Proceedings of Annual South Africa Business Research Conference
11 - 12 January 2016, Taj Hotel, Cape Town, South Africa, ISBN: 978-1-922069-95-5
When Political Risk is Not a Risk: A Country Level Analysis of
Chinese Investment in Africa
Jane Lu, Xueli (Charlie) Huang* and Michael Muchiri
In this literature review paper, we examine the concept of political risk as it applies to Chinese
outward foreign direct investment (OFDI) in Africa. This is in recognition of the significant increase
in Chinese OFDI in Africa over the last decade, and the relatively high level of institutional hazards
(political risk) for Chinese MNCs to invest in African countries. How Chinese MNCs as well as
how the Chinese Government helps its MNCs to deal with political risk in host countries is of both
theoretical and practical significance to policy-makers, industry practitioners and academics.
Thus, in this conceptual paper, we initially define the concept of political risk, then we compare
and contrast existing Chinese MNCs and Western MNCs approaches to dealing with political risk.
After this we develop a conceptual model to explicate some propositions relating to why
differences exist between Chinese and Western approaches to dealing with political risks in their
OFDI. Further, we provide an overview of Chinese MNCs’ practices of dealing with political risks.
We also elaborate on the consequences of Chinese MNCs’ ways of dealing with political risks,
and how they can improve their ways to dealing with political risks in the future. The paper then
puts forward some practical and theoretical implications. Finally, we propose several future
research directions in regard to Chinese OFDI in Africa.
__________________________________________________________________________________________
Prof Jane Lu, Professor, Director of Centre for Asian Business and Economics, The University of Melbourne,
Melbourne, Australia, Tel: +61 3 90356057, Email: jane.lu@unimelb.edu.au
Dr Xueli (Charlie) Huang*, Senior Lecturer, School of Management, RMIT University, Melbourne, Australia. Tel:
+61 3 99251648, Email: Charlie.huang@rmit.edu.au
Dr Michael Muchiri, Senior Lecturer, School of Management, RMIT University, Melbourne, Australia. Tel: +61 3
99251603, Email: michael.muchiri@rmit.edu.au