A Study On The Influence Of Host Country’s Institutional Environment On China’s Preference For OFDI

Outward foreign direct investment(OFDI)is a key aspect of China’s “going global” strategy,participating in the world economy and economic globalization.It is also an typical form of realizing " the belt and road initiative" strategy in China.Global market resources,natural resources and strategic resources are indispensable assistance to keep our economic in an ideal growth trend and realize China’s transformation and upgrading.The neoinstitutional economics considers that OFDI is the competition between different institutional systems.This paper studies its influence on China’s OFDI from the perspective of formal system environment of the host country.From the perspective of the formal institutional environment of the host country,this paper studies its macro impact on China’s OFDI.The institutional environment level of the host country can influence the locational choice of OFDI from the perspective of investment risk,expected benefit and advantage.China’s present OFDI situation dose not exactly matched with the traditional theory.Generally speaking,good institutional environment can provide fair competition environment,lower transaction cost and better property right protection,while poor institutional environment may lead to additional transaction costs and higher operational risks.From the data point of view,while China’s OFDI flows to countries with better institutional environment,it does not contradict the countries with poor institutional environment.Some may even say there is a certain degree of preference of poor institutional environment.China’s OFDI stock mainly concentrated in developing countries which with relatively poor level of institutional environment of host country.Also,‘The Belt and Road along the country’ strategy covers certain numbers of developing countries.The host country with poor institutional environment also has potential opportunity which shall not be neglected.They are the cornerstone of China’s OFDI system.This paper studies how to promote OFDI in China from the perspective of formal institutional environment of host countries,which is of great significance for China to achieve sustainable growth.What preferences does China’s OFDI have for the host country’s institutional environment? Which kinds of typical measures concerning the host country’s institutional environment? Can those measures actually promote China’s OFDI? How to choose between various measures in practice? This paper is devoted to answering the above questions.First of all,about OFDI’s preference for host country’s institutional environment.Based on the current situation and trend of OFDI development in China,this paper analyzes the preferences,causes and trends of OFDI’s preferences of institutional environment of host country.This paper analysis the differences between China’s OFDI investment motives and the differences between different investors.It explains the impact of host country’s institutional environment and its segmentation indicators on China’s OFDI.The empirical results show that our OFDI has a complex preference for the host country’s comprehensive institutional environment.There is no significant linear relationship found between China’s OFDI and host country’s comprehensive institutional environment.At the mean time,China’s OFDI preferences are different for each segmentation index.Overall,China’s OFDI prefer host countries with better political stability and absence of violence/terrorism level.In developed countries,control of corruption and rule of law have significant affect on China’s OFDI.While in developed countries,not significant factor was found.Secondly,about improvement measures of the host country’s institutional environment.This paper chooses the most related aspects of OFDI which are investment liberalization angle and the tax system environment angle.In order to study the long-term promoting role of host country’s institutional environment improvement measures on OFDI from china.The empirical results show that the investment liberalization measures,which represented by bilateral investment agreements(BITs),and the tax system environmental improvement,which measures represented by double tax treaties(DTTs),can significantly promote China’s OFDI.With the improvement of the host country’s institutional environment level,both promoting effect of BIT and DTT Characterized by inverted U type with anterior low and posterior high.Finally,about the choice of host country’s institutional environment improvement measures.This paper committed to improving the choice and application of the improvement measures under different conditions of host country’s institutional environment.Take BITs and DTTs as an example,the empirical results show that signing BITs with developing countries and DTTs with developed countries are more conducive to promoting the OFDI from china.The main contribution of this paper lies in: First,it reveals the preferences,causes and trends of China’s OFDI on host country’s institutional environment,thus filling the gaps in the existing theoretical system.Second,we find that the investment liberalization measures and taxation measures can promote OFDI from China.This paper also analyzes the significant interaction between the measures and the host country’s institutional environment level.Last but not the least,about the choice of host country’s institutional environment measures,this paper analyzes and compares the host country’s environmental measures from different countries and different periods,which provides a basis for the selection of those measures.