Risk assessment and management of overseas investment by state-owned enterprises from the perspective of 'The Belt and Road'.doc

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1、Abstract（摘要）State owned enterprises respond to the policy of The belt and side in all aspects.Infrastructure construction is the foundation and core link of the development of “The belt and side , including railway and highway transportation construction and communication network construction.Togeth

2、er with the countries along the route, China has established a large number of cooperation in ports, railways, highways, electricity, aviation, communications and other fields, effectively improving the level of infrastructure construction in these countries, with results exceeding expectations.Most

3、 of the countries along the belt and road are rich in oil and gas resources, and energy cooperation is an important measure of the “The belt and side initiative. Data display.Capacity cooperation refers to the output of industries and capabilities, not simply to sell products abroad, but to export i

4、ndustries as a whole to different countries to help them establish a more complete industrial system and manufacturing capacity.International capacity cooperation will combine Chinas technology, capital and management with the needs of countries and regions along the “The belt and side “to complemen

5、t each other and enable Chinese enterprises to go out.The development of “The belt and side “needs support from all aspects such as financial capital, insurance underwriting and so on. Foreign investment needs support from domestic financing. External construction and trade need support from insuran

6、ce and logistics. More other “The belt and side “construction process needs to be supported by all kinds of enterprises.When state-owned enterprises invest in projects along the one belt and one way countries and regions, how to use risk management measures to ensure the safety of state-owned assets

7、? The one belt and one way initiative has made remarkable achievements and achieved fruitful results in the past 6 years. But in international cooperation, some state-owned enterprises began to invest in the one belt and one road project. They did not have access to financing, nor could they buy the

8、 insurance products they needed. In some countries, they even encountered political risks.Taking petroleum enterprises as an example, the prevention of foreign exchange transaction risk of transnational operation of petroleum enterprises is related to a specific transaction settled by petroleum ente

9、rprises. There are many risk prevention strategies, which are mainly the internal prevention technology and external prevention technology. The internal prevention technology of transaction risk refers to the method used to prevent and reduce foreign exchange risk in oil enterprises. For example: fo

10、reign exchange net position adjustment method; internal prevention technology of transaction risk is the first consideration for oil companies, because it has low cost; in addition to internal management technology, oil companies should actively use external management technology of transaction risk

11、.Keywords：The Belt and Road；Going global；State-owned business；Foreign exchange risk目 录1. Introduction12. Status quo.32.1. Infrastructure construction.32.2. Energy construction.42.3. Case: China National Petroleum Corporation.52.4. Production capacity cooperation.62.5. National basic services.63. Ris

12、k analysis83.1. Commercial and non-commercial risks:83.2. Foreign exchange risk123.2.1 Causes of foreign exchange risks123.2.2. Foreign exchange risk analysis - take CNPC as an example:144. Risk Management154.1. Specific measures for foreign exchange risk management154.2. Implementation of exchange

13、rate risk management of CNPC164.2.1.Overall thinking of exchange rate risk management.164.2.2. Measures of exchange rate risk management of CNPC.184.2.3. Exchange rate risk management process of CNPC. 184.3. Ways to avoid foreign exchange risk.195. Foreign investment direction of Chinese Enterprises

14、23Reference:27Acknowledgements：30 26 1. IntroductionThe Belt and Road Initiative is a major open strategy proposed by Chinese President Xi Jinping in 2013 to build a mutual benefit and win-win economic and trade partnership.State-owned enterprises should embody new responsibilities in participating

15、in the construction of the “Belt and Road” initiative. State-owned enterprises are an important market carrier for Chinas foreign economic cooperation and bear important responsibilities and missions in the construction of the “Belt and Road” initiative. There are 12 key investment countries along t

16、he “The Belt and Road” route, including seven Southeast Asian countries: Vietnam, Myanmar, Laos, Malaysia, Thailand, Indonesia and Cambodia; Two central Asian states: Kazakhstan and Mongolia; A south Asian country: India; A west Asian country: United Arab Emirates; And Russia.The development of “The

