FIEs and the Transmission of Global Financial Uncertainty: Evidence from China

37 Pages Posted: 30 Jun 2021

See all articles by Shujie Wu

Shujie Wu

The Chinese University of Hong Kong (CUHK)

Haichun Ye

Chinese University of Hong Kong, Shenzhen

Date Written: May 10, 2021

Abstract

This paper provides micro-level evidence for the role of foreign-invested enterprises (FIEs) in the cross-border transmission of global financial uncertainty shocks. Using Chinese firm-level data, we find that rising uncertainty has a significantly larger contractionary effect on real investment for FIEs than their local counterparts. This effect is more pronounced for firms with greater investment irreversibility or higher external finance dependence. The contractionary effect is mainly driven by downside uncertainty, while upside uncertainty is modestly expansionary. Moreover, we find similar effects on other firm-level performance and also a spillover effect to local private firms with FIEs concentrated in the downstream.

Keywords: Global financial uncertainty, international transmission, FIEs, micro-level, real response

JEL Classification: F30, F23, F65, F61, E50

Suggested Citation

Wu, Shujie and Ye, Haichun, FIEs and the Transmission of Global Financial Uncertainty: Evidence from China (May 10, 2021). Available at SSRN: https://ssrn.com/abstract=3869288 or http://dx.doi.org/10.2139/ssrn.3869288

Shujie Wu

The Chinese University of Hong Kong (CUHK) ( email )

Shatin, N.T.
Hong Kong
Hong Kong

Haichun Ye (Contact Author)

Chinese University of Hong Kong, Shenzhen ( email )

2001 Longxiang Boulevard, Longgang District
Shenzhen, 518172

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