Abstract: The object of this paper is the impact of compound country risk on China's Outbound Foreign Direct Investment (OFDI). Compound country risk is a kind of national level macroscopical risk. The range and types of risks affecting OFDI are very wide, including the microeconomic risks at the enterprise level and the macroscopical risks at the national level. Macro-level country risk covers political, economic, legal, cultural and social risk factors, resulting in compound country risk. From the macroscopical level, this paper studies the impact of compound country risk and its main risk factors on China's OFDI. Since the beginning of reform and opening up, China's economy has developed rapidly, and its opening to the outside world has been continuously intensified. With the rapid development of foreign trade and attracting foreign investment, China's foreign direct investment has also grown from small to large, from weak to strong, and entered a stage of rapid development, and China has gradually changed from a net importer of international investment capital to a net exporter of capital. In particular, since the "Belt and Road" initiative was proposed in 2013, China's investment in the countries jointly building the "Belt and Road" has grown extremely significantly, and China's outward foreign direct investment has become more diversified, and its outward foreign foreign direct investment has reached a new level in terms of scale and quality. Since China's foreign direct investment, foreign investment risk has always been accompanied by the growth of the number and scale of China's OFDI, foreign investment risks are also more and more complex, foreign investment activities fail or project termination also occur frequently. Through the analysis of China's OFDI and overseas investment cases, we can see that China's OFDI is largely focused in some developing countries. A large proportion of these developing countries are in the stage of social transformation, political instability, structural contradictions, many belong to the high risk, high conflict countries and regions, therefore, the macro risk at the national level has become a prominent factor affecting China's OFDI. To study the impact of country risk on China's OFDI, we should consider the host country's political environment, economic level, social culture and other aspects. Based on the practice of OFDI in China, this paper discusses the components of compound country risk. Respectively from the compound country risk influence weight is relatively large, but also has the relatively stable characteristics of political risk, economic risk, social risk and other factors on the impact of OFDI system research, and put forward to prevent and deal with the complex country risk related countermeasures and suggestions. The main research contents are as follows: (1) By reading literature, reading reports and collecting relevant data and materials, this paper combs the situation of China's OFDI and investment in the countries of the Belt and Road Initiative, and analyzes the problems and challenges faced. It is concluded that China's OFDI is spread all over the world, and the layout is characterized by diversity and regional, but Asia and other surrounding regions have always occupied a dominant position. In the construction of the "Belt and Road," there are still insufficient understanding of the "Belt and Road," weak awareness of risk prevention, and imperfect mechanisms for protecting the interests of overseas investment. The Belt and Road countries have complex and volatile political environments, poor business environments and high national risks. (2) This paper identifies and analyzes compound country risk. Focus on the political risk, economic risk, social risk and other factors in the complex country risk in the host country. Ten indicators are selected for economic and social risk factors, among which political risk mainly includes regime stability, government efficiency, regulatory stability, rule of law, public participation, corruption control, terrorist activities, military intervention in politics, ethnic conflicts, and democratic distance. Economic risks mainly select inflation, bilateral economic and trade relations, annual exchange rate changes, real interest rates, the proportion of central government debt, per capita income, GDP growth rate, short-term interest rate, loan default rate, household financial obligations, etc. Social risks mainly select the host country's legal environment, Geographical distance, equality between men and women in host countries, whether or not they use the same language, social environment, social security, labor freedom, unemployment status, cost of living, and gap between rich and poor, etc., have jointly constructed a composite index system to assess the impact of country risk on OFDI. On this basis, this paper analyzes the mechanism of compound country risk affecting OFDI. (3) Empirical research. Combined with the specific data from 2003 to 2018, this paper uses the panel fractions model to study the impact of political risk, economic risk and social risk factors on China's OFDI. It is found that political risk is an important factor affecting the inflow of China's direct investment, but the low degree of political risk has a relatively limited role in promoting the inflow of China's direct investment. Economic risk factors have a significant impact on China's OFDI at the high score; Social risk factors are significant in different sub-loci, especially high sub-loci factors have a significant impact on China's OFDI. Based on whether or not the sample countries join the Belt and Road Initiative, this paper divides the sample countries into the Belt and Road countries and the non-Belt and Road countries. Then, according to the level of national development, it is divided into developing countries and developing countries, and the heterogenous effect of compound country risk on China's OFDI is explored. (4) This paper puts forward countermeasures and suggestions from the two levels of the country and the enterprise. At the government level, it is necessary to speed up the design of national risk prevention systems and the building of response capabilities, and strengthen cooperation with host governments and international organizations. At the enterprise level, it is necessary to strengthen its own risk prevention capacity and improve the international business philosophy. It is hoped that it can help the relevant national departments to make decisions and Chinese enterprises to "go out" and carry out foreign direct investment.

Read the full article here:   复合型国家风险对中国OFDI的影响研究_章海源.pdf