“Since the implementation of its ‘going-out’ strategy, China’s outward foreign direct investment (FDI) has experienced a rapid development, which has already become an important part of its overseas interests. This paper briefly analyses the current situation and its main features, the losses suffered as well as the major risks that China’s outward FDI faced during 2008 and 2009. The preliminary conclusions include: (1) China’s overseas FDI has experienced rapid development, but is still low in absolute terms, while the concentration trend of geographical and industrial distribution is obvious. This indicates that the ‘going-out’ strategy has been faithfully implemented, but also contains high risks. (2) The risks of China’s outward FDI emanate from four main aspects: breach of contract and unexpected transactional costs; exchange loss; premium-value transactions; and failure of integration. (3) Overseas FDI faces systemic risks. The internal causes from the Chinese side include a high concentration of investment, excessive government intervention, low international business management ability and a lack of overseas investment strategies. (4) Based on a country risk analysis of China’s overseas FDI, the most important issues are the legal, political, social and other institutional differences and conflicts. Through interpretation of reports on Outward FDI and Co-operation Country (region) Guide (2009 Edition) issued by the Ministry of Commerce, this paper argues that the primary risk of China’s overseas direct investment is the incompatibility of institutions.”
