In view of the current characteristics of China’s foreign direct investment with institutional risk appetite, this paper firstly discusses the mechanism of country system distance and the mechanism of OFDI motivation in the process of foreign direct investment location selection under the framework of heterogeneous enterprises. It has a negative effect on the OFDI motive, which in turn has a negative impact on foreign direct investment. Then, the analysis based on China’s foreign direct investment and related data of 140 countries from 2003 to 2015 shows that the OFDI of Chinese enterprises has obvious market-seeking motive and strategic resources seeking motive, among which market-seeking type OFDI has significant supplement effect while strategic resources seeking type OFDI has squeezing-out effect to some extent. The institutional distance between host countries and China can influence the location selection of Chinese OFDI through investment motive, i.e., Chinese OFDI tends to the countries and regions with smaller institutional distance, and the institutional distance can weaken the supplement effect of market-seeking type OFDI and the squeezing-out effect of strategic resources seeking type OFDI. From enterprise perspective, Chinese enterprises do not have “institutional risk preference” but have the feature of “institutional risk evasion” and choose the countries and regions with smaller institutional risk, smaller institutional distance. As a result, China should deepen market economy system reform, uphold domestic institutional quality, strengthen international economic cooperation, and increase the institutional adaptive capacity of Chinese enterprises so as to effectively decrease the restriction of institutional distance on the location selection of OFDI, to optimize OFDI location distribution and to promote OFDI return and quality.