Abstract: The report of the 20th National Congress of the Communist Party of China pointed out that the primary task of the new era is to achieve high-quality development. In the context of high-quality development of OFDI and the formal entry into force of RCEP, it is of great practical significance to study the impact of the institutional quality of RCEP member states on the efficiency of China’s OFDI. This paper selects the OFDI data of China’s RCEP member states from 2008 to 2021, and takes the six dimensions of global governance indicators, namely voice and accountability, political stability and non-violence, government efficiency, regulatory quality, rule of law, and control of corruption, as non-efficiency items and incorporates them into the stochastic frontier gravity model of time-varying non-efficiency items. This paper analyzes the impact of institutional quality of RCEP member countries on China’s OFDI efficiency, and measures the investment efficiency and investment potential. The empirical results show that the rule of law level of RCEP member states is positively correlated with China’s OFDI efficiency, while the quality of regulation is not significantly correlated with China’s OFDI efficiency, while the right to speak and accountability, political stability and non-violence, government efficiency and corruption control are negatively correlated with China’s OFDI efficiency. Judging from the measurement results of investment efficiency, China’s investment efficiency in RCEP countries is unbalanced and the overall efficiency is low. From the measurement results of investment potential, there is a huge investment potential in the RCEP member countries to be explored. this paper not only helps to understand the motivation of China’s OFDI from the perspective of the host country’s institutional quality, but also provides empirical experience for China’s direct investment in RCEP member countries and helps Chinese enterprises to better “go global”.

Key words: RCEP; Institutional Quality; Outward Foreign Direct Investment; Stochastic Frontier Gravity Model; Efficiency

Reprinted from Guangxi Economic Journal, 2024,42(06):43-54.