Research On The Impact Of Political Risk On China’s Foreign Direct Investment Along The Belt And Road

With the rise of reverse globalization and the influence of trade protectionism,the global investment environment has been deteriorating.In the process of foreign direct investment,the political risks of the host country are often difficult to predict,leading to greater risks for Chinese enterprises investing abroad.The good diplomatic foundation and political relations between China and countries along the "the Belt and Road" have prompted Chinese enterprises to regard countries along the "the Belt and Road" as the preferred location for foreign investment.Based on this background,this paper analyzes the political risks faced by China’s OFDI to countries along the "the Belt and Road" and discusses the impact mechanism of the host country’s political risks on China’s OFDI.Based on ICRG’s political risk index database,this paper selects the panel data of China’s direct investment in 50 countries along the "the Belt and Road" from 2003 to2020,and empirically examines the impact of host country’s political risks,bilateral political relations and their interactive effects on China’s foreign direct investment using a fixed effect model,And four variables(leaders’ mutual visits,sister cities,partnerships and bilateral investment agreements)that measure bilateral political relations are introduced into the model as regulatory variables to further analyze the regulatory effect of bilateral political relations on political risks and foreign direct investment relations.The results show that:(1)Chinese enterprises in the "the Belt and Road" countries are more willing to make foreign direct investment in host countries with high political risk,with the characteristics of "political risk preference";Further analyze the specific impact of the 12 indicators of political risk.Among them,the government stability,socioeconomic conditions,internal conflict,external conflict,investment profile,law and order and democratic accountability of the host country are significantly negatively related to China’s OFDI,and corruption is significantly positively related to China’s OFDI.(2)Bilateral political relations play a positive regulatory role and will promote Chinese enterprises to invest in host countries with high political risks,because good bilateral political relations can reduce political risks to some extent.Specifically,the exchange of visits between leaders can promote China’s investment in countries with high political risks;The promotion of sister city exchanges,partnership upgrading and bilateral investment agreements is not significant.Based on the research conclusion,this paper proposes how to better promote China’s foreign direct investment in the "the Belt and Road" countries from the macro government perspective and the micro enterprise main framework.First of all,we should strengthen the establishment of a risk early warning system for major political risks in the host country.Secondly,we should actively enhance bilateral political relations with surrounding countries,strengthen economic and trade relations with countries along the line,and attach importance to political diplomatic exchanges with investment countries,so as to alleviate the crisis caused by political risk factors in the host country.