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The Impact of Digital Inclusive Finance on China's Outward Foreign Direct Investment— An Empirical Analysis Based on Panel Data from 31 Chinese Provinces

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  • Zilong Li

    (International Business School, Tianjin Foreign Studies University, Tianjin, China)

  • Paredes John

    (College of Computing, University of North Florida, Jacksonville, FL, USA)

Abstract

This paper employs a two-way fixed effects model and uses panel data from 31 provinces of China between 2012 and 2022 to empirically analyze the impact of digital inclusive finance on China's Outward Foreign Direct Investment (OFDI). The study finds that, overall, the development of digital inclusive finance in China significantly promotes OFDI. Its sub-dimensions, including coverage breadth and usage depth, have a significant positive impact on OFDI across Chinese provinces. Further analysis reveals that the sub-dimensions of usage depth, such as credit and payment, also have a significant effect on OFDI in various provinces. In addition, the control variable of economic development level significantly positively influences OFDI in China. Regional regression results indicate that the development of digital inclusive finance in central and western China significantly promotes OFDI in these regions, while the effect is not significant in the eastern region. Policy Recommendations: China should accelerate the development of a digital inclusive finance system and promote financial innovation. It is crucial to focus on the coordinated development of various digital inclusive finance indicators, narrow the financial service gap between regions, and thus foster the long-term development of China's outward foreign direct investment.

Suggested Citation

  • Zilong Li & Paredes John, 2024. "The Impact of Digital Inclusive Finance on China's Outward Foreign Direct Investment— An Empirical Analysis Based on Panel Data from 31 Chinese Provinces," Economic Analysis Letters, Anser Press, vol. 3(4), pages 41-51, December.
    • Handle: RePEc:bba:j00004:v:3:y:2024:i:4:p:41-51:d:374
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    References listed on IDEAS

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