Psychic Distance,Host Country Local Demand And OFDI

Outward Foreign Direct Investment(OFDI)as an important part of economic globalization and capital internationalization,has a pivotal position in the global economic growth.China as a developing country with the high-speed development of the economy vigorously develops OFDI.According to the "2015 statistics bulletin of China’s foreign direct investment",China’s OFDI has set a new record again,$145.67 billion,for the first time came second in the world.This paper from the perspective of psychic distance,the theory analysis combined with empirical study,using FD[flows from China to 50 host countries over the period of 2006-2015,researching the relationship between psychic distance and China’s OFDI,and taking the host country market demand into account as an important factor,to analyze its effect on the adjustment of the relationship between psychic distance and OFDI.It helps China’s enterprises to have a better understanding of psychic distance and the host country market demand,and does good to develop FDI,improve the quality of investment,and enhance the international competitiveness of enterprises.In this paper,we find that,psychic distance and its(cultural,administrative and political,geological)dimcnsions significantly affect China’s OFDI negatively except religious dimension;the host country market demand moderates the relationship between psychical distance and China’s OFDI positively.