The Effect Of Institutional Distance On China’s Direct Investment In Along The Belt And Road

The spread of "trade protectionism" makes economic globalization subject to more uncertain factors.Especially,the effect of COVID-19 has led to a general decline in OFDI.Initiated and promoted by China,the Belt and Road Initiative is gradually taking effect.In 2020,China became the world’s largest OFDI traffic.According to statistics,after the initiative was put forward,my country’s foreign investment in countries continued to expand.At the same time,influence of different countries’ economic institutional,political institutional,legal institutional differences on OFDI has become a vital research direction.According to the availability of data,53 countries along the Belt and Road were chosen as samples,and panel data from 2003 to 2020 were used.A linear gravitation model of investment and a nonlinear threshold panel model explores the impact of institutional distance of various dimensions on my country’s OFDI,and how pre-trade trade affects my country’s OFDI and how pre-trade adjusts institutional distance to affect my country’s OFDI.The verdicts are: First,economic,legal and political system distance all have negative effects on China’s direct investment.Among them,the distance of political system has the greatest influence on investment decision making in China.The group regression results show that for developing countries,institutional distance in each dimension is inversely proportional to OFDI,while developed countries are not affected.Second,the institutional distance in each dimension is affected by the pre-trade.Pre-trade inhibits the negative impact of institutional distance on China’s foreign direct investment,while pre-trade itself promotes China’s foreign direct investment.Third,the institutional distances of different dimensions show nonlinear effects when the pre-trade is used as the threshold variable,and there is a top priority trade interval.Fourth,Cluster analysis shows that among the belt and Road countries,the system distance between developed countries and China is relatively large,while that between developing countries is relatively small.Therefore,when China conducts OFDI,it can give priority to countries with a small institutional distance from China,and countries that already have trade contacts.The optimal institutional distance can be selected for OFDI by examining the value of the pre-trade.