Cultural Distance,Language Distance,and IFDI To China

Under the background of China's further opening-up,China is dedicated to further stabilizing foreign direct investment and attracting high-quality foreign direct investment.Therefore,in order to stabilize and attract inward FDI of China,we need to have a deeper understanding of the contributing factors of China's inward foreign direct investment.This thesis aims to find out whether the cultural difference and linguistic difference between countries have an impact on inward FDI of China,as well as the mechanism.In this paper,cultural difference and linguistic difference are measured as "cultural distance" and "language distance" respectively.Based on the panel data of China's inward FDI from 36 OECD member countries and key partner countries since 2006 till 2018,this thesis draws conclusions that the influence of cultural distance and linguistic distance on FDI in China has the following main characteristics:? The influence of cultural distance on inward FDI is a "positive U" pattern with smaller distance weakening and larger distance promoting,while the influence of linguistic distance on FDI is always negative;? Cultural distance and language distance both indirectly affect China's inward FDI through bilateral trade volume.However,trade volume enlarge the negative effect of cultural distance on inward FDI,while it reduces the negative effect of language distance on inward FDI to a certain extent;?Establishing Confucius Institute helps promote foreign direct investment in China,and the promotion effect is related to cultural distance,not to language distance;?Improving average English proficiency helps promote foreign direct investment as well,and the marginal improvement increases with the language distance from English.Based on these conclusions,several policy recommendations are proposed as well.