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The impact of bank internationalization on the efficiency of Chinese outward foreign direct investment

Author

Listed:
  • Zhang, Xingjian
  • Zhang, Yi
  • Fu, Yingjie
  • Lu, Feichi

Abstract

This study examines the impact of bank internationalization on the efficiency of outward foreign direct investment (OFDI). Using a large dataset of OFDI for 1035 Chinese firms across 136 host economies from 2013 to 2023, we find that the presence of Chinese banks in a host economy significantly improves Chinese firms’ investment efficiency there. This finding is robust to addressing endogeneity with instrumental variables and a series of robustness checks. Mechanism analysis identifies two channels: the credit channel, which lowers borrowing costs and improves loan utilization efficiency, and the information channel, which reduces institutional unfamiliarity and mitigates discrimination. Moreover, its impact varies with host economy characteristics, banking service features, and firm-specific factors. These findings provide important policy insights for emerging economies, highlighting the need to promote greater banking internationalization to improve the global competitiveness of their multinational firms.

Suggested Citation

  • Zhang, Xingjian & Zhang, Yi & Fu, Yingjie & Lu, Feichi, 2026. "The impact of bank internationalization on the efficiency of Chinese outward foreign direct investment," China Economic Review, Elsevier, vol. 96(C).
    • Handle: RePEc:eee:chieco:v:96:y:2026:i:c:s1043951x25003062
    DOI: 10.1016/j.chieco.2025.102648
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    Keywords

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    JEL classification:

    • F30 - International Economics - - International Finance - - - General
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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