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China–US relations and overseas capital allocation of chinese firms

Author

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  • Chai, Haochen
  • Wang, Yunjing

Abstract

Amid prolonged tensions in China–United States (US) relations and escalating geopolitical risks, enterprises’ internationalization decisions and global capital allocation face new uncertainties. This study takes Shanghai and Shenzhen A-share listed companies from 2007 to 2024 as the research sample to empirically examine the impact of China–US tensions on Chinese enterprises’ overseas capital allocation and its underlying mechanism. Baseline regression results indicate that intensified China–US tensions are significantly associated with increasing enterprises’ overseas capital allocation, and this conclusion remains robust following various robustness tests. Mechanism analysis reveals that China–US tensions exacerbate enterprises’ technological blockade pressure, prompting them to acquire technological resources and enhance supply chain security through overseas investments. We construct a technological blockade exposure index based on text mining of listed companies’ annual reports. Heterogeneity analysis demonstrates that this effect is more pronounced for nonstate-owned enterprises and those with senior executives that have overseas experience. This study validates the intrinsic transmission mechanism through which geopolitical shocks affect enterprises’ overseas capital allocation, enriching the relevant literature on the relationship between geopolitical risks and corporate internationalization behavior.

Suggested Citation

  • Chai, Haochen & Wang, Yunjing, 2026. "China–US relations and overseas capital allocation of chinese firms," Finance Research Letters, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:finlet:v:93:y:2026:i:c:s1544612326001522
    DOI: 10.1016/j.frl.2026.109621
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    Keywords

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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General

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