The Risk Prevention and Control Subsystem

Abstract

The international situation has become increasingly complex and changeable in recent years. With their growing size of outbound investment, Chinese organizations face increased investment risks, which have resulted in growth losses in their overseas operations. In addition to traditional operational risks, outbound investment risks generally include: political risks, such as political changes, wars, armed conflicts, terrorist attacks or abductions, social turmoil, ethnic/religious conflicts and crimes in a host country; economic risks, including macroeconomic changes due to economic crises, financial market turbulence and sovereign debt crises, inflation and interest/exchange rate fluctuations; policy risks, which refer to adjustments to the fiscal, monetary, foreign exchange, tax, environmental, labor and resources policies of the government of the host country and nationalization/expropriation risks; natural risks, such as earthquakes, tsunamis, volcanic eruptions, hurricanes, floods, debris flows and other natural disasters as well as pandemics; and other overseas risks that may damage or threaten China’s outbound investment and cooperation. To guide enterprises in reinforcing overseas investment risk prevention and to ensure the smooth enforcement of China’s outbound investment strategy, the Chinese government urgently needs to build a set of overseas investment risk prevention and control systems.