War risk (political violence risk) in the traditional sense refers to war, civil war, terrorist acts and so on. For example, the war insurance currently underwritten by China Export Credit Insurance Corporation refers to the war, civil war, terrorist acts and other similar acts in the country where the investment is made. At present, the main risk of political violence faced by China enterprises in transnational operations is not the traditional risk of war and civil strife, but the risk of political violence driven by trade protectionism in a peaceful environment, and the risk of political violence caused by labor rights and interests is also on the rise. In the brewing and outbreak of these political violence risks, the moral hazard of some politicians and public figures in the host country has played an important role. In many developing countries and countries in transition, the combination of free market economy and universal suffrage democracy has also increased political risks.

(a) The risk of political violence driven by trade protectionism is increasing.

The traditional risks of war, civil strife and terrorism mainly exist in some developing countries and countries in transition, such as Iraq and other countries in West Asia, Venezuela in South America, Congo and other countries in Africa, countries in the former Yugoslavia in Europe, Cyprus and the Caucasus of the Commonwealth of Independent States. No matter from the perspective of export or investment, these countries and regions are far from the focus of transnational operation of China enterprises. Among the 14 countries (Afghanistan, Pakistan, Iraq, Israel, North Korea, Nepal, Cyprus, Democratic Republic of Congo, Serbia and Montenegro, Croatia, Bosnia and Herzegovina, Macedonia, Georgia and Venezuela) with high risks of traditional wars, civil strife and terrorism, the total import and export trade between China and these countries in 2003 was 6,906.48 million US dollars. In 200410-July, it was US$ 5,204.8 million, accounting for only 0.8% of China's total trade in goods (US$ 62,365.438+0.122.7 million). In the foreseeable future, these countries and regions with high traditional war risks are unlikely to become the focus of China enterprises' transnational operations, because the main objectives of China enterprises' transnational operations can be summarized as expanding export markets, acquiring scarce domestic resources and acquiring advanced technology, while the actual and even potential war risks themselves reduce the income of residents in these countries and regions and weaken their ability to absorb China's goods and services, which can only meet the second objective of China enterprises' transnational operations at most. Therefore, at present and in the foreseeable future, the focus of China enterprises' transnational operation can only be developed countries, newly industrialized economies and some developing countries without wars and civil strife. Judging from the Spanish elche incident, it is not impossible that political violence occurred in these countries, resulting in the loss of assets and income of enterprises and nationals in China. However, political violence is unlikely to come from war and civil strife. In the final analysis, terrorist acts are only a few, mainly from the excessive acts taken by losers (manufacturers, workers and other stakeholders in the host country) in international commercial competition. This kind of violence can be transformed from potential risks into reality, and it is often inseparable from the incitement organization of the extreme right.

Take the European Union as an example. The enlarged EU has become China's largest single trading partner. However, in recent years, far-right parties opposed to immigration, European integration and the single currency have become increasingly rampant throughout Europe. German political parties, Italian social movements and national alliances have all inherited the mantle of fascism, and far-right parties such as the German People's Alliance, the French National Front, the Italian Northern Alliance and the Belgian Flemish Group have also gained the opportunity to govern. In the local council elections in Saxony and Brandenburg in eastern Germany announced on September 19, 2004, the far-right parties such as the National Democratic Party and the German People's Union increased greatly, winning local political influence. As far as German, French, Italian and Belgian countries are concerned, their total trade with China in 2003 was $73,703.59 billion, equivalent to/kloc-0.7 times of China's total trade with the above-mentioned/kloc-0.4 countries facing the risk of traditional wars and civil strife, and accounting for 8.5% of China's total trade in goods ($85,654.38+$0,207.29 billion). In 2004,10-July was USD 52,965.76 million, equivalent to 10.2 times of the total trade volume between China and 14 countries facing the risk of traditional wars and civil strife, accounting for the total trade volume of goods in China in the same period (USD 623 1.5438+0.227 billion). Obviously, compared with the traditional risks of war and civil strife, the risk of political violence driven by trade protectionism in a peaceful environment has a much greater impact on the transnational operation of China enterprises.