17、 Belt and Road” has formed a very good atmosphere, not only the domestic atmosphere is good, many countries in the international atmosphere are better than China. In the process of foreign development, Chinese enterprises should take profit, risk, influence and other factors into comprehensive consi

18、deration. For most companies, The Belt and Road carries both benefits and risks. When developing overseas business, Chinese enterprises will face business risks such as operational risks and default risks, as well as political risks such as policy restrictions and leader discrimination.Wang Wen, chi

19、ef economist of China export credit Insurance Corporation and director of the country risk research center evaluated the risk model according to the risk model. Among the more than 60 countries in the One Belt And One Road category, 51 of them were at or above the medium risk level. From the perspec

20、tive of sovereign credit risk rating, 41 countries have risk ratings below investment grade and low debt sustainability（Financial network， 2017）. How does the enterprise identify risks in the whole investment process of “The Belt and Road” project? How to avoid risk? And how to manage risk is the fo

21、cus of this paper.Liu Jifeng, director and general manager of Sinopec insurance, said that in the process of corporate financing, the first step is to involve third parties, such as financing advisers or technical and legal advisers, to provide independent reports to reassure the main stakeholders.

22、We also need to be concerned about technological, economic, financial, tax and geopolitical risks. We need to understand our global competitive advantage and build a good ecosystem（Economic reference， 2019）.2. Status quo: State owned enterprises are the first force of “the Belt and Road2.1. Infrastr

23、ucture construction: railway, highway and other transportation construction Infrastructure construction is the foundation and core link of “the Belt and Road development, including railway, highway and other transportation construction and communication network construction. Since The Belt and Road

24、was put forward in 2013, state-owned enterprises have developed vigorously in the construction of transportation and information facilities. Over the years, China has conducted a lot of cooperation with The Belt and Road countries in the fields of aviation, railways, ports, roads, electricity and te

25、lecommunications, which has not only improved the infrastructure level of those countries, but also provided a lot of job opportunities.According to the information released by the state-owned assets supervision and administration commission (SASAC), at present, Chinas ports have established routes

26、with more than 200 countries and 600 major ports in the world, and the maritime connectivity index remains the worlds first. Big data analysis shows that the port connectivity between China and “the Belt and Road countries is significantly higher than that of other transportation facilities, among w

27、hich China has the most frequent port transportation exchanges with South Korea, India and Indonesia, which also drives the development of trade cooperation（Belt and road portal， 2019）.China also enjoys good railway connectivity with The Belt and Road countries. Among the trade exports between China

28、 and The Belt and Road countries in 2017, the export value of railway transportation grew the fastest, up 34.5% compared with 2016.Railway connectivity has been outstanding, with the china-Europe freight trains contributing a lot. By the end of August 2018, the total number of china-Europe freight t

29、rains had exceeded 10,000, and 48 Chinese cities had opened, reaching 42 cities in 14 European countries（Belt and road portal， 2019）Figure 1：The number of freight trains operating between China and Europe from 2011 to 2018As shown in Figure 1, this chart reflects the trend and magnitude of business

30、volume and growth rate. It can be seen that the growth rate is a volatility curve, which fell to its lowest point in 2012. After that, it rose rapidly and reached its peak in 2013. The curve of the number of businesses has been on an upward trend in the past few years, and it has risen steadily and

31、slowly from 2011 to 2014. There was a significant and rapid rise from 2015 to 2018.In 2011, only 17 China-Europe freight trains were operated in the whole year, with the total annual value of freight less than 600 million us dollars. In 2018, the cumulative operation exceeded 12,000 columns, and the

32、 total value of goods transported annually reached us $16 billion. At present, the main routes of the China-Europe freight trains are in Germany, Russia, Kazakhstan, Tajikistan, Poland, Belarus and other countries（Number of Belt and road，2019）2.2. Energy construction: energy, oil and gas, power stat

