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<p>We investigate the effect of economic policy uncertainty on Chinese firms’ investment decisions using the economic policy uncertainty (EPU) index. Although the strength of the negative relationship between EPU and investment varies across industries, firm-level factors reveal that the negative impact is most pronounced for firms that are already underinvesting, those with low returns on invested capital, and those with limited internal financing. Additionally, Chinese firms experience a stronger adverse effect of EPU on investment following the Split Share Structure Reform. Overall, our results support the idea that uncertainty stemming from economic policy reduces corporate investment in China.</p>

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Economic Policy Uncertainty and Corporate Investment Behavior: Evidence from China

  • 期刊论文

  • 发表日期：

    2025年7月23日

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  • Wei He,
  • NyoNyo Kyaw

摘要

We investigate the effect of economic policy uncertainty on Chinese firms’ investment decisions using the economic policy uncertainty (EPU) index. Although the strength of the negative relationship between EPU and investment varies across industries, firm-level factors reveal that the negative impact is most pronounced for firms that are already underinvesting, those with low returns on invested capital, and those with limited internal financing. Additionally, Chinese firms experience a stronger adverse effect of EPU on investment following the Split Share Structure Reform. Overall, our results support the idea that uncertainty stemming from economic policy reduces corporate investment in China.