The Impact Of Host Countries’ Institutional Quality On China’s OFDI Binary Margins

Since the “going out” strategy was put forward,China’s foreign direct investment has developed rapidly.Host countries’ institutional quality is an important factor affecting China’s OFDI.Many scholars have conducted research on this,but they have not reached a consensus.Besides,the current researches on host countries’ institutional quality and home country foreign direct-investment only focuses on the one-dimensional scale analysis,which often neglects the structural characteristics of OFDI.Therefore,based on the data of CGIT from the year of 2005 to 2019,this paper examines the impact of host countries’ institutional quality on China’s OFDI binary margins(intensive margin and extensive margin).It is found that the host countries’ institutional quality significantly promotes China’s OFDI binary margins,and the conclusion is even more obvious in intensive margin than the extensive margin.In terms of the different dimensions of the institutional quality,the stability of the regime,the efficiency of the government,the quality of supervision,the rule of law and the control of corruption in the host country significantly promotes the extensive margin and intensive margin of China’s OFDI.In terms of the different economic development stage of the host country,China’s OFDI binary margins shows institutional risk preference in the low-income countries.According to the policy-oriented countries,the institutional quality of the countries along the “Belt and Road”only promotes the extensive margin of China’s OFDI.In terms of investment sectors,host countries’ institutional quality significantly promotes the China’s OFDI binary margins in real estate industry and promotes the intensive margin of China’s OFDI in transportation industry.In terms of different investment methods,host countries’ institutional quality significantly promotes cross-border M&A,but only significantly promotes extensive margin of greenfield investment.The test of institutional proximity shows that there is no institutional proximity in China’s OFDI binary margins.The test of institution bias shows that the institution bias exists only in the sample whose institutional quality is better than China’s.Therefore,enterprises should pay more attention to the institution quality of the host country when making foreign direct investment,and the state should also provide help and support for enterprises to avoid institutional risks.