The Institutional Environment Of Host Countries And The Choice Of China’s Investment Location For OFDI In Developing Countries

At present,China’s OFDI is developing rapidly.And the scale of Chinese investment has been expanding especially for the developing countries.China is a big country with a large energy consumption,and its demand for resources is relatively strong.Therefore,China’s investment in the developing countries is often highly motivated by resources.And these developing countries with rich natural resources often also have many potential risks,such as political instability and diverse religious culture,so China’s investment in these countries tends to face more serious political risk.In other words,China’s OFDI is in a dilemma in these countries with relatively poor institutional environment but rich in natural resource.Therefore the selection is important,particularly the selection of institutional and natural resources.The traditional theory of foreign direct investment in the host country’s environmental considerations,especially the considerations of the institutional environment have strict requirements.This paper are based on China’s strong resource needs to explore the host country’s institutional environment and resource endowment for China’s foreign direct investment location choice and investment sustainability.These are of great theoretical and practical significance.Based on China’s foreign investment outflows of the 76 sample developing countries and regions in 2003-2015,the institution is divided into formal institution and informal institution.The paper analyzes the institutional environment of the host countries and the OFDI Location choice from three parts.The first part analyzes preferences of the China’s OFDI location choice to the developing countries by using the Heckman two-step estimation combined with gravitational model.From the view of formal and informal institution to explain the changes in China’s investment behavior and investment changes.The empirical research has found that good institutional environment will be good for China’s OFDI inflows,and also conducive to the expansion of investment scale.The second part uses the Heckman two-step estimation and the gravitational model,and discusses the interaction between the OFDI resources and the institutions to explore the attractiveness of the resource endowment to China’s OFDI under the institutional environment.The empirical study has found that the rich natural resources of the host countries under China’s favorable institutional environment,the attractiveness of China OFDI is strong.In the third part,based on the previous research,this paper explores whether China has developed structural changes in the resource-based OFDI to the developing countries by using the Chow-test and the fixed effect model.That is,the host institutional environment changes in the attractiveness of the resources to China’s OFDI after the global financial crisis in 2008.In other words,after the financial crisis,China has changed its requirements in the institutional environment of the host countries and attractiveness of the natural resources in the developing countries.After the empirical study,the paper has found that the host country’s with the rich resource endowment needs a better institutional environment to attract the inflow of China’s OFDI.That is,after the financial crisis,the China’s investment in natural resources to the developing countries,the requirements of the institutional environment relatively increase.