Abstract
This paper provides micro-level evidence for the role of foreign-invested enterprises (FIEs) in the cross-border transmission of global financial uncertainty shocks. Using Chinese firm-level data, we find that rising uncertainty has a significantly larger contractionary effect on real investment for FIEs than their local counterparts. This effect is more pronounced for firms with greater investment irreversibility or higher external finance dependence. The contractionary effect is mainly driven by downside uncertainty, while upside uncertainty is modestly expansionary. Moreover, we find similar effects on other firm-level performance and also a spillover effect to local private firms with FIEs concentrated in the downstream.
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