Risk Prevention Of Foreign Direct Investment For Chinese Petroleum Industry

After joining the WTO, along with the sustained and rapid development cf the domestic economy and rising energy demand, China has come to the point with an obvious shortage and dramatically growing demand of domestic oil. In order to address the imbalance between supply and demand, people are developing a wider range of oil supply channels and also actively increasing our Foreign Direct Investment in the petroleum industry from both width and depth.Some companies represented by CNOOC, Petro China have adapted the "go-global" strategy to explore opportunities aboard. They initiated a number of overseas mergers and acquisitions with a satisfactory impact. Although the theme of world peace and development remains, there are still regional conflicts with even increasing intense.. Unfortunately, most of our foreign direct investment is in these volatile regions, such as the Middle East, Latin America, etc. Along with the behavior of the host country or some unpredictable factors, the process of the foreign direct investment often faces a variety of risks, including political risk, legal risk, economic risk, technological risk, operational risk and cultural risk. What are the characteristics of these risks, how it can be effectively prevented, should be the hot issue for political science, diplomacy, economics and other disciplines to focus on and study.In this article, based on the status and characteristics analysis, we present the empirical analysis of various risks encountered during the implement of foreign direct investment in China petroleum industry and propose systematic risk preventive measures aiming at preventing the risks through insurance, diplomacy and other measures. Only if we value these risks and take effective risk preventive measures, will China foreign direct investment in oil industry have a healthy development.This article can be divided into five chapters. Chapter 1 introduces the background and practical significance of the study of foreign direct investment in China petroleum industry with clarified definition of foreign direct investment, risk and risk of foreign direct investment. Chapter 2 presents a summary of current situation focusing on characteristics of foreign direct investment in China petroleum industry, followed by specific analysis of its advantages and disadvantages with rising problems highlighted. Chapter 3 identifies several key risks of foreign direct investment in China petroleum industry, as political risk, legal risk, economic risk, technological risk, operational risk and cultural risk. Chapter is the main part of this article. It elaborated the risk measurement and evaluation of China foreign direct investment in the petroleum industry. In the first place, a risk evaluation index system is developed with a set of risk assessment steps proposed, and then analyze the risk using the methods of empirical analysis and finally come to the conclusion of the risk measure. Last but not least, Chapter 5 is the summarization of risk prevention of China foreign direct investment in petroleum industry. On the base of fundamental analysis and empirical analysis from the former chapters, the final chapter summarized valuable countermeasures and suggestions for China foreign direct investment in petroleum industry.