The Central Enterprise Overseas Investment Risk Control Research

Since the reform and opening up, especially China’s accession to the WTO in2001and the establishment of the State-owned Assets Supervision and Administration Commission in2003, with the constant improvement of China’s socialist market economy system and the deepening reform of the oversight system for state-owned assets as well as the advancement of economic globalization, China has been reaching out to the world from all perspectives, with a flood of competitive Chinese enterprises actively implementing the strategy of going out, which not only speeds up globalization, but also launches China’s international investment and business, such as overseas project contracting, acquisitions of international resources, mergers and acquisitions, and overseas listing, etc. Those enterprises have on one hand made the most of the two resources from home and broad, on the other hand extensively participated in the two competitions. Among those enterprises, central enterprises have gradually become the dominant part, whose overseas investment has entered the period of rapid development. However, the risk of foreign investment is also increasing day and night. Therefore, the thesis, taking the good and experience from foreign enterprises and typical central enterprises, aims at setting up a set of risk control mechanism to gradually level up the overseas investment risk control ability of the central enterprises by a comprehensive review of the related articles about foreign investment and risk management and a deep analysis on the current situation of the central enterprises overseas investment and risk management.The first chapter is the introduction. Firstly, the writer analyzes the background information related to this chapter so as to elaborate the theoretical significance and practical directive function of this study. Secondly he summarizes existing domestic and foreign research literatures from overseas investment by central enterprises, including its investment risks, risk management, and comparative research of overseas investment risk management by multinational company, etc. Thirdly, the writer clarified the logical line of thought of this thesis, including from theory to practice, from home to abroad, from micro to macro, and from technology to regulation, as well as the research methods adopted by this thesis, such as literature review, comparative analysis, technical analysis, and case study, etc. Lastly, the writer points out the innovative part of the thesis, as well as the difficulties and defects.The second chapter is an introduction to the theories related to this thesis research. Firstly, this chapter summarizes the concept and connotation and the characteristic of economic globalization, also the meaning, development stage and performance type of the internationalization of enterprises, meanwhile it expounds the close relationship between the economic globalization and enterprise internationalization, which complement each other. Secondly, the meaning of overseas investment and the performance characteristics from six aspects are discussed, and systematically compared and analyzed the new theory of in developing countries-the "no equilibrium theory", as well as four big overseas investment traditional theories which include the international division of labor and comparative advantage theory represented by Richard, the monopoly advantage theory represented by Hymer, the internalization theory represented by Coase, the eclecticism theory represented by Duning and so on. Thirdly, it discusses in detail about theories of risk and risk management from the respects of risk connotation and its categories, overall risk management connotation and the process, and risk warning system, also it expounds the relationship between internal control, overall risk management and modern enterprise management. Lastly, it clarifies some theories about state strategy, public policy, overseas investment insurance, enterprise governance and the stakeholders.The third chapter gives analysis on central enterprises’ overseas investment and current situation of risk management. This chapter digs into major achievements and basic features of overseas investment by central enterprises after putting forward and studying its three development stages. Meanwhile, this chapter demonstrates the idea of risk classification and analytical frameworks of overseas investment by central enterprises into’ three categories and ten kinds’ based on perspectives of environment, domestic investment environment and enterprises themselves. Lastly, the chapter summarizes and analyses main problems and shortcomings of central enterprises’ overseas investment and current situation of risk management.The fourth chapter made a comparative research on risk control of overseas investment in enterprises at home and abroad. Through comparison and analysis on theory and practice of overseas investment in Europe and the United States, Japan, Korea, and some developing countries, this article argues that differentiated stages of investment development and characteristics govern the outstanding disparity on risk management performed by different types of countries and regions. Enterprise-oriented America and Europe, for instance, have now stepped into the stage of comprehensive risk management, as well as Japan and South Korea, which are oriented both in government and enterprises, while in government-oriented developing countries risk management of overseas investment still remains in starting or primary phase. Then general knowledge and the experience for reference and enlightenment of overseas investment are raised based on the comparative research.The fifth chapter is the empirical analysis on cases of risk management of central enterprises’ overseas investment. The chapter takes China Minmetals Corporation’s overseas investment risk control as an example. China Minmetals Corporation is not only a state-owned key central enterprise, but also a world-renowned comprehensive mining group. On the basis of full survey, the writer does a further study on its overseas investment development, basic features and risk control methods, and two cases of foreign mergers and acquisitions. A conclusion is made about major experiences and lessons are drawn from above.The sixth chapter is to construct central enterprises’’Trinity’ overseas investment risk control system from the level of enterprises. Basing on the microcosmic comprehensive perspective, this chapter does research on central enterprises’countermeasures on overseas investment risk control from the technical level. This chapter holds that central enterprises’ overseas investment risk control system should highlight the key points with the principle of emergency and easiness first, difficulty and distance next. For the present, central enterprises’"Trinity" overseas investment risk control system which is guaranteed by the organization system, centered on the early warning system and risk assessment system, and takes the risk culture as the soul should be worked up, and central enterprises’ability and level of risk control should be improved. Whether the corresponding risk early warning index system set up on the basis of the fifth chapter’s "ten types of risks", or the design and establishment of the risk assessment system basing on the combination of quantitative analysis and qualitative analysis, all of which are of perspective and scientific applicability.The seventh chapter is to construct the "One Body Two Wings" promotion and supervision service mechanism from the level of government. Basing on the macroscopic comprehensive perspective, this chapter does research on central enterprises’countermeasures on overseas investment risk control from the level of institution. This chapter thinks that national power, governmental and social resources should be utilized to support and promote central enterprises to be world class enterprises, thereby to further strengthen the abilities against risks, to some extent, which is for risk control. Therefore, this chapter proposes that central enterprises’"One Body Two Wings" overseas investment promotion and supervision service mechanism which takes national strategy orientation as the main body, policy support system and state-owned assets supervision service mechanism as two supporting wings should be established, and holds a deep and systematic discussion on the national strategy of establishing central enterprises’overseas investment, unifying and perfecting the policy system and state-owned assets supervision service mechanism of central enterprises’overseas investment.The article stressed in conclusion, as the important representative to show national strength and the interests of the state on the international stage, the central enterprises shall root in overseas, based on local resources and look around the world with a global mind and vision during the implementation of the strategy of "going out" and developing overseas investment and international operation, besides, they shall take the social responsibilities into mind seriously and enhance the participation in global market competition, the international resource allocation, technology innovation, the industrial integration and risk control ability. After a certain period of unremitting efforts, the goal to strengthen the central enterprises and cultivate first-class enterprise with international competitive will be realized.