The Impact Of Bilateral Political Relations And Host Country Institutional Risks On China’s OFDI

In order to actively respond to China’s "going out" strategy,Chinese enterprises have gone abroad to the international arena,and finally made some monumental achievements.2013 President Xi Jinping proposed the "Belt and Road" initiative,which aims to To strengthen economic cooperation with countries along the route and achieve win-win cooperation with them.In order to further enhance bilateral economic and trade cooperation,China and Russia signed the Joint Declaration of the People’s Republic of China and the Russian Federation on Docking Cooperation on the Construction of the Silk Road Economic Belt and the Construction of the Eurasian Economic Union in 2015.In 2017,the signing of the Agreement on Economic and Trade Cooperation between the People’s Republic of China and the Eurasian Economic Union is an important milestone,providing institutional guarantees for bilateral economic and trade cooperation between China and the Union,and developing economic and trade cooperation with the Eurasian Economic Union and its member states.It is an important part of the "One Belt,One Road" initiative.Of course,the investment environment and bilateral political relations of the Eurasian Economic Union countries are also key factors that multinational enterprises must consider when China strengthens its investment cooperation with the Eurasian Economic Union,led by the policy of actively stepping out of the Eurasian Economic Union.Will bilateral political relations help to alleviate the uncertainty of the investment environment in the Union countries and promote Chinese direct investment in them? All these questions are worth considering.Based on the investment stock data from the "China Outbound Direct Investment Bulletin",this paper constructs a comprehensive institutional risk indicator based on the WGI database and economic freedom-related data,and an indicator of bilateral political relations based on the UN General Assembly voting data.The empirical study finds that,in general,China’s OFDI in Eurasian Economic Union countries has significant institutional risk preferences,as well as resource and technology seeking motives.Bilateral political relations not only directly affect China’s investments in Eurasian Economic Union countries,but also indirectly affect the scale of Chinese companies’ investments in Eurasian Economic Union countries by changing their institutional risk.Overall,bilateral political relations indirectly affect the scale of Chinese investments in the Eurasian Economic Union by regulating institutional risk in the EAEU countries,which not only significantly affects the level of institutional risk in the EAEU countries,but also increases the scale of investments in the Union countries to some extent,providing theoretical support for Chinese investments in the Union countries.