Study On The Impact Of Political Risk In China’s Direct Investment In South Asia

With the development of economic globalization,the economic and trade relations between various economies are increasingly close,and investment is an important way of economic and trade exchanges.All countries in the world are actively making foreign investment.For China,with its growing economic strength and its"The Belt and Road"initiative to encourage companies to "Going out",it is increasing the scale of investment in foreign countries.South Asian countries are important along the area under the initiative of countries,and because of its geographical position,therefore is also important destination of Chinese enterprises "Going out",China’s investment in South Asia is also more and more,but in the process of investment,risk coexist,and often of interest in foreign direct investment,not just in the face of economic and financial risks.even in the face of the social culture of a country risk and political risk,especially the political risk is more and more influence on a country’s foreign direct investment.Firstly,this paper briefly introduces the eclectic theory of international production and the theory of small-scale technology,and classifies and summarizes scholars’studies on the impact of political risk on China’s OFDI,which serves as the theoretical basis for empirical research.Secondly,based on the overall characteristics of China’s direct investment in south Asian countries and the characteristics of various investment modes,the main political risks and risk events,and combined with the basic national conditions of south Asian countries,this paper conducts analysis and demonstration,which serves as the practical basis for empirical research.Finally,based on the market,human resource,natural resource and strategic resource motivation of China’s OFDI,relevant control variables are added,and an extended investment gravity model is established for empirical test to analyze the impact of political risk on China’s OFDI in South Asia.The empirical results show that political risk has a positive impact on China’s direct investment in South Asia,but the impact is limited.The conclusion of the traditional investment gravity model is not applicable to the study of the influence of political risk on China’s direct investment in South Asia.In the case of China’s direct investment in South Asia,the motivation for seeking market and labor is obvious,but the motivation for seeking strategic resources is lacking.The common language has a positive impact on China’s direct investment in South Asia.Finally,from the perspective of enterprises and the government,some Suggestions are put forward to deal with the political risks faced by China’s direct investment in South Asia.From the national perspective,we should strive to sign bilateral investment agreements with more countries,strengthen the strategic mutual trust mechanism at the national level,and improve the overseas investment insurance system.Finally,the government should establish the contingency plan and set up permanent institutions to guarantee the personal safety of overseas staff.