What Is The Effect Of Financial Constraints On OFDI Process:Evidence From Chinese Private Enterprises

Outward foreign direct investment is an import way for Chinese enterprise to join the international market,and it means a lot to the Chinese economy.Since the reform and opening-up,China attracted huge amount of foreign capital to invest and experienced rapid growth.But with time going on,only attract foreign capital couldn’t satisfy this fast-growing economy.So China start to go outside and invest other country.After many year’s development,Chinese OFDI level has become the second around the world.The total amount of OFDI in China was 14.56 billion dollar in 2015 and increased 18.3% compared to the last year.Although Chinese OFDI has experienced huge development,there is an important issue which couldn’t be ignored.Among those companies which has OFDI experience,stated-owned companies take a large portion.The reason why private enterprises don’t invest outside the country is they suffer serious financial constraints.To study this process,we build a theory model to explain it the international behavior of a company.Through this model,we propose two key hypothesis.The first one is that financial constraints have negative impact on OFDI.And the second one is that private enterprises suffer more form financial constraints than state-owned enterprises.In the next part,we prove our hypothesis by the logit model.At the end,we raise our suggestions according to Chinese situation to reduce the financial constraints in the financial market.