The Impact Of Psychic Distance On Chinese OFDI

With the development of psychology, foreign scholars pay more and more attention to the relationship between psychic distance and foreign direct investment. Economists and psychologists begin to study the issue together. The relation between psychic distance and international trade was fist mentioned in 1950s and developed from 1970s. Recently, the Hofstede index was criticized, so the whole research of psychic distance is still relatively immature. Nowadays the development of Chinese OFDI is very fast and Chinese scholars begin to notice the importance of psychic distance. And the study of the issue still needs to be improved.This paper introduces three dimensions of cultural distance which was developed by a Israeli psychologist named Schwartz and uses the index to study the relationship between the psychic distance and the location choice of Chinese outward foreign direct investment. The data of 20 countries and regions from 2003-2012 was collected. The empirical method was applied. Finally, the study found a negative correlation between the psychic distance and Chinese outward foreign direct investment. As foreign scholars had found that the Internet was also a factor of psychic distance, this paper also examined the concept of the Internet. But no relationship between the internet and Chinese outward foreign direct investment was found.