Research On The Influence Of Establishing Sister City Relations On The Scale Of China’s Foreign Direct Investment

With the deepening of globalization,international political relations and diplomatic activities have been endowed with new functions and connotations.Its impact on economic activities is also deepening and expanding.Sister city relationship is not only one of the important ways of China’s diplomatic activities,but also as a part of civil diplomatic activities.It occupies an indispensable position in foreign exchanges as a part of non-governmental diplomatic activities.As a kind of relational contract,Sister city relationship,as a relational contract,effectively reduces the transaction costs of both parties and promotes the long-term economic exchanges and cooperation between sister cities,which is a powerful institutional arrangement for promoting regional economic and trade relations.The promotion effect of sister city relations on economic cooperation has also been demonstrated in academic circles,but the test is not very sufficient in empirical circles.Studying the direct and indirect impact of sister city relations on China’s foreign direct investment,in-depth analysis and correct understanding of the relationship between international political relations and economic activities under the new situation is not only the requirement of reality,but also the need of theoretical development.In this context,this paper systematically evaluates the impact of China’s sister-city relationship with its investment partner countries on the scale of China’s OFDI from 2011 to 2019 by using a combination of fixed effect regression and GMM dynamic regression.The heterogeneity analysis is carried out from the aspects of economic development level,the length of diplomatic relations and regional organizations to study the impact of sister city relations on the scale of foreign direct investment under different classification standards.The empirical results show that: 1.The conclusion of sister city relations has indeed played a significant role in promoting the scale of China’s foreign direct investment;2.The conclusion of sister cities can reduce the institutional distance between the two countries,so as to make up for the inhibitory impact of the institutional differences between the two countries on China’s foreign direct investment;3.Explain that the conclusion of sister cities can promote the scale of foreign direct investment by improving bilateral economic and trade relations.Therefore,the establishment of sister cities can make up for the institutional differences between the two countries and strengthen economic and trade exchanges,so as to promote China’s foreign direct investment in the host country.At the same time,through sample analysis,it is found that China has gradually expanded the circle of friendly cities,especially vigorously expanded the scale and scope of developing countries,and increased political exchanges with developing countries;And comparing ASEAN and the EU,it is found that the conclusion of sister city relations between China and ASEAN countries can better promote the expansion of China’s foreign direct investment.China and ASEAN have a solid political and economic foundation,have a long history of establishing diplomatic relations,stable political relations and maintain friendly economic and trade exchanges.Finally,according to these research conclusions,this paper puts forward suggestions and prospects,and suggests that our government establish and improve the sister city management system to promote the double improvement of the quantity and quality of sister cities;And hope that Chinese enterprises will improve the development layout of sister cities and accurately select appropriate partners of sister cities;Give full play to the positive role of friendly city relations in investment,and enterprises should boldly "go out";Strengthen the risk assessment of investment countries,carefully consider the host state-owned business environment and avoid investment risks caused by institutional differences,adopt differentiated investment strategies,and actively promote the development of China’s foreign direct investment.