Empirical analysis on the sustainable development of China's outward foreign direct investment from the perspective of economic institution

The countries along the Belt and Road (B&R) are important destinations of China's outward foreign direct investment (OFDI). Based on the panel data (2003-2017) on China's OFDI in 65 B&R countries, this paper sets up a Heckman two-stage model, and then empirically analyzes how China's OFDI is affected by the difference between China and the host country in economic institution. In addition, the authors explored whether China has institutional preference in the OFDI with different investment motives. The empirical test shows that: investment selection and investment scale of China's OFDI are promoted to different degrees by the economic institution of the host country, and the absolute distance between China and the host country in economic institution; China has different institutional preferences in market-seeking OFDI between the selection stage and the investment stage; In terms of technology-seeking OFDI, host countries with short economic institutional distance are preferred in the selection stage, and host countries with good economic institution and long economic institutional distance are preferred in the investment stage. The research results provide empirical evidence for China to continuously implement OFDI in B&R countries and create a green investment environment. © 2020 WITPress. All rights reserved.