The Influence Of Economic Freedom Of Host Country On China’s OFDI

Recent year,the Chinese government has been increasing China’s OFDI and firmly implementing the policy of opening-up and Go out.Judging from the current status of OFDI,China’s outward investment cooperation is developing healthily and steadily,and for "One Belt and One Road" countries,we also actively promote investment cooperation with them.The trend of China’s increasing outward investment will not change in a short period.Since the Chinese Ministry of Commerce recorded the annual OFDI statistics in 2003,the research on China’s OFDI has become a trend and has the necessity of research.China’s OFDI location selection is affected by many factors,among which the influence of economic system on China’s OFDI location selection is a worthy topic to discuss.We use the Wall Street Journal and the Heritage Foundation’s index of economic freedom to measure each host country’s economic system.First of all,this paper describes the current situation and characteristics of China’s OFDI,we define the concept of economic freedom and find China’s OFDI develops steadily,but its global distribution is unbalanced.Secondly,Through the principal-agent relationship and the transmission effect of transaction cost mechanism,we analyze how the host country’s economic freedom affects China’s OFDI location selection.In order to study the above problems,we used the flow data of China’s direct investment to 146 countries in the world from 2003 to 2017,and used the Heckman two-stage model and modified gravity model for analysis.Two problems will be analyzed in the paper:First,the influence of host country’s economic freedom on whether China chooses a host country for direct investment.Second,the influence of host country’s economic freedom on the scale of China’s OFDI.According to the results,a higher economic freedom in the host country is beneficial to China’s OFDI,but the influence of various variables is different.Among them,government intervention freedom and commercial freedom are positively correlated with China’s OFDI,while trade freedom are not.Monetary freedom has a negative impact on China’s OFDI.Financial freedom has blocking effect on choosing whether enter the host country to invest,but has active effect on increasing China’s OFDI scale to the host country.Finally,we make suggestions based on the conclusions.For enterprises,we suggest that enterprises should try to choose countries with good overall economic freedom to invest,and give more consideration to the long-term investment.For government,we suggest that the government strengthen economic cooperation with the host country,formulate investment strategies,and undertake to collect information about each host country’s economic system of the international market,provide good internal and external conditions for our country enterprise investment.