4.7 Article

Globalization blueprint and households' fintech debt: Evidence from China's One Belt One Road initiative

Journal

INTERNATIONAL REVIEW OF ECONOMICS & FINANCE
Volume 79, Issue -, Pages 38-55

Publisher

ELSEVIER
DOI: 10.1016/j.iref.2021.12.018

Keywords

Peer-to-Peer crowdfunding; The Belt Road Initiative

Funding

  1. Humanities and Social Science Youth Project of Ministry of Education [19YJC790087]
  2. Shanghai Pujiang Program [18PJC086]
  3. Hong Kong Polytechnic University Start-up Fund [P0036258]

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This paper investigates the response of households' Fintech borrowings to a country's globalization initiative, using China's One Belt One Road initiative as a case study. The study finds that borrowers from China's OBOR node-cities, especially those who are financially constrained, increase their Fintech loans immediately after the policy announcement. The effects are more pronounced for borrowers in infrastructure-related industries, state-owned enterprises, and silk-belt (land-based) node-cities. The analysis also shows that the default rate of borrowers from the OBOR node-cities is significantly lower, indicating a perceived positive externality of the policy initiative.
How do households' Fintech borrowings respond to a country's globalization initiative? It is intriguing to study whether Fintech market participants would form their expectations in the wake of a national strategy and thus affect their contemporaneous Fintech borrowings. In this paper, we investigate this question through China's One Belt One Road initiative (OBOR) using transaction-level Peer-to-Peer (P2P) loan data. The difference-in-differences estimates, consistent with our theoretical framework, show that borrowers from China's OBOR node-cities, especially the financially constrained ones, increase their Fintech loans instantaneously after the policy announcement. Such effects are more pronounced for borrowers from the infrastructure-related industries, the state-owned enterprises, and the silk-belt (land-based) node-cities. Our ex-post analysis indicates that the default rate of the borrowers from the OBOR node-cities is significantly lower. Finally, we find borrowers residing in the cities close to the node-cities also increase their Fintech leverages, showing a perceived positive externality of the policy initiative.

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