The Effect Of Bilateral Political Relationships On Chinese Foreign Direct Investment

With the end of the cold war,bilateral political relations transfer from dominated by ideology to influenced by economic,political,military,historical and other factors.In peace?the win-win principle,the trend of bilateral political relations is stable development between China and other countries,but because of effected by historical factors,the international game,the bilateral political relations country is not stable between China and a few countries.With the integration of economy and politics,this instability affects the China activities of foreign direct investment to some extent,so the research which the bilateral political relations have effect on the Chinese enterprise direct investment,has certain academic and practical significance.Based on the theory of transaction cost,this paper treat the investment activities of the host country as a trading activity for analysis.On both sides of the transaction,the enterprise payment is needed for the activities of outward foreign direct investment,and certain social environment is promised by the host country;The income of the host country,the development of the economy,the improvement of the level of employment,etc.,is to pay for the maintenance of its commitment to the cost of the social environment.Because the enterprise invested capital investment,and the host specificity of the "capital" does not have the specificity,the inequal investment cost,the information asymmetry and incompleteness of contracts and other factors,makes the bilateral contract unequal between the two parties,in other words,the host country has a natural advantage for investment enterprises.These advantages are the internal factors that influence the outbound investment of bilateral political relations.The impact of bilateral political relations on the enterprises' outbound investment is not direct,it affects enterprises' outbound investment through a series of transmission mechanism.The transmission mechanism is divided into the following three aspects: the change of bilateral political relations may vary the country's relevant policies on the home country,which will further affect the enterprise's outbound investment;The change of bilateral political relations may change the political rights of the home country's enterprises in the host country,and further affect the outbound investment activities of the parent companies;The change of bilateral political relations may change the cognition of the host country,which will further affect the outbound investment activities of the parent company.Of course,the bilateral political relations impact on enterprises' outward foreign investment are not in a constant state.The higher the level of economic development of the host country,the two countries involved in the direct investment in the Asia Pacific Economic Cooperation Organization will weaken the influence of bilateral political relations on the outbound direct investment.The quantification of political relations is the key point of this paper.Behaviorism in international politics pointed out that the bilateral political relations can get through the observation of the specific events.The bilateral political relations has the attributes of value neutrality in a certain extent,which makes the observation of bilateral political relations more accurate.In the empirical analysis,this paper selects the China's stock and the flow of outbound investment as the dependent variables and chooses the bilateral political relations as independent variable.According to the relevant research methods,in this paper,the control variables are selected from the aspects of the host country's system,the economic development,the abundance of natural resources,the geographical position and the abundance of labor force.The data of this paper are panel data,spanning 2003-2014 years,involving 160 countries and regions.On the basis of the model test,this paper finds that the dependent variable and the independent variable are endogenous.In order to eliminate the deviation caused by the endogeneity,this paper uses the IV model,and on the selection of instrumental variables,this paper takes the relevant research papers as the reference,and treats the lag period of bilateral political relations indicators as a tool variable.The empirical study found that good bilateral political relations have an important influence on the stock and flow of China's outward foreign direct investment;in addition,the higher level of economic development of the host country and the outbound investment of both countries which are affiliated to the case of APEC organizations will weaken the impact of bilateral political relations on outward foreign direct investment t in the parent country.Based on the above research,this paper puts forward the following suggestions: firstly,putting business activities into diplomatic activities with the aim of guarantee Chinese enterprise's interests;secondly,strengthening multilateral cooperation mechanism can effectively prevent the risks brought by the bilateral political relations;lastly,the enterprise should bring the bilateral political relations into the outward foreign direct investment decision,and should consider other factors.