Political Risk And Institutional Distance To China For Developing Countries Research On The Influence Of Foreign Direct Investment

In 2015,China’s outward foreign direct investment reached its highest level with the first volume of traffic ranking second in the world.China’s outward foreign direct investment not only entered the developed countries but also was a major investor in developing countries.In recent years,China has increased its investment in developing countries at a very fast pace.As of the end of 2015,China’s stock of investments in developing economies was 920.887 billion U.S.dollars.China’s investment in developing countries accounts for more than 80%of China’s total investment.Therefore,it can be said that China’s outward foreign direct investment flows mainly to developing countries,Is a major capital supplier to developing countries.This article uses the institutional distances and political risk as the core explanatory variables,and uses the literature analysis method,the qualitative analysis method and the quantitative analysis method to analyze.At the same time,we use the fixed effect model to analyze the relative data of 81 developing countries from 2005 to 2015 model analysis to discuss the impact of China’s OFDI under different institutional distances and political risks.The results show that political risk has a negative effect on China’s outward foreign direct investment in developing countries.This shows that China’s OFDI flows to developing countries with low political risk shows that developing countries with higher political risks are more and more difficult to attract foreign direct investment in China.Institutional distance has a positive impact on China’s direct investment in developing countries,indicating that China’s OFDI flows to developing countries with relatively large institution.There is also a positive effect of China’s system of direct investment in developing countries from 2005 to 2010 and a negative impact on China’s direct investment in developing countries from 2011 to 2015.Political risk was negative in 2005-2010,with significant effects at the same time.For the above findings,this paper puts forward some relative suggestions:improve our country’s overseas risk assessment and sovereign rating system,improve the insurance measures related to overseas investment risks,promote the effective communication between the enterprises and the local governments in target countries,the direct and medium-sized enterprises’ risk to direct investment in developing countries monitor and increase understanding of the host country’s system and culture.Managers should pay attention to the accumulation of international experience,the improvement of environmental adaptability and the cultivation of social capital in order to more flexibly choose to enter the strategy under the influence of institutional distance.