Barriers remain as Chinese companies go global(2)

Political risks 　

Another thorny issue for Chinese companies operating overseas is political risks like war and rioting.

The CCG report analyzed 120 failed outbound investment cases in the past decade. A quarter of these were the result of political unrest, changes in leadership or impediment by political groups.

In 2011, China invested in over 50 large-scale projects across Libya with total investment surpassing US$18.8 billion, with most aborted due to civil war.

In May this year, anti-China protests and subsequent violence in Vietnam caused significant losses to Chinese companies operating in that country.

Qin said the solution to these risks is to seek insurance covering political risk from companies such as People's Insurance Company (Group) of China Limited, China Export & Credit Insurance Corporation (Sinosure) and insurance institutions under the World Bank.

Sinosure, as China's policy insurance company, has rich experience in dealing with overseas political risk cases, with payout ratios as high as 90 percent.

Insurance could cover losses caused by political elements such as war, coups, strikes and riots, expropriation or confiscation, as well as foreign exchange controls.

Law as a weapon

Besides political risks, legal problems could also be a challenge for Chinese companies.

Wang said many Chinese businesses do not know how to use the law as a weapon to defend themselves when they face unfair treatment and suffer financial losses.

But if used properly, foreign laws could help Chinese companies, with the Sany and Ralls versus Obama case a good example. The US government rejected Ralls Corp, owned by China's machinery manufacturer Sany Group executives, when the company attempted to buy wind farms in Oregon. Ralls then sued President Obama, with the US federal appeals court ruling that the government had violated the rights of Ralls Corp.

Xiang Wenbo, president of Sany, told reporters that investment policies in the US seem to be very open, but that the Committee on Foreign Investment in the United States could easily shut down investment that it regards 'unsafe' without any reason.

Xiang said he hopes companies who receive unfair treatment, like Sany, could use the law as a weapon to seek fair solutions.