The Study On The Effect Of Host Country’s Political Risk On The FDI Of Chinese Petroleum Enterprises

With the rapid development of economy, China’s foreign direct investment is growingyear after year as also. Compared with other countries in the world, it keeps a relativelyhigh and steady rate. In this background, China’s oil industry is benefitting too. And theforeign direct investment of Chinese three state-owned petroleum enterprises hasincreased significantly, and they also gradually emerged in the global investment arena.However, oil, as a rare resource, the foreign direct investment of this industry is differentform others. It required that the host country is abundant of oil. Therefore Chinesepetroleum companies have many limitations in choosing the host countries. While now,the oil rich countries are mostly developing countries with an unsteady political situationand some may have disputes. Like the Middle East district, Africa, South America andother areas. From CNPC’s failure acquisition of Unocal in2005, to the huge losses toChinese petroleum enterprises brought by the Libya war in2011, political risk has madesome disadvantages to the enterprises. Chinese petroleum enterprises are facing aprominent obstacle of political risk. And investigation into political risk has an significantmeaning in helping the companies reduce the losesPolitical risk of petroleum industry has received much concern, while most of thedomestic scholar’s research is mainly concentrated on the theory perspective. The paperfirstly gives statistics of the foreign direct investment cases of the three state-ownedpetroleum enterprises since2001, involving32countries, mainly distributed in NorthAmerica, Middle East, North Africa and South America, which are the subject of the paper.And then the paper selects some relevant indicators, and comes to a conclusion by modelanalysis: Host country’s political risk has a positive effect to the investment of Chinesepetroleum enterprises. That is, the more political risk, the more investment of Chinesepetroleum enterprises instead. Then further the paper analyzes the reasons for such resultsin two aspects: The main reason is because of the particularity of the investment in the oil industry; secondly, for the initial distinctiveness of Chinese petroleum enterprises. In thelast, some related measures against political risk are given.