Research On Effect Of Financial Development On China’s OFDI

Since 2003, China has accelerated the implementation of the “going-out” strategy, OFDI began to enter the period of high speed development. With the promotion of the “One Belt, One Road” strategy, investing abroad is more facilitated, the endogenous dynamic of enterprises “going out” increases, so the extending possibility of China’s OFDI is very large. However, investing abroad needs strong financial support, it is difficult for enterprises to invest abroad just relying on its own funds. Therefore, whether enterprises can solve the funding issues through external financing or not now becomes an important factor in the development of China’s OFDI.So, the development of the financial market whether and how to promote the development of China’s OFDI? This paper reviews the related theories of OFDI and financial development, summarizes the present status and characteristics of OFDI and financial development of China, and analyses the mechanism of financial development effecting OFDI from the theoretical level. Then this paper measures financial development with financial scale, financial structure and financial efficiency. On this basis, this paper makes a regression with China’s 2003-2013 provincial panel data, empirically studying how the three financial development indicators influence China’s OFDI development. Conclusions are drawn through the analysis of the empirical results: First, the expansion of financial scale increases the domestic investment opportunities, bringing about a certain degree of substitution effect to OFDI; Second, the optimization of the financial structure provides more better financing choices for enterprises to carry out outward investment, promoting the development of China’s OFDI; Third, the improving of financial efficiency has different effects on the development of OFDI in different regions. Financial institution in the eastern region is in a large number and has strong innovation ability, so the improving of financial efficiency promotes OFDI’s development, and the effect of financial efficiency on OFDI in the Midwest is not clear; Fourth, the opening degree, the level of economic development and labor costs all have a positive role in promoting OFDI, which means the OFDI of China now is the type of market share and resource seeking. Finally, this paper puts forward some policy suggestions according to the conclusions.This paper systematically and comprehensively introduces the theory of financial development and OFDI, measures the financial development more comprehensively and scientifically from the three aspects of financial scale, financial structure and financial efficiency. According to the actual situation of China’s financial market, this paper uses some methods which are more consistent with present stage characteristics of China’s financial development to calculate the three indexes, making the conclusions more consistent with the reality of China. In addition, based on the study of national level data, this paper also makes empirical test on eastern, central and western regions of China, making the policy recommendations more adapted to the current situations of regional financial development.