A Study On The Influence Of Bilateral Investment Treaties To China’s Outward Foreign Direct Investment

With the enhancement of China’s comprehensive strength,continuous standardization of the management system for outbound investment,and the successive introduction of the "going-out" strategy and the "Belt and Road" initiative,the annual flow of China’s outward foreign direct investment(hereinafter referred to as OFDI)has grown rapidly,breaking through the 100 billion U.S.dollars mark in size and gradually squeezing into the top three globally in terms of international status.However,with the continuous expansion of China’s enterprises’ outward investment scale and scope,cases of investment failure or huge investment losses caused by various risks are not uncommon.Meanwhile,in the context of the lack of a unified global investment legal system,bilateral investment treaties((hereinafter referred to as BIT)have become important legal tools for countries to regulate bilateral investment matters.Since China’s reform and opening up,it has signed BIT with an increasing number of countries as both a capital importer and exporter.Considering the high legal binding force and strong practicality of BIT,they may play an important role in mitigating the overseas investment risks faced by Chinese investors and promoting investment cooperation between China and contracting countries.Therefore,based on the review of relevant literature and the improvement of existing quantitative methods for BIT clauses,this dissertation systematically analyzes and tests the impact of BIT on the scale,entry mode,and performance of China’s OFDI by integrating credible commitment theory,signaling theory,and institutional theories.The objective of this dissertation is to expand and deepen the research on the investment effects of BIT from both theoretical and empirical perspectives,and to extend and deepen the research on China’s OFDI decision-making and performance from the perspective of BIT.In terms of theoretical and current situation analysis,this dissertation first explains why BIT may have an impact on the decision-making and performance of OFDI from three different theoretical perspectives.Then,based on the analysis of the reasons for the emergence and global diffusion of BIT,this dissertation analyzes China’s BIT signing practices from multiple perspectives,including its development process and current situation,international cross-sectional comparison,and latest developments.Meanwhile,building on the review of China’s OFDI development process,this dissertation further analyzes the current situation and characteristics of China’s OFDI from five aspects: location distribution,entry mode,industry distribution,investment subject,and international status.Regarding the construction of the BIT index,this dissertation first classified the clauses related to investor interests into 9 categories based on the text content of all effective BIT in China,as the basis for calculating the single-item index of the BIT.Then,referring to existing research methods and drawing on relevant achievements in the study of BIT clauses in the field of international law,specific values were assigned to the sub-clauses of the 9 categories of clauses that make up the BIT according to the degree of investment protection.Subsequently,by adding up the specific values of the sub-clauses of the BIT,this dissertation calculated the 9 single-item indexes and the overall index for each BIT.Through horizontal and vertical comparative analysis,differences in the clause provisions of BIT concluded by China in different periods and with different regions and types of countries were summarized.Finally,considering the fluctuation differences in the value assignment of different clauses in BIT and the differences in the importance of different clauses,this dissertation innovatively introduced the Analytic Hierarchy Process-Entropy Weight Method to calculate the composite weights of each sub-clause and single-item index,and based on this weight,further calculated the overall intensity index and 9 single-item intensity indexes of all effective BIT in China.Based on the calculated BIT intensity index and national-level OFDI data,this dissertation empirically tested the impact of BIT with different levels of investment protection on China’s OFDI scale.The research found that: first,an increase in the investment protection level of BIT between the host country and China will increase China’s OFDI scale in that country,meaning that the effective or updated high-intensity BIT have a positive promoting effect on China’s OFDI.Second,different provisions in BIT have different effects on China’s OFDI scale.Among the 9 categories of BIT provisions,only six of them,including the scope of application,most-favored-nation treatment,national treatment,expropriation and compensation,war damage compensation,and investor-state dispute settlement,have a significant positive impact on China’s OFDI scale.Third,the investment promotion effect of BIT intensity varies depending on the country,mainly affecting China’s OFDI in developing countries and countries in Europe and Asia.Fourth,BIT concluded between China and the host country will affect China’s OFDI scale through the signaling effect,institutional quality regulation effect,and bilateral political relationship regulation effect.Among them,the institutional quality regulation effect and bilateral political relationship regulation effect also prove that high-intensity BIT are one of the reasons for China’s institutional risk preference and other political risk preferences in OFDI.Regarding the impact of BIT on the mode of Chinese OFDI,this dissertation employs panel data at the firm-country-year level to empirically test the effect of BIT with different investment protection intensities on the mode of entry of Chinese multinational enterprises(MNEs)into overseas markets.The findings are as follows: First,the increase in investment protection intensity in BIT between host countries and China increases the probability of Chinese firms choosing the greenfield investment mode to enter host country markets.Second,different clauses in BIT have varying effects on the mode of Chinese OFDI.Among the nine major categories of BIT clauses,only the clauses on national treatment,compensation for war damage,and investor-state dispute settlement have a significantly positive effect on Chinese OFDI entry modes.Third,the impact of BIT intensity on OFDI entry modes varies by country and firm characteristics,mainly affecting OFDI entering developing country markets and OFDI from state-owned enterprises.Fourth,the BIT concluded between China and host countries affect the mode of entry of Chinese firms into those countries through the risk compensation effect of war damage,the institutional quality regulation effect,and the bilateral political relationship regulation effect.With regard to the effect of BIT on Chinese firms’ OFDI performance,this dissertation first empirically examines the effect of BIT’s investment protection intensity on the business performance of Chinese firms investing in a contracting country using data of Chinese listed firms,and then empirically examines the effect of BIT intensity on the success rate of the investment of Chinese multinational firms investing in that country using investment record data from the Global Investment Tracking Database(CGIT).The finding is that,first,the BIT coverage intensity of Chinese firms’ OFDI has a significant positive impact on firms’ business performance,indicating that an increase in the investment protection intensity of BIT between the host country and China helps to enhance the business performance of Chinese MNEs investing in that country.Second,the impact of BIT intensity on firms’ OFDI performance is heterogeneous.The business performance of non-state firms is significantly affected by the intensity of BIT concluded between their overseas investing countries and China,while the business performance of state-owned firms is not significantly affected by this factor.Third,the reason why BIT affects the business performance of Chinese firms investing in that contracting country is that,BIT intensity affects the investment success rate of Chinese firms investing in that country,and the successes of firms’ overseas investment projects has a significant effect on the performance of multinational firms.Based on existing research,the marginal innovation of this dissertation is mainly reflected in the following three aspects: Firstly,by introducing a comprehensive weighting method combining the Analytic Hierarchy Process and Entropy Weighting Method,it improves the quantitative method of BIT clauses,making the calculated BIT intensity index more scientific and reasonable.Secondly,this dissertation innovatively analyzes the mechanisms by which BIT affects the OFDI both theoretically and empirically,which makes up for the shortage of existing studies that rarely discuss the mechanism other than the institutional effect of BIT.Thirdly,it expands the research on OFDI entry mode and performance of OFDI from the perspective of bilateral institutional arrangement actively constructed by the two countries.