“If you build it, will they come?”—Did city commercial bank development shape the spatial evolution of foreign direct investment in China?

Dan Zhou (), Xue Li (), Yao Yao () and George S. Chen ()
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Dan Zhou: Xiangtan University
Xue Li: Shanghai Lixin University of Accounting and Finance
Yao Yao: Shanghai Lixin University of Accounting and Finance
George S. Chen: University of New England

The Annals of Regional Science, 2025, vol. 74, issue 2, No 22, 30 pages

Abstract: Abstract We examine the causal influence of city commercial bank (CCB) development on the spatial configuration of foreign direct investment (FDI) in China. Using a comprehensive panel dataset from 130 cities for the 2007–2019 period, we find that better CCB development raises the inflow and project number of FDI. However, we find the extent of this causal influence negatively moderated by local government intervention. We also demonstrate the CCB–FDI nexus to be most pronounced in eastern, southern, and central cities, and predominantly driven by the risk-sharing motive. Our results remain robust to different model specifications and identification strategies. We suggest that an efficient and innovative CCB sector can catalyze the internalization of FDI spillovers in the relatively backward northern, northwestern, and southwestern cities.

JEL-codes: C36 F21 O16 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s00168-025-01386-2

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