Impact Of The Host Country's Institutional Environment On China's Outward Direct Investment

In recent years,China's foreign direct investment has grown rapidly.As of 2019,China's foreign direct investment totaled US $ 117.12 billion.With the implementation of the “Belt and Road” initiative,China's direct investment in the countries along the route has also continued to increase.In 2019,China's direct investment flows to the countries along the route reached 15.04 billion US dollars,accounting for 13.6% of the total in the same period.Among them,Central Asia is an important target area for the implementation of the Belt and Road Initiative.With the continuous growth of China's direct investment in Central Asia,it is particularly important to study the influencing factors of China's direct investment in Central Asia.Although there are many factors influencing China's outward FDI,the host country institutional environment has gradually become an important factor influencing China's outward FDI.It is worth mentioning that although the number of scholars studying the impact of the host country's institutional environment on China's outward FDI is increasing,the research conclusions are more divided.Therefore,the paper attempts to use Central Asia as an example to study the impact of the host country's institutional environment on China's foreign direct investment,and analyze whether the host country's institutional environment has an impact on China's foreign direct investment? If so,is it positive or negative?The paper will divide the institutional environment into five categories according to the World Bank's classification standards and research needs,namely political stability,government efficiency,supervision quality,rule of law,and corruption control.Starting from these five types of institutional factors,the specific study of the institutional environment in Central Asia is made.On this basis,the paper analyzes the state of China's direct investment in Central Asia based on the data of China's foreign direct investment from 2009 to 2018,and puts forward some possible problems.Currently,among the five Central Asian countries,Kazakhstan has the greatest impact on China's direct investment.Whether in terms of flow or stock,it ismore attractive to Chinese companies than other four countries.Its level of rule of law,political stability,corruption control,regulatory quality,In terms of government efficiency,it also performs better than the other four countries.On the basis of theoretical analysis,the paper uses investment gravity models for empirical analysis,and selects the latest panel data of the five Central Asian countries from 2006 to 2017 for research.Central Asian direct investment has a significant impact,and the level of rule of law and the quality of supervision are positively correlated with China's outward direct investment.This means that in Central Asia,Chinese enterprises are more inclined to carry out investment activities in countries with high levels of rule of law and high levels of regulatory quality.At the same time,the paper selects China's GDP?Host country natural resources?bilateral trade volume?host country GDP as the control variables.According to the empirical results,China's GDP?host country GDP have significant positive impacts on China's foreign direct investment.At the end of this article,I draw conclusions based on theoretical and empirical analysis,and put forward some suggestions from the Chinese government and corporate levels for reference by Chinese companies in order to avoid risks.