A Study On The Influencing Factors Of China's Direct Investment In South Asian Countries From The Perspective Of Cultural Distance And Political Risk

Due to the geographical position close to the complementary and industrial structure,the south Asian region to attract investment in China is huge,especially after the "area" initiative puts forward,the investment in the south Asian region growing in our country,but the investment in the region still exist many problems to be solved,including the optimization of industrial structure and national investment gap and other issues,This shows that the investment potential of South Asia region is still huge and is worth further exploration.After exploring the development status of China's investment in South Asia,this paper analyzes the influencing factors of China's direct investment in South Asian countries in the broad sense,and focuses on studying the influence mechanism of cultural distance and political risk in the investment process.Taking cultural distance and political risk as the two core explanatory variables,this paper takes 14 broad South Asian countries as the benchmark,uses the data from1998 to 2018,and uses the investment gravity model as the main model tool for analysis.In addition,while considering the influence of the GDP of China and the invested country,the geographical distance between countries in bilateral trade situation and other variables on OFDI,the control variables such as the perfection of infrastructure,international cargo transportation capacity and technology level are added.After conducting various robustness tests,2SLS was adopted to obtain relatively robust regression results and conduct corresponding analysis.The regression results of the linear model depict the negative effect of cultural distance,that is,the outsider disadvantage effect.The following nonlinear model regression results fully prove the U-shaped effect of cultural distance in the process of China's investment in South Asia.At the same time,the research results show that there is an obvious threshold effect between cultural distance and investment in the process of China's direct investment in South Asian countries,that is,to the left of the critical value,OFDI is inversely proportional to cultural distance.On the right side of the threshold,OFDI showed a positive relationship with cultural distance.For the influence mechanism of political risk,risk preference effect is a relatively significant feature.Based on these research conclusions,this paper gives relevant policy suggestions.