Globalization blueprint and households’ fintech debt: Evidence from China’s One Belt One Road initiative

Abstract

<p>How do households’ <a href="https://www.sciencedirect.com/topics/economics-econometrics-and-finance/fintech" title="Learn more about Fintech from ScienceDirect's AI-generated Topic Pages">Fintech</a> borrowings respond to a country’s globalization initiative? It is intriguing to study whether Fintech market participants would form their <em>expectations</em> in the wake of a national strategy and thus affect their contemporaneous Fintech borrowings. In this paper, we investigate this question through China’s One Belt One Road initiative (OBOR) using transaction-level Peer-to-Peer (P2P) loan data. The difference-in-differences estimates, consistent with our theoretical framework, show that borrowers from China’s OBOR node-cities, especially the financially constrained ones, increase their Fintech loans instantaneously after the policy announcement. Such effects are more pronounced for borrowers from the infrastructure-related <a href="https://www.sciencedirect.com/topics/economics-econometrics-and-finance/specific-industry" title="Learn more about industries from ScienceDirect's AI-generated Topic Pages">industries</a>, the state-owned enterprises, and the silk-belt (land-based) node-cities. Our ex-post analysis indicates that the default rate of the borrowers from the OBOR node-cities is significantly lower. Finally, we find borrowers residing in the cities close to the node-cities also increase their Fintech leverages, showing a perceived positive externality of the policy initiative.</p>