Influence Of Cultural Differences On China's OFDI

Since the 40 th anniversary of reform and opening up,China has been implementing the strategic policy of opening to the whole world,and its opening has become more and more profound.The development of the “Belt and Road” initiative,which is dedicated to building a “community of interest” and “destiny community”,has attracted worldwide attention.Since the introduction of the “Belt and Road” initiative,economic,political and cultural ties of countries along the line have become increasingly close.As of 2017,except Bhutan,China has invested in countries along the “Belt and Road”,and its investment methods have become more diversified.The industry is widely distributed,with an investment stock of US$1,809.04 million.On the one hand,Chinese enterprises are facing huge opportunities and challenges,on the other hand,they also face various potential risks.The countries involved in the “Belt and Road” are complex.Geopolitics,regional conflicts,frequent government changes,diverse religious beliefs,unbalanced economic development,and imperfect legal systems all affect bilateral trade,investment and other economic activities between China and countries along the route.At the same time,there are many countries along the route and have a long history.It is the birthplace of many civilizations.The collision of different civilizations has led to the widespread existence of cultural differences.Based on cultural differences,this paper takes China's OFDI stocks in the “Belt and Road” countries as the research object,and examines the relationship between the cultural differences and China's direct investment.This paper uses the combination of literature analysis and theoretical analysis to systematically sort out the researches of many domestic and foreign scholars on the direct investment and the impact of cultural differences on direct investment,and effectively apply the theory to the problem analysis of foreign direct investment.At the same time,it expounds the influence mechanism of cultural differences on foreign direct investment,and analyzes the relationship between cultural differences and OFDI from the perspectives of positive and negative effects.In addition,this paper uses a combination way of current situation analysis and empirical analysis.First,it analyzes the general situation of China's OFDI,based on the stock situation,industry distribution,and industry proportion.And it analyzes China's direct investment in the “Belt and Road” countries from the perspectives of stocks,regional distribution,and industry distribution,and discusses its investment risks.Secondly,35 sample countries along the “Belt and Road” are selected as research targets to quantify the cultural differences between China and the sample countries.According to the Hofstede cultural dimension theory,the KSI index and the EDI index are used to calculate the cultural distance.At the same time,China's direct investment data for the sample countries from 2007 to 2017 is used as the explanatory variable,with cultural distance as the core explanatory variable.The geographical distance,the bilateral trade volume between China and the host country from 2006 to 2016,the host country's governmental indicators,per capital national income,labor force population,whether the host country established Confucius Institute are selected as control variables.And using these variables establish a gravity model.The sample countries are used for full-sample regression and sub-sample regression.For the sample-sample regression,the sample countries are divided into three parts: developed economy,transition economy and developing economy according to the level of economic development.In this paper,we use random effects(RE),feasible generalized least squares(FGLS)and panel correction standard error estimation(PCSE)to compare sample regression results,and conclude that cultural differences are negatively correlated with China's OFDI on the “Belt and Road” countries.Finally,based on the previous discussion,this paper gives relevant policy recommendations based on the three perspectives of government,industry associations and enterprises.