Not only some EU countries, but also some other countries have similar risks of political violence. Australia is China's ninth largest trading partner, and negotiations on the China-Australia Free Trade Agreement are under way. However, the welfare level of Australian residents is relatively high, and the competitiveness of manufacturing industry is far lower than that of their counterparts in China. Manufacturing interest groups are trying their best to stop the China-Australia free trade agreement negotiations, and white racist parties and their political views once had a great influence in the country's political arena. In the painful process of industrial adjustment under the background of trade liberalization, the probability of political violence against China and other East Asian economies cannot be underestimated.

(b) The risk of political violence caused by labor rights issues is rising.

The issue of labor rights and interests has a potential and vital impact on China's social stability and enterprise management, but this potential impact has not been fully revealed for the following reasons: (1) China citizens are gentle; The overall supply of domestic labor market exceeds demand; The current cadre assessment system encourages government officials to be more inclined to employers in labor disputes, and the government has strong action ability; ..... All these factors have led to the great advantages of domestic capital in China at present. It is precisely because of this that the management of enterprises in China lacks experience in dealing with labor rights and interests in different environments. However, the above factors are not available in many countries. In the process of transnational operation, China enterprises are at high risk of political violence caused by labor rights and interests, among which the following two types of projects are the most prominent:

Resource development projects invested in some developing countries with imperfect legal systems. At present and for a long time to come, large-scale overseas investment projects in China are mainly extractive industries, and enterprises with more employees are more likely to experience industrial unrest. Employees in extractive industries are generally fierce, and the probability of labor disputes is relatively high. Shougang Peru Iron Mine Co., Ltd. has been plagued by labor disputes since its establishment. The strike that started on June 2004 1 only caused the company a direct loss of $35 1 10,000, which is a typical case.

Manufacturing investment projects, especially M&A investment projects, in some newly industrialized economies whose average income level is higher than that of China and which have achieved democratization. Firstly, the competition between these economies and China is obvious, and workers are more worried that the transfer of production to China will reduce their employment opportunities. Secondly, workers are worried about the decrease of income level. Third, such countries have implemented democratic systems for a short time and have not yet formed a mature mechanism of checks and balances at all levels of society similar to those in Europe and America. Their citizens are enthusiastic about exercising their democratic rights and relatively indifferent to fulfilling their obligations, which is easy to form extreme group behavior. Shanghai Automotive Industry Corporation plans to acquire South Korea's Ssangyong Motor Company, and Ssangyong Trade Union is one of the biggest obstacles.

(c) The moral hazard of some politicians, public figures and groups in the host country has become increasingly prominent.

During the gestation and outbreak of the risk of political violence driven by trade protectionism, the moral hazard of some institutions, politicians, public figures and groups in the central and local governments of the host country is quite prominent, and vicious incidents are usually inseparable from their connivance or even encouragement. In the elche incident, the most shocking thing was not the arson of the mob, but that the local police stood idly by for this serious crime, and some leaders in elche even publicly excused the dereliction of duty of the mob and the police. No society can live without thugs. The fundamental difference between a well-governed society and a poorly-governed society is not whether there are behaviors and people who disturb the order, but whether the defenders of social order can be loyal to their duties and whether the behaviors that disturb the order can be fully prevented and punished in time in advance. During the elche incident, the moral hazard of the local police, the mayor and the Spanish shoe association in elche caused the local social order to waver. In addition to psychological and emotional factors, the moral hazard of these people is mainly driven by political and economic interests.

Motivation of political interests, that is, some politicians hope to win votes by conniving or even encouraging the exclusion of foreign goods, enterprises and workers, or demanding excessive labor treatment. This moral hazard varies with the level of government and political system of the host country. National politicians who centralize central power must consider national diplomatic interests more, while local politicians do not need to consider national diplomatic interests. Therefore, the moral hazard of the central government is lower than that of local governments. The moral hazard level of local governments in the host country depends largely on the political system of the host country. Other things being equal, in countries or regions where local autonomy is practiced, the central government has relatively few means to restrain local politicians, and local politicians pay more attention to local public opinion (whether this public opinion is rational or narrow), and the moral hazard level of local governments is high; In countries where local government leaders are appointed, the "black hat effect" of the central government to restrain local politicians is relatively strong, and the internal motivation of local politicians to blindly cater to local public opinion is relatively weak, so the moral hazard level of local governments is correspondingly low. Since the drastic changes in Russia, the system of local autonomy has been implemented, and local leaders have been elected by local residents. Therefore, local leaders often rely on public opinion to compete with the federal central government. In view of the fact that Russia is expected to carry out political system reform after the Beslan hostage tragedy, local leaders will be appointed rather than elected, and the political risk of such local politicians against the central government is expected to be reduced.

