Research On Country Risks Of Direct Investment In “The Belt And Road” Countries

Since “The Belt and Road” initiative was proposed in 2013,more and more domestic companies have made direct investments in countries along the “Belt and Road”,and China 's direct investment in countries along “The Belt and Road” has shown an overall upward trend.However,in the complex investment environment and fierce international competition,Chinese companies face greater risks when investing and operating in countries along the route.The investment risk is an important factor that affects investment decision-making and investment performance.Therefore,it is of great significance to assess the national risks in overseas investment of the countries along the route.This paper adopts the research framework of “study on the status quo-risk identification and analysis-risk evaluation-policy recommendations”.First of all,it sorts out the existing related literature and defines the key concepts such as the countries along the “Belt and Road” and national risks,as well as summarizing the research status of influence factors of OFDI,then briefly describes the evaluation practices of some authoritative international rating agencies.Based on an in-depth analysis of the formation and identification of national risks,the national risks that domestic companies may face in the direct investment of countries along the “Belt and Road” are classified into three categories: political risk,economic risk,social and cultural risk.This paper selects 19 indicators from those three dimensions to construct a national risk evaluation in direct investment by applying the technique of factor analysis.The risk assessment and early warning model constructed in this paper decomposes multiple comprehensive indicators into five factors: social stability factor,business environment factor,economic stability and independence factor,market size and facilities factor,and investment guarantee factors,and the importance of each factor decreases.In the empirical analysis,36 countries along the “Belt and Road” sample were collected and the national risk comprehensive score and various factor scores are calculated and analyzed,which initially verified the rationality of the evaluation system.The main conclusions are as follows.Firstly,the empirical research shows the national risk ranking of OFDI in 36 sample countries,reflecting overall risk status of each country,while five-factor scores reveal the specific source of national risk,which in turn validate the risk assessment proposed in this paper.In addition,total scores and sub-scores of five factors of sample countries in different regions is various,and scores of countries in the same region are also different.Secondly,this paper puts forward corresponding suggestions.To deal with political risks,intergovernmental communication needs to be strengthened and foreign investors' diplomatic protection mechanism deserves further improvement.China could establish and perfect the overseas investment insurance system.To deal with economic risks,multinational companies should be familiar with the investment environment of host-countries,weighing the risk-return of investment projects.Besides,carrying out cross-border mergers and acquisitions may be a strategy to avoid economic risks.To cope with social and cultural risks,cooperation at the government level can be advanced to jointly maintain social security.Multinationals need learn to integrate into local social governance systems and fulfill social responsibilities so as to gain recognition from local people.