US economic policy uncertainty and China’s outward investment diversification

Hee-Eun Kim, Wonkyung Lee and Jiyong Moon

Finance Research Letters, 2025, vol. 73, issue C

Abstract: This study investigates the impact of US economic policy uncertainty (EPU) on the diversification of China’s outward foreign direct investment from Q1 2005 to Q4 2022. We find that US EPU significantly influences Chinese firms to diversify their overseas investment geographically, suggesting that they tend to reduce their exposure to the US market and expand their investment portfolios across different regions as a risk mitigation strategy. We also find that the influence of US EPU on Chinese firms’ diversification decisions intensifies during the US-China trade conflicts, with this effect being more pronounced among Chinese state-owned enterprises.

Keywords: Economic policy uncertainty; Outward foreign direct investment; Diversification; Connectedness; US-China trade conflict (search for similar items in EconPapers)
JEL-codes: D81 F21 F42 G15 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:73:y:2025:i:c:s1544612324016490

DOI: 10.1016/j.frl.2024.106620

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