Risk Analysis of the Chinese Outward Foreign Direct Investment from the Perspective of International Investment Competitiveness

Abstract

The Chinese foreign direct investment experienced unprecedented growth during the last two decades. With $118 billion of investment, China ranks 3rd following the U.S. and Japan in Outward FDI. However, with growth of foreign investment, associated risks and conflicts between the Chinese industry sectors and the recipients also continued to grow. This study attempts to analyze the troubled/risky transactions from a perspective of international investment competitiveness. By using Chinese Government data the authors create several indices as analytical tools. Revealed Investment Advantage (RIA) in combination with Industrial Static Agglomeration Degree (ISAD), and Industrial Dynamic Agglomeration Degree (IDAD) indices were computed to categorize the troubled/at risk transactions by industry sectors. Based on the analyses, the paper offers strategic suggestions toward reduction of risky transaction for Outward FDI.