Research On The Influence Of Cultural Distance On China’s OFDI

In recent years,the scale of China’s Outward Foreign Direct Investment(OFDI)is constantly expanding and its geographical distribution is increasingly diversified,but China is also facing a more complex international environment.With the deepening of the research on the influencing factors of China’s OFDI,it is found that cultural differences and bilateral diplomatic relations have gradually become the factors that need to be considered in China’s OFDI.Therefore,a correct understanding of the influence of cultural distance and bilateral diplomatic relations and their interactions on China’s OFDI is conducive to promoting China’s OFDI.This paper focuses on the analysis of the influence of cultural distance on China’s OFDI,and focuses on the impact of the interaction between cultural distance and bilateral leaders’ visits on China’s OFDI.This paper adopts relevant data of China’s OFDI from 2003 to 2018,and uses the Gravity model to conduct full-sample regression analysis and sample regression analysis of different economies.The results show that,in general,there is an obvious negative correlation between cultural distance and China’s Outward Foreign Direct Investment.To be specific,the greater cultural distance between China and the host countries,the greater the inhibiting effect on China’s direct investment.And the bilateral leaders’ visits,which promote good bilateral relations,can effectively alleviate the inhibiting effect of cultural distance on China’s foreign direct investment.In addition,from the sample regression analysis of different economies,it can be seen that cultural distance has a inhibiting effect on China’s direct investment in both developing and developed countries,and bilateral leaders’ visits can alleviate the negative impact of cultural distance on China’s Outward Foreign Direct Investment.Among them,in developing countries,bilateral political interaction has a more significant mitigating effect on the negative impact of cultural differences on China ’s OFDI,while in developed economies,the mitigating effect of bilateral leaders’ political interaction is less obvious.The reason for this result may be that the developed countries has a sound legal system and low investment risks,and China’s direct investment in developed countries is relatively stable.Although there are more investment opportunities in developing countries,China’s direct investment in developing countries is affected by many factors.Thus,China’s direct investment in developing countries is relatively unstable.Therefore,compared with developing countries,the mitigation effect of bilateral leaders’ visits on China’s direct investment in developed countries is not as strong as that in developing countries.In addition,this paper also uses different methods to test the robustness of the regression model,and the test results show that the regression results of the model in this paper are robust.By analyzing the empirical results,this paper finally puts forward some corresponding suggestions on how to promote China’s Outward Foreign Direct Investment.Specifically,China should correctly grasp the impact of cultural distance and bilateral diplomatic relations on China’s foreign direct investment,strengthen the cultural exchange with the host countries,and enhance the cultural identity.At the same time,China should actively develop mutually beneficial and win-win bilateral diplomatic relations and make full use of high-level visits and other diplomatic activities to weaken the negative impact of cultural distance on China’s OFDI,which will help to further enhance the scale and effectiveness of China’s OFDI.