Research On The Impact Of Institutional Distance On China’s Outward Foreign Direct Investment

"The Belt and Road" initiative put forward by China has an important impact on promoting China’s sustained economic growth and promoting the cooperation and development of Asia,Europe and the world economy.Chinese enterprises’ Outward Foreign Direct Investment(OFDI)is an important part of "The Belt and Road".According to statistics,in 2018,Chinese enterprises invested 15 billion 640 million dollars in direct investment in countries along "The Belt and Road",accounting for 13%of the total amount of the same period.In the process of successful OFDI activities,Chinese enterprises not only need to grasp the development trend of global OFDI and the investment focus areas,but also need to identify and manage the various institutional risks faced in the process of OFDI.A good system is the driving force of sustained economic growth.In a sense,institutional factors are more important than economic factors.Therefore,taking China’s direct investment along "The Belt and Road" as an example,this paper examines the impact of the formal institutional distance between two countries on China’s OFDI,which from the perspective of formal institution of host country and distance between the two official systems.On the basis of systematic analysis of China’s direct investment status along "The Belt and Road" area,taking the formal system distance between the countries along the border countries and China as the breakthrough point.This paper uses 3 first level indicators and 16 two level indicators to calculate the formal system quality and the formal system distance by principal component analysis,and then establishes an extended gravity model including formal system.Stata14.0 software is used to make an empirical test for the influence of direct investment between China and countries along "The Belt and Road",and the effect of formal institutional distance on China’s OFDI is analyzed.The conclusions are as follows:first,the formal system of the host country is an important factor affecting China’s OFDI.The full sample data test shows that the formal system distance has a significant negative correlation with China’s direct investment.Second,the influence of the formal system quality of "The Belt and Road" countries on China’s OFDI is different.When the quality of the host country’s system lags behind that of China,the higher the quality of the formal system,the more attractive it will be to China’s OFDI;while,when the quality of the host country’s system is higher than that of China,the higher the quality of the formal system,the weaker the attraction to China’s OFDI.Generally speaking.China has a unique institutional preference for direct investment in countries along "The Belt and Road",that is,"institutional proximity".Based on the above theories of integration system and outward foreign direct investment,this paper hopes to provide theoretical basis and empirical evidence for promoting the construction of "The Belt and Road",managing the institutional risks in the process of China’s outward foreign direct investment,and further enhancing the quality of direct investment in China along "The Belt and Road".