Financial development, OFDI spillovers and upgrading of industrial structure

Technology spillovers from outward foreign direct investment (OFDI) have the significant impcat on the industrial structure in emerging economies and to what extent they depend on the absorptive capacity of the home country. This study specifically investigates the issue of how financial development as a key factor reflecting absorptive capacity affects OFDI spillovers, especially the technology spillovers and uses the method of threshold regression to verify the analysis, based on the panel data of 31 provinces in China (2008-2016). The results suggest that, first, the effects of China's OFDI on the industrial structure are positive in general but show regional heterogeneity in terms of absorptive capacity. Second, such effects have the characteristics of double threshold based on financial development. Moreover, the benefits from OFDI in most provices in China are still limited and financial deepening is of great significance to OFDI and its spillover effects.