A Study On The Impact Of US Monetary Policy And Trade Frictions On Chinese Two-way FDI Under The Background Of The COVID-19

In a complex and volatile international economic environment,cross-border direct investment is a rich topic.The United States has implemented quantitative easing monetary policy for 6 years since the subprime mortgage crisis until the end of 2015,followed by a gradual increase in interest rates by the Federal Reserve to return to normal.The outbreak of the new COVID-19 in 2019 spread around the world in a short period of time,and the world economy was seriously impacted.The United States issued Treasury bonds in response to risks,lowered benchmark interest rates,and resumed loose monetary policy again.Prior to this,with Trump coming to power,SinoUS trade frictions have escalated until today.China’s direct foreign investment and the actual use of foreign capital have also been affected.This paper first sorts out the journals and literature on the monetary policy adjustment of the United States at home and abroad,sino-US trade frictions,and the COVID-19 on China’s IFDI and OFDI,and analyzes the following: the monetary policy adjustment of developed countries mainly affects other countries through exchange rate channels;enterprises under anti-dumping investigation often circumvent trade barriers through direct investment;and international capital usually flows to a stable and safe investment environment.On this basis,this paper constructs the TVP-VAR model and uses markov-Monte Carlo simulation to test the impact of using monetary policy changes in the United States,Sino-US trade frictions,and the COVID-19 on China’s two-way FDI.The empirical results show that:(1)The United States injects a large amount of liquidity into the market to bring appreciation pressure to the renminbi,and some capital flows into China in the form of direct investment,increasing China’s IFDI and reducing China’s OFDI in the short term.(2)Enterprises affected by trade frictions will reduce losses through cross-border mergers and acquisitions and greenfield investment,which will have a positive impact on BOTH OFDI and IFDI.(3)In the early days of the outbreak of the COVID-19,capital fled,and foreign investment increased while capital inflows decreased,but as China took the lead in stabilizing the epidemic,the economy recovered rapidly,and domestic and foreign capital flowed to China again.The findings remain true after a series of robustness tests.Finally,under the premise of summarizing the research results,suggestions and prospects are put forward from both internal and external aspects.Further promote the process of RMB internationalization,establish a market-oriented exchange rate system and prudently treat the opening up of short-term capital accounts,curb the frequent flow of shortterm capital;actively respond to frictions abroad,encourage and guide powerful enterprises to "go global" and strengthen international communication and cooperation to fight the epidemic,and actively assist countries and regions with serious epidemics and weak sanitary conditions.