Driven by economic interests. Some leading figures of trade associations, chambers of commerce and enterprises attempt to attack China's goods and enterprises through abnormal means, maintain or even expand the sales and market share of their member enterprises, or acquire an asset. Most oligarchs who control the lifeblood of Russia's economy get rich by abnormal means. Under the condition that Russia's political and economic order is not fully on the right track, they naturally prefer to continue to seize economic resources at low cost through abnormal means. In the auction of Slavic Oil Company from June 5438 to February 2002, two oligarchs, Abramovich, the boss of Siberian Oil Company, and Friedman, the boss of Alpha Group (which controls Tyumen Oil Company), manipulated public opinion and legislation of the State Duma, forcing PetroChina to withdraw, thus obtaining a company with a valuation of more than $3 billion at186 billion.

China enterprises interested in transnational operations should pay attention to the fact that since the early 1990s, marked by drastic changes in the Soviet Union and Eastern Europe, the free market economic system and universal suffrage democratic political system have swept through many developing countries and countries in transition with the strong output of western countries. Some scholars believe that free market and universal suffrage democracy are the guarantees of private property rights and economic prosperity, but in practice, even if all-out civil wars in the process of introducing multi-party system in many developing countries are not considered, the biggest side effect of this change is to increase the risk of political violence in internationally operated enterprises (especially those relying on overseas businessmen).

Second, the risk of predatory expropriation is increasingly prominent.

Expropriation risk is the risk of expropriation, confiscation or nationalization of foreign-funded enterprises by the host government. In 1960s and 1970s, developing countries once set off a climax of nationalization, when the risk of expropriation was more prominent. Since 1980s, the risk of expropriation has been greatly reduced. At present, governments all over the world are competing to attract international investment. In most countries that have established a normal political order, the risk of open and direct expropriation is basically negligible.

However, in the transnational operation of China enterprises, the risk of "creeping expropriation" (also known as "indirect expropriation") still exists and even rises. "nibbling expropriation" means that the host government and foreign investors have agreed in advance in the investment contract that foreign investors will gradually transfer their shares to the host government or nationals in a certain proportion within a certain period of time, so that the shares held by the host country will reach more than 565,438+0%, or even 65,438+000%. Later, its connotation gradually enriched and developed. According to the comments of Article 3 of the Investment Protection Committee of the Development Assistance Committee of OECD, predatory expropriation specifically refers to improper arbitrary taxation, restrictions on remittance, prohibition of dismissal, refusal to approve the import and export of raw materials, and so on. The relevant materials in the US House of Representatives define predatory expropriation as discriminatory treatment of foreign investors, change of foreign investment policies, forced nationalization, loan restrictions, restrictions on hiring foreigners, forced export, price control and so on. Summarizing all kinds of specific acts of encroachment and expropriation can be defined as that the central and local governments of the host country have not publicly announced the direct expropriation of the tangible property of the enterprise, but have taken various measures to prevent foreign investors from effectively controlling, using and disposing of the enterprise property, so that the rights of foreign investors as shareholders are greatly restricted or actually cancelled, thus constituting a de facto expropriation act. China enterprises and overseas Chinese businessmen face three kinds of predatory expropriation risks, namely, predatory expropriation as a tool of trade protectionism, predatory expropriation combined with corruption motives and predatory expropriation caused by changes in policies and regulations of the host country.

