Political Risk Assessment Of China’s Foreign Direct Investment

In recent years, with the increasing integration of the world economy and the gradual deepening of economic globalization, China’s foreign direct investment shows a rapid growth. Chinese enterprises actively participate in the global wave of foreign direct investment in order to achieve long-term goals of multinational enterprises and global investment. However, the subsequent is political risk of transnational operation increasing risks rise, the political risk faced by enterprises will largely affect the success or failure of transnational operation. Political risk has become the starting point of the foreign investment project evaluation, is the key factor that influence the success of the foreign direct investment. Political risk research and its quantitative assessment have important practical and theoretical significance.This paper aims to select a series of economic, political and social indicators to establish a set of political risk assessment system with the use of the principal component analysis method, and thus to measure of the host country political risk level, that can visually reflect the political risk level of each host country, hoping to provide reference for researchers in this field and overseas investors.This paper first reviews the definition and classification of political risk, theory research associated with foreign direct investment and political risk, and political risk mechanism, this paper also summarizes the main method of political risk assessment. Then, this paper introduces the current situation and characteristics of China’s foreign direct investment, from the aspects of investment scale, growth rate and industrial distribution. There is an in-depth analysis about the political risk faced by Chinese enterprises in foreign direct investment, and each analysis has encountered different types of political risk in foreign direct investment process. After that, the article around the main political risk assessment method- principal component analysis(pca), select a range of political, economic and social indicators for the host country political risk assessment study. The main select Chinese foreign direct investment flows in 20 major countries 2003-2012 data, using principal component analysis method for quantitative analysis, obtaining each host country political risk assessment of the comprehensive score each year, and based on empirical results classifying four types of host country security team. Finally, according to the current China’s foreign direct investment of political risk faced by, respectively, from the perspective of the government and the enterprise risk prevention and control strategy are put forward.