Institutional quality differences will increase the risk cost of economic and trade exchanges between two countries. Based on the transaction cost theory

this paper constructs a partial equilibrium model between Chinese enterprises and the host country government to illustrate that the institutional distance inhibits Chinese enterprises’ OFDI by generating transaction costs

and the host country signing the Belt and Road Initiative can alleviate this inhibition. Based on the panel data of 118 signatories of the Belt and Road Initiative from 2003 to 2019

this paper explores the impact of institutional quality differences on China’s OFDI and the moderating effect of the Belt and Road Initiative through empirical analysis. The results show that political and economic institutional quality differences have a significant inhibitory effect on China’s OFDI. The host country signing the Belt and Road Initiative can significantly alleviate the inhibitory effect

and this conclusion is still sound after considering endogenous problems. As the accumulation of China's OFDI in the host country increases

the inhibitory effect of institutional quality differences on China’s OFDI gradually weakens

and the moderating effect of the host country's signing the Belt and Road Initiative weakens. Taking geographical distance as the threshold value

the greater the geographical distance from China

the greater the moderating effect of the Belt and Road Initiative.