(A) predatory expropriation as a tool of trade protectionism

This predatory expropriation is usually caused by the relevant departments of the host government frequently searching foreign-funded enterprises in the name of checking tax evasion, smuggling and health and safety conditions, frequently imposing high fines and additional taxes, interfering with their normal production and operation, and even confiscating the goods of foreign-funded enterprises under the above excuses. The relevant departments of the Russian government often confiscate a large number of Russian goods on the grounds of "gray customs clearance" of China's exports to Russia, which is a typical example. Before the elche incident, the Spanish police raided the shops and warehouses of Chinese businessmen in elche and pointed a gun at their heads, which was quite suspected of abusing violence. Because the business environment in the host country is not standardized, the legal system is not perfect, and some overseas Chinese businessmen are greedy for small profits or rely too much on price competition strategies, some overseas Chinese businessmen do have such problems, which also provides some government departments in the host country with an excuse to nibble at the collection.

(B) combined with corruption motives, predatory expropriation

In some countries with imperfect legal system and corrupt bureaucratic system, the interests formed by corrupt government agencies or corrupt bureaucrats and private capital are used to embezzle the assets of the government and the public to enrich themselves, and foreign investors are also involved. Once combined with the motive of corruption, the risk of predatory expropriation is even more difficult to avoid. If the mainstream consortia in the host country generally rely on cheap plunder of state-owned assets in the process of privatization of state-owned enterprises, the risk of predatory expropriation combined with corruption motivation is relatively high.

The risk of predatory expropriation is often the product of the combination of trade protectionism and corruption motives. After the political upheaval, Russia ranks among the best in the corruption rankings of organizations such as Transparency International. When Chinese businessmen and China goods occupy a certain position in Russian society, Russia's light industry, which has gradually recovered from the ruins of the disintegration of the former Soviet Union, hopes to crowd out its counterparts in China, while the police department covets the property of Chinese businessmen and envies the rich oil and water seized by customs officers from the "gray customs clearance" of Chinese goods, and the confluence of trade protectionism and corruption. Since the late 1990s, vicious incidents of Russian police seizing China goods have occurred frequently: in l998, all China goods on the second floor of Moscow's eastward expansion and barracks were seized; From 2000 to 200 1 year, there were hundreds of incidents of Russian seizure of China goods, with a total value of hundreds of millions of dollars; On February 10, 2004, the Russian police robbed China businessmen of goods worth as much as $30 million.

Predatory expropriation caused by changes in host country's policies and regulations

Sometimes, due to the changes in the policies and regulations of the host country, foreign investors have to withdraw from some or even all of their investment shares. First of all, foreign investors usually withdraw their shares against their original intention; Secondly, due to policy changes, foreign investors were forced to sell their shares collectively in a short time. Even if their assets can find a buyer, the market price of the seller's assets will be greatly reduced in this artificial buyer's market. Therefore, this is also a risk of encroaching on expropriation. Typical example: Qatar government adjusted the "sleep guarantor" policy in 2004. According to Qatar's domestic laws, except for agriculture, manufacturing, health, education, tourism, local mineral development and other industries, all for-profit activities must be participated or represented by Qatari nationals. Foreigners who want to engage in for-profit activities must establish joint ventures with Qatari nationals according to the equity ratio of 49% (foreigners) and 565,438+0% (Qataris). In practice, the Qatari government, courts and residents have accepted an alternative approach for many years, that is, the book equity ratio of enterprises conforms to the above-mentioned legal provisions. In fact, the two sides reached a private agreement that foreigners would provide all the funds and operate independently, while Qataris, as nominal major shareholders, only charge a fixed guarantee fee, which is the so-called "sleep guarantor". In July 2004, the Government of Qatar promulgated a new law that explicitly prohibited this practice. Violators can be punished by confiscation of property, revocation of licenses, fines and imprisonment of up to 1 year. Many foreign-funded enterprises, including China enterprises, are at risk of predatory expropriation.

China enterprises can't avoid the above predatory expropriation risks simply by withdrawing from relevant countries and regions, because many countries with high predatory expropriation risks are of great significance to China to ensure the supply of resources, or belong to the blank areas of China enterprises' western competitors, so China enterprises often need to bear the above risks and open up the markets of these countries.

Third, countries with high incidence of financial crisis have higher transfer risks.

