The Influence Of Political Risk And Cultural Distance On Chinese Private Enterprises’ Foreign Direct Investment

In recent years,with the shrinking global value chain and the global cross-border investment continuously depressed,China’s outbound investment speed has begun to gradually decrease.In 2019,China’s foreign industry-wide direct investment totaled US$117.12 billion,down 9.8% year on year.Meanwhile,the continuous escalation of Sino-US trade frictions has caused Chinese companies to face increased costs and increased tariff barriers in foreign trade.European and American countries have increasingly restricted China’s investment activities against them,and more and more sanctions are imposed on Chinese enterprises’ foreign investment.Against the background of the sluggish global economic growth and the deceleration of overseas investment by domestic companies,the sudden new crown virus pneumonia epidemic in2020 has severely impacted the economic and social development of my country.Multinational enterprises are facing the restrictions of liquidity,blocked personnel flow,declining market demand,forced interruption,extension or cancellation of existing investment projects and the increasing trade protectionism of host countries.Especially for private enterprises in China,due to their small scale of development and insufficient anti-risk capabilities,they have suffered a deeper impact.According to survey data released by the All-China Federation of Industry and Commerce,96.00% of the surveyed enterprises believe that the epidemic has different effects on the profit expectation,export business,supply chain and capital chain of enterprises.In the face of increasingly severe domestic and international economic conditions,how can Chinese private enterprises participate in outward foreign direct investment and select accurate investment locations?Through literature inquiry and data search,we find that few people study the factors influencing the outward foreign direct investment of private enterprises in China.It is less to explore the influence of political risk and cultural distance on the location selection of private enterprises’ OFDI from the perspective of system.In view of this,based on the existing research,this paper analyzes the overseas investment data of listed companies listed in A-share of the top 500 private enterprises in China from 2009 to 2018,and concludes that: the political risk has a significant positive correlation with the location selection of China’s private enterprises’ OFDI,and the cultural distance has a significant negative impact on the outward foreign direct investment of private enterprises in China Relevant relationship.This paper explores the influence of political risk and cultural distance on the location choice of OFDI of private enterprises in China,enriches the theoretical research conclusion of the factors influencing the foreign direct investment of Chinese enterprises,and provides a new way of thinking about how to consider the influence of political risk and cultural distance from the perspective of system in the future of the location of OFDI.The thesis first introduces the introduction and literature review of this article.The literature review is divided into private enterprise investment-related,investment theory and location selection,political risk influence and cultural distance influence,giving their respective definitions and introducing the research on the influence of private enterprises’ outward foreign direct investment.Secondly,a detailed analysis of the status quo of foreign direct investment of Chinese enterprises and Chinese private enterprises,including general situation,regional distribution,industry distribution,and analyzes the tendency of outward foreign direct investment of Chinese enterprises and private enterprises.Subsequently,we selected the panel data of listed companies listed overseas in the top 500 private companies from 2009 to 2018 to conduct an empirical study on the influence of political risks and cultural distance on the location of private companies’ outward foreign direct investment,and explore whether the conclusions of the empirical research are consistent with the assumptions.Finally,the paper concludes and puts forward some suggestions for the participation of private enterprises in OFDI in location selection,and provides theoretical support for the future choice of OFDI for private enterprises in China.