Empirical Study On The Effects Of Host Country’s National Economic Risk On China’s OFDI

With the economic globalization and China’s rapid economic growth, China’soutward foreign direct investment (OFDI) entered a period of rapid growth. Thedirect and indirect effects of host country’s economic and financial turmoil to thesafety and profit of China’s oversea property is more and more obvious during theprocess of China’s speeded up participation in internationalinvestment. TheChinese enterprises arealso taking the host country’s economic and financial risks,which are known as National Economic Risk (NER) in this study, into theinvestment decision-making process.But at the present stage,the theory researchof the effects of host country’s national economic risk onChina’s OFDI has notreached a unanimous system. The empirical study on China’s OFDI from the pointof view of national economic risk of the host country isalso quite rare.In this study, we based on the core theory of transactioncosttheorytoconstruct thetheory and empirical model ofhost country’s NER affectChina’sOFDIafter reviewing and summarizing the classic theoryresearch about regionaldistribution of FDI. Then use static panel FE, RE and dynamic panel SYS-GMMto compare and to estimate whether host country’s NER influence the regionaldistribution of China’s OFDI. After getting the positive conclusion, further byusing the method of threshold regression analysis of the influence of host countrydifferences.The first chapter of this paper introduces the background and significance ofthe research, which point out the reason that why this paper focus on the effect ofhost country’s NER on China’s OFDI, and make the definition of NERon thisbasis. Then introduces the idea of this study, points out the research structure,content and target, and concludes the possible innovative of the paper. The secondchapter reviews the relevant research at home and abroad.The third chapterdiscusses whether the national economic risk of hostcountryhas influence on the OFDI of China, has which kind of influence, andwhether this kind of influence exists host country difference.This chapteruses panel data of78investment in the host country during2003-2010and control thekey factors of China’s outward foreign direct investment(OFDI) to set thebenchmark model, and then the introduction of the national economic riskvariables to investigate China’s OFDI in recent years, the results show that thehost country’s economic risk was significantly negative impact on China’s OFDI,further grouping tests have also shown that this impact with significantdifferences between the countries which are different in the level of economicdevelopment condition.In chapter four,this paper try to go a step further by using threshold model totest the differences inthe process ofChina’s OFDI influence different hostcountry’s NER. According the discovery in grouping tests, choose the hostcountry’s economic development level as a threshold variableto build thethreshold model of host country’s economic risk affect China’s OFDI, and measurethe threshold level of national economic risk affect China’s OFDI from the aspectof host country’s economic development condition. Result show that, in theprocess of China’s OFDI influence host country’s NER, host country’s economicdevelopment level has a single threshold.When the host country’s economicdevelopment level is below the threshold value, the host country’s NER has asmaller negative influence on China’s OFDI. But when the level of host country’seconomic development across the threshold, the negative influence is much bigger.It means thenegative effect of more developed host country’s NER on China’sOFDI is more obvious.