity model taking Chinese banking industry as an example and empirically tests the heterogeneous impact of Chinese offshore financial branches on Chinese enterprises’ outward FDI using country-level panel data.Finally,from the perspective of promoting the establishment of Chinese offshore financial branches,policies and suggestions are proposed to promote the development of Chinese outward FDI in terms of the layout of Chinese offshore financial institutions and policy guarantees.The main findings of this paper are as follows:(1)There is a correlation between overseas investment of Chinese financial institutions and Chinese outward FDI in terms of scale and location distribution.(2)The establishment of overseas financial branches can promote Chinese enterprises’ direct investment in host countries through mechanisms such as compensating for the lack of financial development in host countries and alleviating the uncertainty risk of enterprises’ investment in host countries.(3)Based on China’s outward foreign direct investment data and overseas financial branch location data from 2003-2019,this paper finds that China’s financial branches established in host countries significantly promote China’s direct investment in host countries,and there are country and investment motive heterogeneity effects on developing countries and "One Belt,One Road The promotion effect is relatively larger for developing countries and countries along the "Belt and Road" route,which mainly promotes China’s horizontal outward FDI to host countries.The above estimation results remain robust by controlling for model endogeneity and replacing explanatory and explanatory variables.(4)To alleviate corporate financing constraints and promote Chinese outward FDI,China should accelerate the layout of overseas financial branches,and the government should also provide a sound policy guarantee system.