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Bilateral Investment Treaties, Regional Institution and Regional FDI

【Authors】
LI Yiying, WANG Zengtao & HU Yanxin
【WorkUnit】
?Xi'an Jiaotong University, 710061.
【Abstract】

?China is the largest transitional economy in the world, and her regional institution and regional FDI scale vary greatly. Therefore, the study of bilateral investment treaties, regional institution and regional FDI will not only enrich the theory of bilateral investment treaties, but also benefit the balanced development of China's regional economy. Taking the provincial panel data of China from 1997 to 2016 as the sample, this paper conducts theoretical and empirical research based on FDI comprehensive motivation theory and the threshold model. The research shows that bilateral investment treaties and regional institution have significant positive effects on regional FDI, and there is a significant substitution effect between bilateral investment treaties and regional institution. Using the regional institution as a threshold variable, we further find that there exists a regional institution threshold for the impact of BITs on regional FDI: compared with regions where the regional institution value is higher than the threshold value, bilateral investment treaties have greater positive effects on FDI flowing into the regions where the regional institution value is lower than the threshold value. Therefore, actively signing bilateral investment treaties and making efforts to improve regional institution will help not only to attract foreign direct investment, but also to narrow the differences in the scale of regional foreign direct investment, and promote the balanced development of China's economy.

JEL: F02, F21

【KeyWords】
Bilateral Investment Treaties, Regional FDI, Regional Institution, Threshold Effect