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Impact of Outward Foreign Direct Investment on Chinese Manufacturing Firms' Financialization and Servitization

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  • Fei Nie
  • Jian Li
  • Xiaoli Etienne
  • Gucheng Li

Abstract

This study examines the impact of outward foreign direct investment (OFDI) on Chinese manufacturing firms' financialization and servitization. Using a difference‐in‐differences approach with propensity score matching, we found that OFDI encouraged firms' financial and service activities. The effects of OFDI on financialization were stronger for firms specializing in short‐term financial assets, operating in labor and technology‐intensive sectors, investing overseas to pursue production, resources and markets there, and investing in non‐OECD and Belt and Road Initiative (BRI) countries. Meanwhile, firms investing overseas were more likely to provide services at the sale or postsale stages. Outward foreign direct investment has also boosted the service activities of firms operating in the technology‐intensive sector by investing overseas to seek resources and markets, as well as investing in non‐OECD and BRI countries. Finally, OFDI partially influenced the extent of financialization and servitization of firms by affecting their profit‐making ability.

Suggested Citation

  • Fei Nie & Jian Li & Xiaoli Etienne & Gucheng Li, 2023. "Impact of Outward Foreign Direct Investment on Chinese Manufacturing Firms' Financialization and Servitization," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(2), pages 112-136, March.
    • Handle: RePEc:bla:chinae:v:31:y:2023:i:2:p:112-136
    DOI: 10.1111/cwe.12473
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    2. Ömer Tuğsal Doruk, 2024. "The dark side of finance: the link between financialisation and labour investment in emerging Asian countries," Economic Change and Restructuring, Springer, vol. 57(6), pages 1-20, December.
    3. Kui Wang & Shuang Tao, 2023. "Why Do Chinese Private Enterprises Seek Outward Foreign Direct Investment?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(4), pages 200-218, July.
    4. Zhang, Yongmin & Zhang, Zhenbang & Jin, Hanglin & Tu, Wenjun & Liu, Yingnan, 2024. "Innovation and OFDI along the Belt and Road," Technological Forecasting and Social Change, Elsevier, vol. 200(C).
    5. Xingyu Lu & Tong Qi & Wenjing Xie, 2023. "Earnings Management of Chinese Listed Multinational Corporations," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 31(6), pages 179-206, November.

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