The Impact of Foreign Bank Presence on Foreign Direct Investment in China

Steven Ongena, Shusen Qi and Fengming Qin
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Shusen Qi: Tilburg University
Fengming Qin: Shandong University

No 14-13, Swiss Finance Institute Research Paper Series from Swiss Finance Institute

Abstract: We analyze the impact of foreign bank presence on foreign direct investment (FDI) in China. The connection between the two could be particularly relevant for an emerging economy like China because the supply of financial services provided by banks may act as a constraining factor. Foreign bank presence may then enable and foster FDI and not simply result from it. Our estimates demonstrate that FDI across regions in China is increasing in the existing network of regional branches of foreign banks, which itself is driven (and, therefore, instrumented) by the timing of the regional phasing out of the local limits for foreign banks on local currency business. The effect of foreign bank presence on FDI is particularly strong for some specific sectors (farming, manufacturing, construction, transportation, wholesale/retail trade and real estate) if those sectors are importantly represented in the source economies.

Keywords: Foreign direct investment; foreign bank presence; China (search for similar items in EconPapers)
JEL-codes: F21 G21 (search for similar items in EconPapers)
Pages: 30 pages
Date: 2014-01
New Economics Papers: this item is included in nep-cna and nep-int
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Citations: View citations in EconPapers (2)

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Related works:
Journal Article: Impact of Foreign Bank Presence on Foreign Direct Investment in China (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:chf:rpseri:rp1413

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