The Influence Of Institutional Distance On China's Foreign Direct Investment

With the development of China's economy,the number of outward foreign direct investment enterprises in China has gradually increased,and the distribution of countries and regions has become wider and wider.With the introduction of the "One Belt,one Road,strategy,more Chinese enterprises will go abroad in the future.However,opportunities and challenges coexist.In the process of OFDI in China,the institutional environment that enterprises face,such as politics,economy,law,culture,etc.are significantly different from those in China.These institutional differences bring huge risks and costs to enterprises.Therefore,it is important to study whether these institutional differences have an impact on China's OFDI,and how to prevent and resolve the risks brought about by institutional differences.Bilateral investment treaties(BITs)are legal agreements between a country and a host country to encourage,promote and protect transnational investment.Since the 1980s,China has signed BITs with many countries.With the increase of enterprises,the number of BITs signed by China is also increasing.Therefore,it is also important to study whether the signing of BIT can promote China's OFDI and how BIT can promote China's OFDI by adjusting the institutional distance.Based on the actual background,this paper combs relevant theories and literatures,summarizes and proposes the influence mechanism of institutional distance on OFDI and the direct and indirect effects of BIT on OFDI.This paper uses entropy evaluation method to construct political,economic and legal institutional distance into a comprehensive institutional index.On this basis,this paper uses the panel data of 55 countries from 2005 to 2016 to use the investment gravity model to study the influence of institutional distance,BIT and the interaction between BIT and institutional distance on OFDI,and divide the institutional distance into positive and negative institutional distance,study the influence of institutional distances on OFDI in different institutional directions,and the adjustment effect of BIT on institutional distances in different directions.At the same time,further divide institutional distance into political,economic,and legal institutional distances,and study institutional distances of different institutional impact on OFDI.The empirical results show that:Firstly,in general,the institutional distance is negatively correlated with OFDI.By country,the developed countries "institutional escape,and the developing countries“institutional approach".In terms of sub-system categories,on the whole,"political and economic institutional approach"and "legal institutional are not significant".Developed countries show "political and legal institutional approachr" and "economic system escape,'.Developing countries present "political and economic institutional not significant,"The legal institutional approach".Secondly,BIT can directly promote OFDI of Chinese enterprises,and the longer it takes effect,the more it can promote China's OFDI.In terms of countiy categories,the effect of signing BIT on developed countries' OFDI is higher than that of developing countries.Thirdly,BIT can indirectly promote China's OFDI by adjusting the institutional distance.BIT has a significant direct effect on OFDI in developed countries.The indirect effect is not significant.It has significant direct and indirect effects on developing countries.BIT can regulate the political and legal distance of developed countries,and the legal distance of developing countries.Finally,this paper put forward policy recommendations.