The Impact Of Bilateral Investment Treaty On China’s Propensity For Overseas M&A

With the deepening of economic globalization and the increase of China’s openness to the outside world,more and more Chinese companies are investing in overseas markets.The rise of the fifth wave of global M&A and China’s accession to the World Trade Organization provided a good opportunity for China’s overseas M&A,which entered a new stage of historical development.In 2014,“The Belt and Road” Initiative gave a new meaning to China’s overseas investment.In order to further promote the “going out” strategy and facilitate overseas investment,the Chinese government has signed bilateral investment treaties with 103 countries to provide policy support and security for Chinese enterprises’ outbound investment.In this context,the impact of bilateral investment treaty on two-way OFDI has received increasing attention,however,from the perspective of overseas M&A,there are few studies on the economic effects of bilateral investment treaty and the internal mechanism needs to be explored.In the context of the entry into force of bilateral investment treaties,this paper investigates the relationship between bilateral investment treaties and China’s propensity for overseas M&A by using the difference-in-difference method.Then,use institutional distance as a mediating variable to explore its mechanism of action.The main findings of this paper are as follows: Firstly,the entry into force of bilateral investment treaties can significantly promote Chinese firms’ propensity for overseas M&A.Secondly,except South America and Europe,the promotion effect of bilateral investment treaties on Chinese M&A abroad is significant in other regions of the world,and is more pronounced in host countries with lower levels of development.Based on the in-depth perspective of the bilateral investment treaty text,the subsequent deepening of the agreement has a more significant effect on the enhancement of China’s propensity for overseas M&A.Third,bilateral investment treaty can significantly reduce the institutional distance between the contracting parties,and the reduction of the institutional distance plays a positive role in the process of “going out” of Chinese enterprises.This paper expands and enriches the theoretical research on the relationship between bilateral investment treaty and Chinese overseas M&A.It is also provides empirical evidence on the practice of Chinese bilateral investment treaty in the new development stage and provides reference information for China to participate in the negotiation of international investment rules in the future.