Asian Infrastructure Investment Bank (AIIB)

Where are the riskiest places in the world for Chinese to do business? This map tells you

PUBLISHED : Thursday, 31 December, 2015, 10:36pm
UPDATED : Friday, 01 January, 2016, 11:32pm

Venezuela is the riskiest destination for Chinese to invest – worse even than Iraq and Sudan – while Germany is the safest, followed by the United States and Britain.

That’s according to the latest findings by the Institute of World Economics and Politics of the Chinese Academy of Social Sciences, a government think tank.

READ MORE: China’s ties with Latin America counter US rebalance policy

While overseas investment continues to grow – China’s outbound investment rose 16 per cent to US$104 billion in the first 11 months of 2015 – some companies have suffered huge losses on overseas deals.

Deals that have gone pear-shaped include a controversial water dam project in Myanmar and a delayed copper mine development in Afghanistan.

The institute assessed 57 countries, mainly non-tax haven destinations for Chinese outbound investment, under a home-grown rating system to provide a risk map for Chinese investors venturing abroad.

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“As Chinese companies’ outbound investment is expanding, the risks associated with such investments are rising considerably,” the government think tank said. “To make China’s overseas investments more successful, it is important to improve risk warning, risk recognition and proper risk management.”

To do so, the institute developed a rating system to measure each country’s risks for Chinese companies. A country’s overall risk was measured by its economic fundamentals, debt repayment abilities, social conditions such as internal conflicts and security, and political soundness.

In a separate sub-index, each country was assessed in terms of its relations with China.

Many countries that ranked highly in terms of friendliness to China – such as Laos, Tajikistan, Sudan and Myanmar – were also dangerous places to invest.

Meanwhile, some developed countries that were not so warm towards China were found to be good places to invest.

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Venezuela has long been a key ally for China in Latin America. The China Development Bank, a state lender, is believed to be providing more than US$50 billion to the country under a deal agreed under Hugo Chavez, the country’s late former president, and his successor Nicolas Maduro. The country’s political landscape ­altered this month when the ­opposition won control of parliament by a landslide – the biggest change in the 17 years since Cha­vez started his socialist revolution.

On the other hand, the United States ranked 22nd in terms of its relations with China, but was the second safest place for Chinese to invest. Pakistan was regarded by the academy as China’s best friend, but was the 35th safest place to invest after mediocre scores for its economic and political fundamentals. It came below Uzbekistan, Iran and Greece.

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The publishing of the risk map comes as China drums up support for its “One Belt, One Road” development strategy and the Asian Infrastructure Investment Bank, which was legally established on Christmas Day and is months from making its first loan.

According to official statistics, China is close to becoming a net exporter of long-term funds. In the first 11 months of 2015, foreign direct investment into China was US$114 billion, a rise of 1.9 per cent from a year earlier.