The Study Of The Influence Of Country Risk On China's OFDI

With the deepening of economic globalization,China has moved onto the world stage,so that the scale of China's Outward Foreign Direct Investment(OFDI)stock has been increasing.The proposal of the "Belt and Road" initiative in 2013 has won great support from the countries along the "Belt and Road" and made significant progress.However,most of these countries that China initially invested in were developing countries,and their economic development and corruption situations were different,so the risk associated with the investment were not the same.Now,China's investment in countries along the route is increasing year by year,which brought an urgent issue that we should know whether and how the country risk of the host country will affect OFDI,whether the impact is positive or negative.Only by fully understanding and analyzing the risk,can we formulate corresponding risk control policies in order to eliminate the negative impact of country risk on investment losses.After theoretically explaining the definition of country risk and the impact of risk on investment,this paper uses 40 countries along the Belt and Road as samples to construct a panel model based on fixed effects,selects China's OFDI stock from 2007 to 2017 as the dependent variable indicator,and chooses the host country's country risk,political risk,and economic and financial risk as explained variables.The host country's market size,infrastructure construction and openness are used as control variables.The purpose of this paper is to systematically identify and verify whether China's foreign investment is affected by the above-mentioned risk items from following three different dimensions:1)overall country risk,2)single political or economic financial risk,3)political and economic portfolio risk.From the empirical test of the measurement,identification and regression between OFDI and country risk,we found that all the comprehensive country risk,the political risk,the economic and financial risk significantly affect China's investment in countries along the "Belt and Road".Among them,the economic and financial risk will inhibit China's foreign investment.As the risk increase,the investment decreases accordingly.However,in terms of the impact of comprehensive country risk and political risk on OFDI,it shows a "risk preference" characteristic.This paper believes that the reason why there is the above conclusion lies on the following two points.First,"non-market motivation" dominates.In the early days of the Belt and Road Initiative,the main investors were state-owned enterprises which needed to realize profits,as well as shouldered the responsibility of transmitting policies and implementing plans.Their investments were greatly constrained by political factors.Second,compared with private enterprises,state-owned enterprises established a longer-term vision that is to maximize national economic interests.Finally,combined with theoretical analysis,literature review and empirical research,this paper gives China's investment risk control recommendations for countries along the route from two dimensions:government and enterprise.