Bilateral Political Diplomacy And The Location Choice Of Chinese Outward Foreign Direct Investment

Nowadays, politics and economy are combined closely together. The application of one country’s political forces cannot separate with the consideration of economic factors. As the largest developing country, China has continued to improve the comprehensive national strength. Chinese outward foreign direct investment(OFDI) is developing very rapidly. Foreign direct investment is significant to China’s economic growth, and industrial structure transformation. In order to promote the development of China’s foreign direct investment, the state visits are endowed with a new mission. Through the analysis of the present situation of Chinese OFDI, some characteristics are found. The rapid development of foreign direct investment, the obvious resource-seeking motive, the major investors are the state-owned enterprises and the government has an impact on the state-owned enterprises are the main features. These features make the "Chinese style" foreign direct investment. In order to reveal the puzzle of the "Chinese style" OFDI, this article starts from the role of government leaders to study on the influence of the governance of political relations on China’s foreign direct investment location choice.Based on investment gravity model, the author tests the influence of bilateral political diplomacy on the distribution of Chinese OFDI. The empirical test shows that: diplomacy visit has a significant promoting effect on Chinese OFDI. There are differences between the influences of different levels of the diplomacy visit activities on Chinese foreign direct investment. Diplomacy visits conducted by the heads have the most significant influence on the outward FDI. Diplomacy visits conducted by the members the Political Bureau Standing Committee without the heads and other leaders of the state do not affect the OFDI. Diplomatic visits conducted by China’s political leaders have promoted the development of China OFDI. Friendly bilateral diplomacy visits have an important role in promoting resource seeking OFDI of China. In those countries or regions with rich resources, diplomacy visit is related positively to OFDI of China. In resource poor countries of poor resources, diplomacy visit does not have any promoting effect on OFDI. Diplomacy visit can help Chinese enterprises entering the countries or regions of small market rather than the countries or regions of large market. The alternative relationship between the diplomacy visit and institutional quality only exists in the countries of low institutional quality.It is not observed in countries with high institutional quality.Under the background of perplexing international political environment and the changing environment of international economic pattern, risks of foreign direct investment faced by Chinese enterprises continue to increase. The uncertainty of foreign direct investment faced by multinational enterprises is increasing. This requires the government to display its function actively to create a good environment by using the political influence for the enterprises to realize the internationalization management. Finally, it puts forward the countermeasures and suggestions to further expand Chinese foreign direct investment. Focused on the structure arrangement of diplomacy visits by governance leaders, this paper puts forward relevant policies and recommendations for the government in order to escort the Chinese foreign direct investment.