The Impact Of Bilateral Political Relations And The Host Country's Institutional Environment On China's Foreign Direct Investment

In recent years,Chinese companies have continuously increased their foreign direct investment,which will be affected by many factors when choosing their investment location.Among them,bilateral political relations and the host country 's institutional environment often affect the investment strategies of enterprises.Previous studies have paid less attention to the interaction between bilateral political relations and the host country's institutional environment.First of all,this article explores the influence mechanism of bilateral political relations,the host country's institutional environment and their interaction on foreign direct investment.According to the analysis,this article put forward corresponding hypotheses.Secondly,this paper draws on the stock data of China 's direct investment in the 48 major “The Belt and Road” countries from 2003 to 2018,uses the Panel Correction Error Model(PCSE)to conduct an empirical analysis,and conducts a robust test,and use research results to analyze the impact of bilateral politics and host country institutional environment and their interactions on China's foreign direct investment.According to the results,friendly bilateral political relations and a superior host country institutional environment can promote foreign direct investment by enterprises.High-level mutual visits have an optimized promotion effect on the host country's institutional environment.Bilateral investment agreements,partnerships,and the institutional environment are mutually substituted,which mitigate investment risks and costs.In addition,in further research,institutional distance and foreign direct investment are negatively correlated,and bilateral political relations can significantly regulate the negative impact of increased institutional distance on investment.Finally,this article puts forward policy recommendations based on the conclusions.On the one hand,we should continue to improve and promote the negotiation of bilateral investment agreements with countries along the “Belt and Road”;On the other hand,we must make full use of short-term diplomatic activities such as high-level visits and actively build and upgrade long-term partnerships.At the same time,the early warning mechanism for overseas investment risks should be strengthened to properly protect investors' rights and interests and provide good internal and external conditions for China's investment.