Impact of Economic Policy Uncertainty on Industrial Convergence: Evidence from China

Abstract

The uncertainties in current economic policies have increased, and Decisions about industrial convergence by businesses are impacted by uncertain macroeconomic policy. Using a fixed-effects model, the article selects annual data from A-share listed Chinese companies from 2010 to 2021 and empirically analyzes the relationship between economic policy uncertainty (EPU) and industrial convergence, as well as the mediating and moderating effects of diversification strategies and financial distress under this path of action. The findings are as follows: (1) EPU has a significant negative impact on industrial convergence, and this phenomenon is most obvious for non-state enterprises. (2) Enterprise diversification strategy mediate the relationship between industrial convergence and EPU (3) Corporate financial distress has a negative moderating effect on the relationship between EPU and industrial convergence. (4) The nature of firm property rights has a negative moderating effect on the relationship between EPU and industrial convergence. The aforementioned conclusions have implications for policy: the government should always ensure the long-term stability of economic policies and direct and encourage the development of cross-industry convergence of enterprises. Enterprises need to actively empower development with joint efforts to achieve win-win cooperation.