Outward Foreign Direct Investment of China's Banking Sector: Determinants and Motivations

35 Pages Posted: 18 Feb 2021

See all articles by Yuhua Zhao

Yuhua Zhao

Beijing International Studies University

Nilufer Ozdemir

University of North Florida

Ren Zhang

Texas State University

Lian An

University of North Florida

Date Written: February 7, 2021

Abstract

The outward Foreign Direct Investment is important for the sustainability of the banking sector’s development of China. The paper examines the location determinants of outward Foreign Direct Investment by state-owned Chinese banks during 2003-2015 with a set of negative binomial panel regression models. We find that the outward Foreign Direct Investment for the Chinese banking sector generally exhibits market-seeking, efficiency-seeking, resource-seeking motivation. The outward Foreign Direct Investment also tends to flow to countries with lower economic risks and political risk. The results are robust to various model specifications, time periods, and methodologies. We find that that current theories can largely explain the investment behaviors of Chinese banks with some necessary adjustments.

Keywords: China, banking sector, outward FDI, locational determinants

JEL Classification: F21 G21

Suggested Citation

Zhao, Yuhua and Ozdemir, Nilufer and Zhang, Ren and An, Lian, Outward Foreign Direct Investment of China's Banking Sector: Determinants and Motivations (February 7, 2021). Available at SSRN: https://ssrn.com/abstract=3780899 or http://dx.doi.org/10.2139/ssrn.3780899

Yuhua Zhao

Beijing International Studies University ( email )

Beijing, 100024
China

Nilufer Ozdemir

University of North Florida ( email )

4567 St. Johns Bluff Road, South
Jacksonville, FL 32224-2645
United States

Ren Zhang

Texas State University ( email )

Department of Finance and Economics
McCoy College of Business Administration
San Marcos, TX Texas 78666
United States

Lian An (Contact Author)

University of North Florida ( email )

4567 St. Johns Bluff Road, South
Jacksonville, FL 32224-2645
United States

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