The Impact Of Political Risk In The ASEAN On The Flow Of China's Outward Foreign Direct Investment

The emergence of China as one of the world's largest outward direct investor had a major impact on all Association of Southeast Asian Nations.ASEAN and China share a complex relationship in economic and political terms;their dialogue mechanism has been evolving from consensus-seeking to strategic means,and while they cooperate in several spheres,conflict of interests is not uncommon either.The study examines the impact of political risks in Association of Southeast Asian Nations on the flow of China's outward foreign direct investment and evaluates the influence of diplomatic exchange between China and the ASEAN countries on the FDI flows.Analysis shows that political risk in the ASEAN has a negative effect on China's flow of outward foreign direct investment,while territorial disputes between home/host countries do not have a significant negative influence on the OFDI coming from China.Higher number of bilateral senior visits between China and ASEAN Member States has a positive effect on China's OFDI.A novel contribution of the paper is to test the correlation between China's FDI flows and the level of internal and external political risks in the countries-recipients.