Research On The Impact Of Central Bank Currency Swaps On Chinese Enterprises’ OFDI

After the outbreak of the international financial crisis in 2008,most emerging economies faced liquidity difficulties,capital flight,increased exchange rate uncertainty,and other issues,further worsening the development of trade and investment.In order to stabilize the financial market,support bilateral trade and foreign direct investment to stabilize the economy,the People’s Bank of China actively promotes currency swap cooperation with other countries or regions.By 2022,the People’s Bank of China had signed currency swap agreements with 40 countries or regions with a total scale of over 4.02 trillion yuan,promoting the development of trade and investment.As for the effects of currency swaps on OFDI,current research focuses on the national level,ignoring the differences in investment decisions of micro entities.This article aims to supplement the research on the impact of central bank swaps on OFDI from the micro level of enterprises.This article matches the data of A-share listed companies from 2008 to 2021 with the data of enterprises’ outward direct investment in CSMAR’s Overseas Direct Investment Database.At the same time,it collects national level data in the World Bank database,and uses a multi-period double difference method to explore the impact of the signing of the central bank’s currency swap agreement on Chinese enterprises’ OFDI.Conduct a comprehensive and systematic evaluation of the implementation effect of currency swap arrangements from the perspective of OFDI by enterprises,provide micro evidence for relevant research on central bank currency swaps and OFDI,and analyze the mechanism of central bank swaps affecting OFDI by enterprises.Considering the differences between different ownership systems and total factor productivity enterprises in terms of investment motivation,financing constraints,production capacity,and technological innovation,this paper examines the heterogeneity of enterprises based on ownership characteristics and total factor productivity levels,explores the heterogeneity impact of central bank currency swaps in a sub sample,and comprehensively analyzes the impact of central bank swaps on enterprises’ OFDI.This article first reviews relevant theories and research literature at home and abroad in detail,and outlines the conceptual development process of currency swaps and the overall characteristics of China’s OFDI.Secondly,it expounds the theoretical mechanism of currency swaps promoting enterprise OFDI.Based on panel data on OFDI of 389 Chinese enterprises in 68 countries from 2008 to 2021,this paper uses a multi-period double difference model to study and find that currency swap agreements significantly promote OFDI of Chinese enterprises.The multi-period double difference based on propensity score matching and time placebo test verify the robustness of the empirical results.Currency swaps can provide liquidity for enterprises in both countries through swap funds.However,given the small amount of funds currently used,the demonstration significance far exceeds its actual use value.The exchange rate agreed in advance in the agreement can play a role in stabilizing the market exchange rate.The signing of the agreement also highlights the close relationship between the two countries and enhances the enthusiasm of enterprises for OFDI,Therefore,exchange rate risk and emotional effects are important influencing mechanisms for currency swap agreements to promote OFDI by Chinese enterprises.The signing of currency swap agreements can help enterprises avoid the operating costs caused by sharp currency appreciation or depreciation by forming relatively stable exchange rate market expectations and reducing the exchange rate fluctuation risks faced by enterprises in the investment process;The signing of a currency swap agreement is a high-profile indication of the willingness of both sides to strengthen monetary cooperation,suggesting an increasingly close relationship between the two countries,reducing the uncertainty in the investment process of multinational enterprises in the host country,improving the investment sentiment of enterprises,influencing their cognitive evaluation of investment plans,and thereby promoting the active development of direct investment activities.The signing of currency swap agreements has different impacts on OFDI of enterprises with different ownership natures and different productivity,and the positive impact on OFDI of nonstate owned enterprises and high productivity enterprises is more significant.The findings of this study are of great significance to the monetary swap policy of the Central Bank of China.In the context of the trend of anti globalization and complex international economic relations and situations,this article provides relevant suggestions for China’s currency swap policy based on empirical results.It believes that it is not only necessary to promote the process of currency swap cooperation and increase the amount of funds used,but also necessary to coordinate the promotion of exchange rate market reform,and increase support for non-state owned enterprises,in order to promote the currency swap policy to better play a stable role in the financial market Promoting the role of trade and investment facilitation.