Speaker: Masanori OHKUMA, Waseda University

Location: Room 513, Run Run Shaw Science Building,Central Campus

Abstract:

This study explores whether incoming foreign direct investment improves the distortions in credit allocation in China’s banking system. Controlling other factors, we find that foreign direct investment exerts significant positive influences on local financial development–the availability of bank credit for the non-state-owned sectors and deposit collection–in recipient provinces. Further, the marginal effects of incoming foreign direct investment appear to be relatively large in more economically developed provinces. The empirical results suggest that it is important to spur competition among domestic banks at the local level by introducing foreign direct investment or through other means to improve the efficiency of capital allocation and, consequently, to facilitate the growth-led firms in China.