The Influence Of Host Country Economic Policy Uncertainty On China’s OFDI

With the continuous development of economic globalization,the trade relations between countries in the world become more and more close,which promotes the integration of the global economy.China is constantly adapting to the development trend of global trade and actively expanding foreign investment in order to participate in the international market competition.However,the current international political and economic situation is complex and changeable,and China’s overseas investment activities have been greatly affected.In this paper,the uncertainties of host countries’ economic policies will be deeply discussed and how they affect the scale and entry mode of China’s OFDI will be analyzed,which will provide important guidance for China’s foreign economic activities.This paper discusses four mechanisms,namely real option mechanism,financing cost,policy information and macroeconomic development level of the host country,and studies the willingness of the host country to invest in Chinese investors,and plays a promoting role.This paper constructs a dynamic panel model to conduct an empirical study on the relationship between uncertainty and China’s OFDI,and explains the model according to the empirical results.The results show that:(1)China’s FDI is inhibited by the uncertainty of the host country’s economic policies,and this inhibition has a lag effect.Through empirical regression analysis,we found that this conclusion is consistent with the results of previous studies.(2)It can be seen from the regression coefficients of EPU from 2005 to 2010 and 2011 to 2020 that the negative impact from 2011 to 2020 is greater.Therefore,the host country’s economic policy as an important factor affecting foreign investment activities should be paid attention to.(3)Due to the variable economic policies of host countries,the flow direction of OFDI will be different,but the impact on the flow direction of greenfield investment is far greater than that of cross—border mergers and acquisitions.On the basis of the above research,this paper discusses the development behavior of China’s foreign direct investment from multiple perspectives,and gives some suggestions for reference.From the perspective of enterprises,enterprises should be selective in developing foreign direct investment,choosing those countries with developed economy,complete infrastructure and loose foreign investment policy.Strengthen enterprise research and development investment,improve their own strength.From the point of view of the country,the country should change the mode of foreign investment and enrich the location choice of foreign investment.At the same time,ensure the stability of domestic policy environment,improve the relevant early warning mechanism,so as to effectively deal with the problems,accelerate the speed of adaptation to the economic policy environment of the host country;We will establish a sound information sharing mechanism,strengthen international exchanges and cooperation,and strengthen supervision over the financial sector,especially the banking sector.