Analysis Of Impacts Of Institutional Distance On China’s OFDI In The "Belt And Road" Countries

Under the wave of “Reform and Opening up” policy in 1978,China’s economic development has achieved rapid development.By 2017,the OFDI flows of China have grown to the third largest in the world,only after the United States and Japan.The "Belt and Road" initiative has been put forward for nearly six years,bilateral cooperation of trade and investment,infrastructure,logistics and transportation between China and the countries along this area has achieved remarkable results.In the future,cooperation and communication will go deeper,along with the expending investment scale.Nowadays,the pace of world economy is slowing down,and the rising danger of trade protectionism cannot be underestimated.As for the domestic situation,our economy has been stepping into the “new normal” phase.The investment environment of countries along the “Belt and Road” is complex,which has increased difficulties and risks for Chinese enterprises to operate locally.With more and more Chinese enterprises going abroad to participate in the activities of foreign direct investment,the related issues of China’s OFDI in the countries along “Belt and Road” have already attracted broad attention.Proper location choices of OFDI is critical for China in the process of promoting the implementation of the "Belt and Road" initiative.Therefore,this paper focuses on the institutional factors,studying the implication of institutional distance on China’s OFDI location in the countries along “Belt and Road”.Firstly,the paper reviews the domestic and foreign literatures about institutional factors and foreign direct investment.In Chapter III,based on the eclectic theory of international production and the theory of transaction costs,this paper analyzes the influence mechanism of institutional distance on China’s OFDI in the “Belt and Road” countries and suggests corresponding hypotheses.Chapter IV focuses on the present condition of China’s OFDI in the “Belt and Road” area,summarizing the characteristics of China’s investment in different regions.In the fifth part,to test the hypotheses,the paper uses the panel data of China’s OFDI in 57 countries along the "Belt and Road" in 2003-2017,choosing the method of principal component and the extended gravity model.After setting up the institutional distance index of three dimensions: politics,economy and culture,the empirical analysis has been carried out on the impact of institutional distance of China’s OFDI in the countries along the “Belt and Road” area.The empirical results show that political institutional distance,cultural institutional distance and geographical distance have negative influences on China’s OFDI on the countries along “Belt and Road”,while the impact of economic institutional distance is positive.Meanwhile,the market scale of the host country has an obvious promotion effect,which indicates that China has an obvious market seeking motivation while investing in the “Belt and Road” area.At regional levels,the influences of institutional distance are diversified.The negative influences of political and cultural institutional distance in Asia are obvious;in Central and Eastern Europe,the influences of political and economic institutional distance are significant;in,only the economic institutional distance has an obvious contribution to China’s OFDI.Meanwhile,the motivation of seeking labor and natural resources in Middle East is strong.Finally,based on above conclusions,this paper suggests the policy recommendations: strengthening the co-construction of the institution with the countries along the belt and road;strengthening risk assessment management;paying attention to the management of financial risks in the process of investment and financing and the promotion of RMB internationalization.