The OFDI Risks In The Construction Of The Belt And Road

In 2013,President Xi Jinping proposed “the Belt and Road” initiative.In March 2015,the Chinese government formulated and issued the "Vision and Action for Promoting the Joint Development of the Silk Road Economic Belt and the 21 st Century Maritime Silk Road".With the continuous advancement of “the Belt and Road ” initiative,China attaches great importance to strengthening trade and financial exchanges with countries and regions along the route,jointly deepening “the Belt and Road” international cooperation,and working together to build a community of shared future for humanity.Foreign direct investment is an important part of China's promotion of “the Belt and Road” construction.As of the end of 2018,China's investment in the countries along “the Belt and Road” has reached USD 172.8 billion.However,China's foreign direct investment in the construction of “the Belt and Road” has great investment risks.Therefore,how to effectively identify,evaluate and prevent investment risks has become an urgent problem in the construction of “the Belt and Road”.Construction is of great significance.Since the introduction of “the Belt and Road” initiative,China's direct investment in countries along the route has maintained a high growth rate,and its progress reflects the following characteristics: the scale is expanding but with gradually decreasing speed;the location is widely distributed,but mainly concentrated in Asia;The industry is becoming more diversified and upgraded;contracting projects and M & A projects continue to increase.Chinese enterprises' direct investment in countries along “the Belt and Road” is mainly due to reasons such as seeking markets,acquiring resources,seeking efficiency,seeking technology,and enhancing competitive advantages.Direct investment along “the Belt and Road” has created opportunities for Chinese enterprises to communicate with each other through policy communication,facility connectivity,unimpeded trade,financial and financial support,and connectivity between the people.However,Chinese companies have also encountered constraints such as complex political conditions in host countries,limited corporate financing channels,restrictions on investment in specific industries by host countries,differences in legal systems,and increased competition caused by external factors.To prevent foreign direct investment in “the Belt and Road” construction,we must first clearly identify the risks that may be encountered.Foreign direct investment risk is the uncertainty that may adversely affect the achievement of corporate goals when an enterprise makes foreign direct investment.It usually has the characteristics of objectivity,loss,uncertainty and measurability.The risk identification process of an enterprise is relatively complicated.The identification of investment risks must comply with the feasibility principle,cost-benefit principle,flexibility principle,comprehensive principle,and systemic principle.By using the SWOT analysis method to identify the sources of risks in the process of foreign direct investment of enterprises in the context of “the Belt and Road” from the two dimensions of the country and the enterprise,the following risk identification system is constructed: macro environmental risks(including political risks,economic risks,social risks,cultural risks and natural disaster risks)and enterprise-level risks(including competition risks,investment risks,and management risks).These risks have a higher proportion of political risks,higher risks due to regional concentration,more difficult risk management and risk loss Great and other characteristics.China invests in the countries along “the Belt and Road”.The countries along the route have different degrees of development and great differences in economic ties with China.Therefore,China's proportion of foreign direct investment varies.Evaluate the risks of ODI in Chinese companies' “Belt and Road” construction from the perspective of the host country,select 33 countries with available data along “the Belt and Road” as research objects,and use the CROIC-IWEP national risk rating method(including 5 first-level indicators and 41 secondary indicators).By standardizing the raw data of the secondary indicators,and using the entropy method to measure the degree of dispersion and the corresponding weight matrix of each secondary indicator,the risk scores of countries are obtained.The assessment integrates factors such as economic foundation,solvency,social resilience,political risks,and relations with China.The results show that Singapore,Israel,the Czech Republic,Hungary,and other countries have less risk;Malaysia,Russia,Romania,and Central Asian countries have controllable risks;Southeast Asian countries have higher investment risks,with Myanmar,the Philippines,Vietnam,and Laos ranking behind;Egypt,Iraq,and Mongolia rank at the end,with higher risks than other “the Belt and Road” countries.In order to further manage and control risks,it is necessary to assess the risks of ODI in the construction of “the Belt and Road” from the perspective of the enterprise.The fuzzy analytic hierarchy process(F-AHP)is used to determine the risk weight,and the maximum degree of membership method is used to determine the degree of risk facing the enterprise.The assessment shows that the total score of China's enterprises on “the Belt and Road” foreign direct investment risk is 72.23 points,which is at a "higher" risk level.Specifically,the two secondary indicators are in the "higher" level range.Compared with the macro environmental risks,the internal risk of the enterprise is slightly higher.Among the factors affecting macro risks,the scores of the four factors of political,economic,socio-cultural,and natural disasters are gradually decreasing.Political and economic risks are at a "higher" level,and socio-cultural and natural disasters are at a "medium" level.Economic risk is an important factor affecting macro environmental risks.On this basis,a regression model was selected by using the proxy variables of politics,economy,social culture,and corporate risk as explanatory variables to analyze the actual impact of each risk factor on corporate performance.The current level of risk management of foreign direct investment in Chinese enterprises is generally low.A systematic risk prevention system that can improve the efficiency of enterprise risk management is needed to provide effective protection for foreign direct investment of enterprises in the context of “the Belt and Road”.First,we need to establish a risk assessment system and make quantitative assessments of different types of risks based on risk identification.Second,we must establish a risk early warning system and use computer systems to obtain corresponding early warning signals.Finally,we must build a risk disposal system.An enterprise shall,in light of its own circumstances,take corresponding risk treatment measures for different levels of risk.From the perspective of the enterprise,it is necessary to formulate a scientific foreign direct investment strategy,implement efficient internal risk management and control,and comprehensively improve the comprehensive competitiveness of the enterprise.From a national perspective,a legal guarantee system should be established to provide protection for foreign direct investment,improve the information service platform,strengthen financial support,and encourage independent innovation.