We investigate the relationship between bank FDI and manufacturing firm FDI using a detailed firm-level dataset on outbound multinational activity from China that was contemporaneous with the global expansion of China's Big-5 banks. Adopting an event study approach that exploits information on years of entry across potential host countries, we find that the establishment of a Big-5 bank subsidiary or branch is associated with a significant increase in subsequent years in Chinese firms' likelihood to establish an overseas subsidiary in that host country. We present tests - including an instrumental variables strategy - that build a case that the relationship from China's bank FDI to firm FDI is causal in nature. We discuss supporting evidence to show that China's bank presence abroad serves to facilitate the financing needs of Chinese firms' overseas subsidiaries. The findings speak to a nexus between the internationalization of a country's banks and the ability of that country's firms to engage in multinational activity abroad.

Dr. Tomoo Kikuchi is Professor at the Graduate School of Asia-Pacific Studies, Waseda University and Adjunct Senior Fellow at the S. Rajaratnam School of International Studies (RSIS), Nanyang Technological University. Previously, he worked at the National University of Singapore, Nanyang Technological University, and Korea University and held visiting positions at the MIT Sloan School of Management and the Keio University Global Research Institute. His main research areas are international macroeconomics and economic growth and development. His main research question has been how the global capital market influences economic development of countries. His research has been published in top economics journals such as Journal of Economic Theory, Theoretical Economics and Journal of Money, Credit and Banking. He obtained his Ph.D. in economics from Bielefeld University in 2006.