Research On The Influence Of Host Country Foreign Investment Regulatory Policy On The Binary Margin Of China’s OFDI

In recent years,the flow and stock of China’s foreign direct investment have always ranked among the top in the world,but the scale of capital outflow has continued to decline.In addition to the novel coronavirus pneumonia’s adverse effects on the global economy,the emergence of protectionism in the field of international investment is an important constraint on the development of investment.The developed countries,represented by the US and Europe,continue to promulgate the review rules for FDI.Based on this realistic background,it is of great significance to explore the role and effect of the host country’s foreign investment regulatory policy on China’s foreign direct investment.Previous studies have generally focused on the univariate analysis of the scale of foreign direct investment.Based on the perspective of binary margin,this paper examines the differential impact of foreign capital regulatory policies on the diversity and sustainability of OFDI in China.In addition,the heterogeneity analysis based on industry segmentation is another innovation that distinguishes the article from the existing literature.This paper selects the OECD FDI Regulatory Restriction Index to describe the level of regulatory policies implemented by the host country for foreign direct investment,and analyzes the impact of the host country’s foreign investment regulatory policies on China’s OFDI binary margin from different policy areas such as Foreign Equity Restrictions,Screening & Approval,Key Personnel Restrictions and Other Restrictions.Specifically,according to the difference of its role in the investment process,the foreign investment regulatory policy is divided into foreign investment entry regulatory policy and foreign investment operation regulatory policy.Among them,the foreign investment entry regulatory policy not only reflects the host country’s protection of sensitive industries and national security,but also stimulates the cross industry flow of foreign direct investment in the home country,which affects the extensive margin of OFDI in both directions and is not conducive to the intensive margin.The foreign investment operation regulatory policy mainly affects the operation right of the home country to overseas subsidiaries,and has a negative impact on the binary margin of OFDI.Based on theoretical analysis and the "China global investment tracking" database,this paper selects the panel data of China’s foreign direct investment in 12 industries in 47 countries from 2010 to 2019,and makes an empirical test by constructing a Heckman two-stage selection model.The following conclusions are obtained: First,the host country’s high-level foreign investment regulatory policy will effectively promote the growth of China’s OFDI extensive margin and bring negative impact on the intensive margin.Second,China’s OFDI extensive margin has four investment motives: market seeking,efficiency seeking,resource seeking and strategic asset seeking,while the intensive margin deviates from the strategic asset seeking motivation.The more open foreign capital regulatory environment of the host country will help the country give full play to the attraction of factor endowment.Third,the heterogeneity analysis of regulatory policies and measures shows that Screening & Approval and Other Restrictions have a more significant positive effect on China’s OFDI extensive margin,while the intensive margin is mainly limited by the regulatory policy of foreign capital entry.Fourth,the analysis of national heterogeneity confirms that improving the level of foreign investment regulation in developed countries is conducive to the expansion of China’s OFDI extensive margin,while in developing countries,reducing the standard of foreign investment regulation can effectively stimulate the improvement of intensive margin.Fifth,considering industry differences,the effect of foreign capital regulation of the host country on the inflow of overseas capital into the service industry is more prominent.Finally,combined with the empirical research results,this paper puts forward corresponding policy suggestions for Chinese enterprises to better "going out".