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“If you build it, will they come?”—Did city commercial bank development shape the spatial evolution of foreign direct investment in China?

Author

Listed:
  • Dan Zhou

    (Xiangtan University)

  • Xue Li

    (Shanghai Lixin University of Accounting and Finance)

  • Yao Yao

    (Shanghai Lixin University of Accounting and Finance)

  • George S. Chen

    (University of New England)

Abstract

We examine the causal influence of city commercial bank (CCB) development on the spatial configuration of foreign direct investment (FDI) in China. Using a comprehensive panel dataset from 130 cities for the 2007–2019 period, we find that better CCB development raises the inflow and project number of FDI. However, we find the extent of this causal influence negatively moderated by local government intervention. We also demonstrate the CCB–FDI nexus to be most pronounced in eastern, southern, and central cities, and predominantly driven by the risk-sharing motive. Our results remain robust to different model specifications and identification strategies. We suggest that an efficient and innovative CCB sector can catalyze the internalization of FDI spillovers in the relatively backward northern, northwestern, and southwestern cities.

Suggested Citation

  • Dan Zhou & Xue Li & Yao Yao & George S. Chen, 2025. "“If you build it, will they come?”—Did city commercial bank development shape the spatial evolution of foreign direct investment in China?," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 74(2), pages 1-30, June.
    • Handle: RePEc:spr:anresc:v:74:y:2025:i:2:d:10.1007_s00168-025-01386-2
    DOI: 10.1007/s00168-025-01386-2
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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance
    • C36 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Instrumental Variables (IV) Estimation

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