Foreign exchange restriction risk (transfer risk) refers to the host country's international balance of payments difficulties, the implementation of foreign exchange control, prohibiting or restricting foreign investors from transferring principal, profits and other legitimate income outside the host country. Since 1980s, under the impact of the wave of global financial liberalization, most countries have gradually liberalized their foreign exchange controls, and the transfer risk has been greatly reduced accordingly. However, due to the frequent outbreak of international monetary/financial crises since 1990s, the transfer risks of developing countries and some countries in transition cannot be underestimated. In recent years, the Russian crisis of 1998, the Brazilian real crisis of 1999, the Turkish crisis of 200 1 and the Argentine crisis in early 2002 broke out in emerging markets. If the host country is not the issuer of the international reserve currency, the capital account and domestic asset market will be opened more quickly and thoroughly, the domestic asset market will be overheated, or the foreign debt burden will be heavier, such a country will have a greater probability of currency/financial crisis and a greater risk of transfer.

Fourth, the risk of default is concentrated in developing countries.

That is, the host government defaults, and investors cannot or cannot turn to judicial or arbitration institutions in time; Or although there is a ruling, it is impossible to apply for enforcement. The government default insured by China Export Credit Insurance Corporation refers to the illegal or unreasonable cancellation, violation, non-performance or refusal to recognize the specific guarantee, guarantee or franchise agreement issued by the government of the investment country. This kind of risk usually appears in some developing countries with imperfect legal system and countries in transition in the former Soviet Union and Eastern Europe.

The risk of deferred payment of verb (abbreviation of verb) cannot be ignored.

Usually refers to the risk of sovereign debt default, that is, due to the host government's stop or delay in payment, foreign investors can not recover the due principal and interest of creditor's rights and investment profits in full and on time. At present, this risk mainly exists in some heavily indebted developing countries. The currency of major developed countries is an internationally accepted means of repayment, and their governments can theoretically start printing presses to repay debts indefinitely. Therefore, foreign businessmen usually do not have the risk of delaying payment when dealing with the central governments of major developed countries, but they may not be able to sit back and relax when dealing with local governments in developed countries, because local governments do not have the right to issue money, and they may completely fall into financial bankruptcy. There are not many examples in this respect, even new york, Munich and other world-famous rich people.

Sixth, the risk of intervention by third countries has increased.

The risks of intervention by third countries can be divided into two categories. One is the risk of direct sanctions by the government of a third country. At present, this risk mainly comes from the United States. If enterprises engage in economic and trade exchanges with so-called "rogue countries" listed by the United States, such as Iran, Sudan and North Korea, they may face such risks, and their potential losses include the inability to enter the American market, the inability to raise funds in the United States, and the inability of senior managers to enter the United States. When PetroChina was preparing for overseas listing and roadshows in new york, some political forces in the United States wrote to major investment funds, asking fund managers to boycott PetroChina on the grounds that PetroChina was developing oil in the "evil country" Sudan and proposed a formal bill in the US Congress. At the beginning of 2004, when Sinopec participated in bidding for Iranian oil fields, it was also blocked by the United States. If an enterprise is listed on the US capital market for financing, or its export business to the US is large, or it is engaged in strategic resource development business, or it is engaged in sensitive industries, it will face higher risks. Although the Helms-Burton Act and the Bird Act of the United States have been resisted by most countries in the world, as long as the status of the United States as the only superpower in the world remains unchanged, this behavior of the United States will not stop. In the future, it is also possible for the EU to impose this threat on enterprises in other countries under the pretext that "human rights are above sovereignty".

Another risk of intervention by a third country is not direct sanctions by a third country, but the risk of default by the host government under the pressure or temptation of intervention by a third country. Due to Japanese participation, the plan of the Sino-Russian oil pipeline project has been repeated many times, and the initial investment of PetroChina in Anda Line has all failed, which has damaged China's energy strategy. This is a typical case of this kind of risk.

Seven. Concluding remarks

With the growth of China's foreign trade and overseas investment, the political risks faced by China enterprises are increasing day by day. In less than a month from September to June, 2004, the Ersh incident and two vicious cases of Pakistani bandits kidnapping China engineers broke out one after another, which fully illustrated this point. Although China has established a political risk response system for transnational operations, including bilateral investment protection agreements, multilateral investment protection systems, policy-based export credit insurance and overseas investment guarantees, there are still many unsatisfactory aspects in dispute settlement and compensation efficiency, and the failure to effectively cover new political risks is its outstanding defect. Therefore, it is imperative to develop and improve China's political risk response system.