Study On The Impact Of Institutional Distance On China’s Foreign Direct Investment

Since President Xi Jinping visited Central and Southeast Asian countries in 2013 to launch the Belt and Road Initiative,the Chinese government has adopted relevant policies and laws and regulations to encourage domestic investors to invest in countries along the Belt and Road,-and actively promoted economic cooperation between China and countries along the Belt and Road route.Economic ties between countries along the route are becoming closer.With the expansion of the scale of China’s foreign direct investment,scholars have made a multi-angle analysis of the factors affecting China’s foreign investment,and scholars have repeatedly jumped out of the framework of traditional research,no longer limited to the market size,economic development scale,degree of opening up,etc.,and in-depth study of the system distance this factor,Scholars from different perspectives to study the impact of institutional differences on China’s foreign direct investment,and constantly improve the theory of China’s FOREIGN direct investment.However,due to the short time proposed by the "Belt and Road" initiative,scholars from the perspective of institutional distance to the "Belt and Road" research is relatively small,the system distance of the sub-index research is even rare,so the author through the system distance subdivided into the political system distance and economic distance two aspects,At the same time,empirical research is carried out on the sub-indicators under the two indicators,and the impact of these sub-indicators on China’s direct investment in countries along the Belt and Road is tried to fill the gaps in the relevant research.Through combing and summarizing the research results of the predecessors,the author summarizes the literature into three aspects:the system angle of the home country,the system angle of the host country and the angle of the system distance,and makes a corresponding comment on the above literature research.Through the reading and finishing of the existing literature research,the author has organized the suitable research ideas and research methods.In addition,through the collection and collation of relevant data,the author excludes countries and regions that lack too much critical data,and takes into account the need for comparison before and after the Belt and Road Initiative,and finally selects 44 countries along the Belt and Road route between 2010 and 2018,using five variables,such as China’s trade volume,wage level,infrastructure and China’s trade volume with the host country and the host country’s population,as the control variables affecting China’s direct investment in these countries.The system distance is subdivided into the political system distance and economic system distance as the explanatory variable that affects China’s direct investment in the host country,and the traditional trade gravity model is deformed,the relevant control variables are introduced,and the expanded trade gravity model is constructed to study the impact of institutional distance on china’s direct investment in the countries along the Belt and Road.This paper makes an empirical analysis of the two indicators of political system distance and economic system distance,and gets the relevant empirical analysis results:(1)With the increase of economic system distance,its corresponding OFDI will be reduced by a small amount,and the economic system distance will have a small impact on China’s FOREIGN direct investment.(2)With the increase of the distance of the political system,the corresponding OFDI will decrease,and the political system distance will have a greater impact on China’s FOREIGN direct investment.(3)The size of the host country,wage levels and labor costs,infrastructure,as well as China’s trade with the host country and the host country population,these traditional factors will also have a certain impact on China’s OFDI.The author thinks that the relevant research can continue to go deep,so the author further empirical analysis of the subdivision indicators under the two indicators,the following conclusions are drawn:the political system distance and economic system distance under these two indicators of the sub-factors of China’s foreign investment is not exactly the same.The empirical study of the subdivided indicator is consistent with the results of the study on the overall index.The above conclusions can be found that the factors affecting China’s OFDI are very complex,so it should be comprehensively analyzed.Only a careful and comprehensive analysis of the factors affecting China’s OFDI can better help investors make the right choice in investment decisions,and better play the "Belt and Road" initiative to promote the economies of the countries along the route.Finally,this paper puts forward the targeted policy proposal from the conclusion of empirical analysis at the national and corporate levels,hoping to help the management of the state and the company pay more and more attention to the impact of the system on investment when making decisions,help our enterprises to better benefit from foreign investment,and improve the quality of the overseas layout of Chinese enterprises.The main innovation points of this paper are as follows:(1)In the research object,the previous scholars focus on developed countries,mainly to study the impact of institutional factors in developed countries on international investment;The impact of institutional factors on international investment in the countries along the route can enrich the relevant research and be innovative.(2)The existing research is mostly limited to the study of the total index of political system distance and economic system distance,the research of the sub-index included under these two indicators is less,and this paper makes an empirical analysis of the sub-index under the distance of political system and economic system,and digs the factors affecting China’s foreign investment from a deeper level.This is also one of the innovation-points of this paper.