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How do government subsidies affect OFDI of private enterprises? Evidence from China

Author

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  • Liu, Yuandan
  • Tang, Tingfeng
  • Li, Haiyang
  • Luo, Limin

Abstract

Compared with state-owned enterprises, private enterprises generally face strict financing constraints, especially in the process of internationalization which have a greater demand for funds. At the meantime, we focus on how government subsidies, as a form of financial support, affect the outward foreign direct investment (OFDI) of private enterprises. Using micro-data from the CSMAR database covering private listed companies from 2013 to 2017, this empirical study reveals that government subsidies positively promote OFDI of private enterprises. Moreover, financing constraints have an adverse effect on OFDI, but government subsidies help mitigate this effect. Furthermore, the results indicate that the impact of government subsidies on private enterprises' OFDI varies depending on the degree of marketization.

Suggested Citation

  • Liu, Yuandan & Tang, Tingfeng & Li, Haiyang & Luo, Limin, 2024. "How do government subsidies affect OFDI of private enterprises? Evidence from China," International Review of Economics & Finance, Elsevier, vol. 90(C), pages 241-251.
    • Handle: RePEc:eee:reveco:v:90:y:2024:i:c:p:241-251
    DOI: 10.1016/j.iref.2023.12.005
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    3. BAEK,Youngmin & HAYAKAWA,Kazunobu & PARK,Danbee, 2026. "Firm Responses to Export Controls: Evidence from the Japan–Korea Trade Dispute," IDE Discussion Papers 991, Institute of Developing Economies, Japan External Trade Organization(JETRO).
    4. Jinjing Zhao & Yunfan Gao & Qihang Lang & Chenlu Gao & Miao Su, 2025. "Technology transfer and political alignment: new evidence from China’s outward foreign direct investment (OFDI) in Africa," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-12, December.
    5. Yang, Shaoyu & Lu, Yang, 2025. "Government subsidies, data assets, and firm outward foreign direct investment," Finance Research Letters, Elsevier, vol. 85(PE).
    6. Liang, Ye & Zhou, Chuanyu & Wu, Yunfeng, 2025. "The emerging driving force of green transformation in resource-based cities: Does the digital economy work?," Economic Analysis and Policy, Elsevier, vol. 86(C), pages 1858-1880.
    7. Siqi Li & Mengdi Sun, 2024. "Spillover effects of government subsidies on outward foreign direct investment: Evidence from China," Review of International Economics, Wiley Blackwell, vol. 32(4), pages 1521-1566, September.
    8. Meng, Delin & Li, Yanxi & Wang, Lan, 2025. "Foreign shareholders and the green internationalization strategy of enterprises: A response to the governance supervision and "locust invasion" perspectives," Economic Analysis and Policy, Elsevier, vol. 87(C), pages 1142-1158.
    9. Chang,Kuo-I & Hayakawa,Kazunobu, 2025. "Subsidies for Reshoring: Evidence from Taiwan," IDE Discussion Papers 974, Institute of Developing Economies, Japan External Trade Organization(JETRO).
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    11. Sun, Meng & Yang, Jihong, 2025. "Business environment facilitation in RCEP countries and China’s OFDI: a mechanism analysis based on the depth of regional trade agreements," Finance Research Letters, Elsevier, vol. 86(PF).
    12. Song, Yingjie & Dong, Jie, 2024. "Executives’ green experience and corporate ESG performance: Do government subsidies matter?," Finance Research Letters, Elsevier, vol. 69(PA).

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