The Influence Of Host Country Political Uncertainty On Chinese OFDI

There was an overwhelming consensus among the existing literature that host political uncertainty will have an important impact on OFDI.In recent years,Thailand political uncertainty has been in the rising trend.China is one of the main source of foreign investment in Thailand,since Thailand geographical advantages which can facilitate China's “One Belt and One Road” initiative,as a partner to connect China and Southeast Asian countries.However Thailand political uncertainty may become an important factor influencing Chinese investment in Thailand.This paper aim to analyse the influence of Thailand political uncertainty on Chinese OFDI by collecting quarterly data on China's direct investment in Thailand from 2005 to 2018,using Thailand political uncertainty index(PUI)developed by Luangaram and Sethapramot(2018).PUI is separated into two dimensions,external uncertainty and internal uncertainty.Then using the impulse response and variance decomposition of time series vector autoregressive model(VAR).Findings:(1)In Overall,Thai political uncertainty has an important impact on Chinese direct investment in Thailand,in short-term show a positive shock,and quickly turned into a medium-term negative shock,then gradually decayed and tended to disappear;(2)The internal and external political uncertainties have similar impacts on China's overall direct investment in Thailand,but the external uncertainties have a significantly greater impact;(3)The impact of Thailand's political uncertainty on Chinese direct investment in Thailand shows significant industry differences,the direction,magnitude,and duration of the shocks in different industries are quite different.The industries that are subject to large fluctuations due to political shocks such as the construction,accommodation and food services,wholesale and retail trade,and finance.The industries that are less volatile by political shocks such as mining and real estate;(4)The internal and external political dimensions have different impact on Chinese enterprises investing in different industries in Thailand,which the financial,construction,manufacturing,wholesale and retail trade,electricity,real estate,and mining industries are more sensitive to external political shocks,while agriculture,accommodation and food services,and transportation are more sensitive to internal political shocks.