PAN Zhen, JIN Zhongkun：Bilateral Political Relationship, Host Country Institutional Risk and China's Outward FDI

Abstract：Incorporating political factors into the framework of institutional analysis, the paper investigates the impact mechanisms and effects of bilateral political relationship and host country institutional risk on China's outward FDI simultaneously.Based on theoretical analysis, using outward investment flow data in 117 host countries from 2003 to 2013, the empirical results show that Chinese Outward FDIs tend to invest in those countries with good political relationship and high institutional risk, and the effects of political relationship and institutional risk differ between developed countries and developing countries significantly.In addition, good political relationship is served as alternative arrangement of lessening uncertainty to encourage outward FDI in the context of high host country's institutional risk, and in the context of low host country's institutional risk, good institutional quality is a complementary rather than promoting FDI obviously.The findings are still robust after controlling sample selection bias.

Key words： China's Outward FDI    Bilateral Political Relationship    Institutional Risk    Institutional Distance

source:Finance & Trade Economics ,No.6,2015