33、ion, power grid (Case: petro china overseas construction status).Countries along the route of One Belt And One Road are generally rich in oil and gas, so energy cooperation is indispensable.Data show that the remaining proved reserves of oil and gas along the “the Belt and Road line are 133.8 billio

34、n tons and 155 trillion cubic meters respectively, accounting for 57% and 78% of the worlds total proved reserves, and concentrated in Russia, central Asia and the Middle East. As for the current situation of “the Belt and Road energy cooperation, Xie Kechang, an academician of the Chinese academy o

35、f engineering, led the research group of the energy revolution consulting project of the Chinese academy of engineering to conduct a field investigation and research and summarized it in one sentence - abundant resources and remarkable results.At present, the global economy and energy transformation

36、 face multiple challenges, the energy and resource endowment of various countries is unbalanced, and the construction of energy transport routes lags behind. Most of our partners are developing countries. The poor level of energy infrastructure restricts economic and social development. The two side

37、s will work together to enhance oil and gas cooperation（ZhangYi, 2017）.2.3. Case: China National Petroleum CorporationAs one of the first Chinese companies to cooperate with countries along the belt and road since the policy was put forward, CNPC has made full use of its first-mover advantage in int

38、ernational cooperation over the past 25 years and played a major role in “The Belt and Road construction. Through oil and gas investment cooperation, CNPC has completed and put into production a number of major oil and gas infrastructure projects in Iraq, Kazakhstan, Russia, Turkmenistan, Uzbekistan

39、 and other countries, and accelerated the development of the whole industrial chain in the upper, middle and lower reaches. The international trade business controls the share of overseas refining and processing of 34.25 million tons annually, with a total international trade volume of 480 million t

40、ons and a trade volume of 238 billion U.S. dollars(Tonghuashun Finance, 2018).In the first half of 2017, petro chinas overseas oil and gas business took advantage of the strategic opportunity of One Belt And One Road to actively promote international oil and gas cooperation, and new progress was mad

41、e in oil and gas cooperation in central Asia, the Middle East and other regions. Overseas operations produced 89m barrels of oil and gas equivalent, down 17.7 per cent year on year. (Petro china annual report 2017). The Belt and Road has become one of the highlights of petro chinas overseas performa

42、nce.2.4. Production capacity cooperation: combining supply and demand of international production capacity and drawing on each others strengths.Instead of simply selling products abroad, it exports the whole industry to different countries to help these countries build a more complete industrial sys

43、tem and manufacturing capacity. On December 14, 2014, Chinese premier Li Keqiang in Kazakhstans capital Astana with President Nursultan Nazarbayev, the prime minister, Mr. Massimov on ha in iron and steel, cement, plate glass, equipment technical cooperation in areas such as enhanced capacity reache

44、d important consensus and agreed on the capacity of cooperation as a deepening china-Kazakhstan cooperation focus and the window, it is regarded as the beginning of promoting international cooperation capacity. On May 16, 2015, with the endorsement of Premier Li Keqiang, the state council issued the

45、 guidance on promoting international cooperation in production capacity and equipment manufacturing. The government has signed a series of agreements on the production capacity cooperation framework with 15 countries, including Brazil, Kazakhstan, Ethiopia and Malaysia (Belt and road portal，2019).2.

46、5. Basic services: insurance, finance, logistics and other basic service system construction.The development of The belt and the road needs support from all aspects such as financial capital, insurance underwriting and so on. Foreign investment needs support from domestic financing. External constru

47、ction and trade need support from insurance and logistics. More other one belt and one road construction process needs to be supported by all kinds of enterpFigure 2: Belt and road portalThe financial industry has introduced the source of water for the The belt and road initiative：As shown in Figure

48、 2, in the list of the top 50 most influential enterprises, representative enterprises in the financial sector include bank of China, China construction bank, bank of communications and agricultural bank of China. According to the official website of the bank of China, by the end of March 2017, the bank of China had followed up about 460 major overseas projects along the One Belt And One Road line, with a total investment of more than us $437.2 bill