The Impact Analysis Of The Influence Of Bilateral Investment Treaties On China’s OFDI

In recent years, Chinese outward foreign direct investment mainly flows to the developing countries, which political and economic system is not sound and the institutional policies is not perfect. Instability of the system in these countries makes Chinese foreign investors difficult to gain enough protection. At the same time, some Chinese companies lack the awareness of institutional risks, thus it will lead to Chinese overseas enterprises face greater risks.Complex international situation and investment environment will always lead to the changes of the quality of the institutional environment in host country. Bilateral investment agreements which aim to protecting and promoting foreign direct investments make up the institutional short board and the instability of the host country. So it can provide Chinese foreign direct investment which different from the general system and such a legal system environment is not lower than the general quality of institutions in the host country. Therefore, bilateral investment agreements’ investment promotion effect is worth to testing.The paper uses panel data of 131 sample countries by making use of gravity model in international economics from 2003 to 2013. First, the paper examines the impact of bilateral investment agreements on Chinese outward foreign investment. Then the paper examines institutional impact on Chinese foreign direct investment. At last, we examine the impacts from the regional distribution of the host country. By the empirical study, the paper gets the following results:Firstly, the bilateral investment agreements can promote China’s foreign direct investment and it has positive influence for the enterprise to go out. It can limit the behavior of the host country’s government and low the threshold of institution to protect the investors’ interests. Thus it can provide legal protection for the investors.Secondly, from the perspective of the economic entity the host country belongs to, the bilateral investment agreements’ promotion effect is different: it has significant substitute effect for the institution of the developing countries. But the effect is smaller in developed countries.Thirdly, from the perspective of the institution difference between China and the host country, Chinese companies tend to invest to countries that difference is smaller. At the same time, the bilateral investment agreements can weak the system differences of the two countries. In other words, it can narrow institution differences between China and the host country, thus promote China’s investment to countries that have bigger institution differences;Finally, from the perspective of the geographic character of host countries, bilateral investment agreements can promote China’s foreign direct investment to Africa and Latin America, and the investment promotion effect is significant. While bilateral investment agreements can promote to Europe countries, but the investment promotion effect is small.