The Impact Of Political And Economic Uncertainty In Host Countries On Their Attraction Of Chinese OFDI

Currently,China’s outward foreign direct investment(OFDI)is transitioning towards high-quality development,while the increasingly complex international environment has led to rising political and economic uncertainties in countries worldwide.It is essential to understand the impact of the host country’s political and economic uncertainties on a country’s absorption of Chinese OFDI,not only for the host country’s own development but also for China’s OFDI to shift from high-speed growth to high-quality development objectively.This thesis aims to examine the impact of the host country’s political and economic uncertainties on its absorption of Chinese OFDI.First,the relevant literature on factors influencing OFDI in host countries is reviewed.Then,by retracing the theoretical origins and mainstream measurement methods of uncertainty and considering the characteristics of Chinese OFDI,this thesis proposes criteria for selecting proxy indicators of uncertainty.Next,this thesis introduces the development process and characteristics of Chinese OFDI,as well as the basic situation of host countries attracting Chinese OFDI.Through a scatter plot of Chinese OFDI and the host country’s political and economic uncertainties,this thesis preliminarily explores the relationship between the two and finds that Chinese OFDI is more concerned with greater political and economic uncertainties in host countries.Qualitative analysis is conducted on the regulatory effects of bilateral political relations and financial openness,and the intrinsic mechanism of how host country political and economic uncertainties affect a country’s absorption of Chinese OFDI is discussed from the perspectives of market potential and financial openness constraints.In the empirical research part,this thesis expands the gravity model and uses data from 102 countries from 2010 to 2020 to conduct a two-way fixed-effect regression.The study finds that(1)the host country’s political and economic uncertainties can significantly inhibit its absorption of Chinese OFDI,and this conclusion is verified by the instrumental variable method and two-step system GMM method;(2)by constructing different levels of host country political and economic uncertainty indicators participating in the regression,the baseline model results are robust,and it is also demonstrated that Chinese OFDI does indeed only focus on greater political and economic uncertainties in host countries;(3)the results of box and kernel estimations show that bilateral political relations have a significant regulatory effect;(4)the two-way fixed-effect model and feologit model find that political and economic uncertainties affect a country’s absorption of Chinese OFDI by suppressing the host country’s market potential and tightening its financial openness;(5)in the extended analysis,the sample is analyzed for heterogeneity according to whether it is a developed country,whether it is part of an overseas economic and trade cooperation zone with China,and whether it comes from the Chinese cultural circle.The study finds that the rising political and economic uncertainties in host countries have a differentiated impact on their ability to absorb Chinese OFDI.Finally,based on the research results,this thesis proposes the following recommendations:(1)strengthen communication with Western developed countries and establish consensus;(2)deepen mutual trust with other countries in the Chinese cultural circle;(3)actively cooperate with host countries to build overseas economic and trade cooperation zones and promote the implementation of negotiation results;(4)conduct industry-academic-research cooperation with developed countries;(5)deepen the supply-side structural reform and promote the development of high-tech industries;(6)improve risk warning mechanisms and guide the healthy development of enterprises.