The Impact Of Business Environment On Foreign Direct Investment

Optimizing the business environment is an important basis for China to accelerate the construction of a modern economic system and promote high-quality development.In October 2019,the State Council promulgated the Regulations on Optimizing Doing Business Environment,which came into force on January 1,2020.Local governments at all levels also began to issue supporting policies to optimize the business environment.As an important measure to deepen reform and opening up,improving the business environment is of great significance to attract foreign direct investment.Therefore,this thesis attempts to analyze and study the impact of business environment on attracting foreign direct investment in all provinces by constructing a business environment index evaluation system.On the premise of objective indicators and available data,with reference to the Chinese Provincial Business Environment Report 2020 issued by Wuhan University and Peking University and the research on the evaluation of business environment indicators by many scholars,this thesis considers four dimensions:a market that operates on the basis of fair competition,a government that operates cleanly and efficiently,policies and legislation that are marked by fairness and transparency,and a cultural environment that is open and inclusive.And then constructs a business environment indicator evaluation system.The Entropy Method is used to determine the weight of each index,so as to calculate the comprehensive index and sub index of business environment of 30 provinces in China from 2008 to 2019.Then the thesis makes a horizontal and vertical comparative analysis.Based on the panel data of 30 provinces from 2008 to 2019,this thesis empirically tests the impact of business environment on attracting foreign direct investment by using two-way fixed effect model.This thesis consists of six parts.Part Ⅰ describes the research background,research significance,research content and research methods.Part Ⅱ is literature review,which reviews the relevant research results at home and abroad from three aspects:the connotation of business environment,the influencing factors of foreign direct investment and the impact of business environment on foreign direct investment.Part Ⅲ is China’s provincial business environment measurement and result analysis.Through the existing evaluation,it can be found that China’s business environment has achieved remarkable results.In view of the shortcomings of the relevant evaluation,the thesis tries to construct a new business environment index evaluation system,using the entropy method to determine the weight of each index and measuring the provincial business environment of China.The study finds that the overall business environment of 30 provinces in China from 2008 to 2019 shows a trend of continuous improvement.But there are obvious differences among regions.Business environment decreases from the east to the west.The level of business environment in the eastern region is much higher than that in the central and western regions,of which Beijing and Shanghai are far ahead,while the central and western regions are both below the national average.Part IV is a factual analysis of the impact of the business environment on FDI,which is carried out from four aspects:opening of the market is synchronized with the increase in the total amount of FDI,industrial upgrading is closely related to the industry distribution of FDI,regional strategy is related to the regional distribution of FDI,and law and cultural environment is related to the distribution of sources of FDI.Part V is an empirical research of the impact of the business environment on FDI.This part analyses the influential mechanism and establishes a two-way fixed effect model which is used for empirical analysis.The results show that the overall index and sub index of business environment both have a significant positive impact on foreign direct investment.Each 1%improvement of business environment can increase foreign direct investment by 4.9886%.Each 1%improvement in market environment,policies and legislation environment,government affair environment and cultural environment will increase foreign direct investment by 9.8923%,7.7200%,3.7688%and 3.4865%respectively.Among them,the improvement of market environment has the most obvious effect on attracting foreign direct investment.At the same time,the control variable traffic also plays an obvious role in promoting China’s foreign direct investment,while all empirical results are stable and reliable.However,the impact of business environment on FDI is heterogeneous.In terms of region,business environment can promote the inflow of foreign direct investment in the central region to the greatest extent,followed by the eastern and western regions.In terms of period,the impact after 2014 is significantly higher than that before 2014.The preference of foreign direct investment for business environment shows a dynamic upward trend.In terms of the source of overseas direct investment,business environment has greater impact on FDI inflow from China’s Hong Kong,Macao and Taiwan region as well as European countries.Part VI is the research conclusions and policy implications.This part summarizes the research conclusions and empirical analysis results,and provides corresponding policy implications.