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VAT credit refund policy and outward foreign direct investment: Firm‐level evidence from China

Qilin Mao & Yueqing Wang

Contemporary Economic Policy2026https://doi.org/10.1111/coep.70027article
AJG 2ABDC B
Weight
0.50

Abstract

We employ China's 2018 value‐added tax credit refund reform as a quasi‐natural experiment to investigate the policy's impact on firms' outward foreign direct investment (FDI). We find that the policy significantly promotes firms' outward FDI through improved liquidity, increased risk‐taking capacity, and heightened innovation incentives. The effect is stronger for non‐state‐owned enterprises, high‐tax‐burden firms, credit‐accumulating firms, and those with limited tax‐shifting capacity. The policy also expands outward FDI diversification across countries and industries. Additionally, we evaluate the policy's effects from a supply chain perspective, revealing that affected supplier firms can substantially enhance their customer firms' outward FDI through supply chain transmission mechanisms.

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https://doi.org/https://doi.org/10.1111/coep.70027

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@article{qilin2026,
  title        = {{VAT credit refund policy and outward foreign direct investment: Firm‐level evidence from China}},
  author       = {Qilin Mao & Yueqing Wang},
  journal      = {Contemporary Economic Policy},
  year         = {2026},
  doi          = {https://doi.org/https://doi.org/10.1111/coep.70027},
}

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VAT credit refund policy and outward foreign direct investment: Firm‐level evidence from China

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Evidence weight

0.50

Balanced mode · F 0.40 / M 0.15 / V 0.05 / R 0.40

F · citation impact0.50 × 0.4 = 0.20
M · momentum0.50 × 0.15 = 0.07
V · venue signal0.50 × 0.05 = 0.03
R · text relevance †0.50 × 0.4 = 0.20

† Text relevance is estimated at 0.50 on the detail page — for your query’s actual relevance score, open this paper from a search result.