The Influence Of Host Countries’ Institutional Factors On The Location Selection Of China’s OFDI

With the development of economic globalization and China’s economic strength highly improved, China’s enterprises accelerate the pace of "going out", and China’s outward foreign direct investment(OFDI) is growing rapidly, becoming an important force in the development of the global economy. China’s foreign direct investment in 2014 reached 123.12 billion dollars, ranked third in the world for 3 years. At the meantime foreign investment inflow and outflow achieved balance for the first time. Virturely China has become one of the main capital-exporting countries. During foreign investment, Institutional factors affect enterprises’ transaction costs and risks, which is the key factor of the success of China’s foreign direct investment. Effective institutional arrangement can reduce the transaction costs and risks, improve the international competitiveness of enterprises and products. Therefore, it is important to study how the host country system affects the location selection of China’s OFDI.But nowadays, there are few studies on the influence of institutional factors on OFDI. Most of the researchers are in the view of certain aspect of institutional factors to analyze the effect on OFDI, such as host countries’ democratic politics, which has some limitations.Combined with the characteristics of the regional distribution of China’s OFDI, this paper will analyze the host countries’ institutional factors’ influence on the location selection of China’s OFDI from the political and law, economic, and cultural aspects respectively. On the basis of theoretical analysis, this paper collects the panel data as a sample, 56 countries(regions) between 2004 to 2013 where China’s OFDI flow to, using the gravity model to analyze the influence of the host countries’ institutional factors on the location selection of China’s OFDI. The empirical results show that the host country’s political and legal system and economic system are significant, the impact of the cultural system is not significant.On the basis of previous studies, this paper complements and enriches the research on the impact of institutional factors on the location selection of foreign direct investment. While it provides global enterprises some advice about how to choose the FDI location.