Study On Political Risk Of Chinese Resource--seeking Overseas Direct Investment

Along with the rapid economic growth, the scale of Chinese overseas direct investment has become bigger and bigger, facing with kinds of risk. The resource pressures brought by the economic development forced more Chinese overseas direct investment flow to natural resource industry. Due to its special industry characteristics, when studying the political risk of resource-seeking overseas direct investment, we want to focus on the specific political risk.Most of the existent literatures on political risk treated it as blanket risk for all enterprises. This paper regards the political risk as a specific dynamic risk for different enterprises. We divide the political risk into the political risk of the barriers to entry and the political risk of operating in accordance with the process of overseas investment by resources-oriented enterprises. Under the concept of "fancy value", we consider the source of political risk is the subjective assessment of incremental social welfare of the host country brought by the multinational corporations. Thus we turn the political risk from a blanket risk to a specific risk using the subjective assessment frame. We use the Cobb-Douglas to grab "the fancy value". We create the coefficient of the political risk of the barriers to entry to represent the subjective assessment. In this way, including the host country factors, the enterprise factors and the home country factors to avoid the limitations made by the previous literature tend to focus on the single host country factors. Thus we can analyze the political risk overall to provide solid management and control strategies.We analyze the cause why political risk coming out from the host country factors, the enterprise factors the home country factors and the dealing factors. With empirical analysis and case study, we verified the validity of the theory. At last we bring forward some long term advice to avoid the political risk.