The Effect Of Host Country’s Political Risk On The Ofdi Of China

Since China implemented the strategy of "Going Abroad", China’s outward foreign direct investment has grown rapidly and significantly, While with its huge market potential and rich natural resources, Africa has become the first choice of China. However, with the rapid growth of China’s investment to Africa, the cases that Chinese enterprises suffer from the political risk of African countries have also increased obviously, but so far, there are few domestic research about the effect of Africa country’s poitical risk on the OFDI of china.Against this background, by combining the qualitative analysis with the quantitative analysis, this paper attempts to solve the following four issues:what types of political risk the African countries have? How the Political risk factors affect the direct investment of China to African? Does Chinese investor get enough emphasis on Political risk in African? How to deal with the political risk? Most of the existent literatures on political risk treated it as a exogenous variable of policy. In the part of theory analysis, a typical model of the two countries is built to turn the political risk into a endogenous variable, and then analyze the emergence and development of political risk and its mechanism on OFDI. Then on the basis of the describe of political environment in Africa, I analyzed the types of political risk faced by Chinese enterprises in African one by one. In the part of empirical analysis, this paper take Oseghale’s theoretical framework of political risk as a reference, by using the panel data of China’s investment in Africa from2003to2012, and then build a dynamic panel model to test whether political risk is an important factor to the OFDI of China in Africa. Finally, this paper make a conclusion based on the full text and put forward several reasonable suggestions to deal with the political risk of African countries.