M.A. / The discipline of political risk analysis has often been criticised as a ‘soft science’. As the title of this study suggest, the major challenge of this study is set out to provide an empirical analysis of political risk and to prove that political risk can indeed be measured. The aim of this study is to provide an empirical analysis of political risk by testing the reliability of current risk assessment approaches to accurately forecast political risk. There have not been many attempts to test the reliability of political risk assessment models. However, Howell & Chaddick (1994) tested the reliability of three (EIU, PRS and BERI) political risk assessment models to accurately forecast risk projections in the period 1982-1994. This study will revisit the test done by Howell & Chaddick (1994) in order to determine the reliability of three forecast models. In order for forecasts to be reliable, forecasts must be justified and defended by applying practical logic. Practical logic implies that theory be tested against real world experience. Hence, a reliable analysis will require that actual losses be tested against theory. Therefore, in addressing the connection between theory and actual losses, this study will correlate losses incurred in the period 1994- 2004 with theory. Due to the nominal nature of the concept political risk, there has been a lack of consensus in the field on what constitute political risk. This study will provide a conceptual clarification of political risk. A brief discussion of the underlying theoretical background in political risk is required in order to understand the concept of political risk and terms thereof. Hence, this study will establish a theoretical base of political risk analysis. This study argue that low political risk encourage foreign direct investment. The relationship between political risk and foreign direct investment will be analysed in this study. It is hoped that in light of this study’s findings, a case can be putt III forth that multi-national corporations can use political risk analysis to minimise exposure to losses and as an extension of political risk analysis, multi-national corporations can use political risk insurance to hedge against political risks. The outcomes of this study aim to prove that political risk can be empirically tested and measured and that the analysis of political risk is essential to successfully manage political risks.

Thesis (MA)--Stellenbosch University, 2003. / ENGLISH ABSTRACT: The study addresses the topic of foreign direct investment in the People's Republic of China (P.Re.) by South African companies, focusing on opportunities and risks in the context of 'South-South Co-operation' between the P.RC. and South Africa. Relations between the two developing countries have only been forged since January 1998 when South Africa recognised the P.RC. government as the dejure representative of China. With the Chinese market of 1.3 billion potential consumers proving to be a lucrative opportunity for all international, multinational and transnational companies, it is imperative for South African companies to gain a foothold in the Chinese market. Therefore, entry requirements as well as impediments that could emerge have to be scrutinised. Analysis of governmental relations currently being forged between the two states is assessed as well as the wider context of 'Sino-Africa' co-operation. China's recent entry into the World Trade Organisation (WTO) has and will continue to have a substantial effect on the international trading system. The implications of this for South African companies is given considerable attention in order to highlight resulting opportunities. Apart from assessmg the current state of relations and identifying investment and business opportunities, the study also focuses on the method of conducting business in China which has highly complex rules and regulations for companies entering the P.RC. An analysis of the different modes of entry is conducted, coupled with a focus on the cultural sensitivities and norms that are associated with building relationships when negotiating possible business partnerships. The study finally identifies potential risks that foreign direct investors need to continually assess, namely, the transfer of political power to a new generation of relatively young leaders, corruption that is spreading within China and the restructuring of State Owned Enterprises (SOE's) and the inevitable consequence of job losses. / AFRIKAANSE OPSOMMING: Hierdie studie spreek die onderwerp van buitelandse direkte investering in die Volksrepubliek van Sjina (VRS) deur Suid-Afrikaanse maatskappye aan, en fokus op geleenthede en risikos in die konteks van 'Suid-Suid samewerking' tussen die VRS en Suid-Afrika. Betrekkings tussen die twee ontwikkelende lande is eers onlangs gesmee nadat Suid-Afrika in Januarie 1998 die VRS as die dejure verteenwoordiger van Sjina erken het. Met In Sjinese mark van meer as 1.3 miljard potensiële verbruikers wat In winsgewende geleentheid vir alle internasionale, multinasionale en transnasionale maatskappye skep, is dit imperatief vir Suid-Afrikaanse maatskappye om hulself in die Sjinese mark te vestig. Dus moet toegangsvereistes asook moontlike hindernisse noukeurig ondersoek word. Die studie doen 'n analise van betrekkings wat huidiglik tussen die twee state se regerings gesmee word, en die breër konteks van samewerking tussen Sjina en Afrika word ook geëvalueer. Die VRS se onlangse toetrede tot die Wêreldhandelsorganisasie (WHO) het en sal aanhou om 'n wesenlike impak op die internasionale handelsstelsel te hê. Daar word ook aansienlike aandag geskenk aan die implikasies hiervan vir Suid-Afrikaanse maatskappye om sodoende geleenthede uit te lig. Bo en behalwe 'n evaluering van die huidige stand van betrekkings en 'n identifisering van beleggings- en besigheidsgeleenthede, fokus hierdie studie ook op die manier waarop besigheid in Sjina onderneem word, wat uiters gekompliseerde reëls en regulasies insluit vir maatskappye wat die land betree. 'n Analise van die verskillende wyses van toegang is onderneem, tesame met 'n fokus op die kulturele sensitiwiteite en norme wat 'n invloed op die bou van verhoudings tydens die onderhandeling van moontlike besigheidsvennootskappe kan hê. Laastens identifiseer die studie potensiële risikos wat buitelandse direkte beleggers voortdurend in ag moet neem, naamlik die oordrag van mag na 'n nuwe generasie van relatief jong leiers, die verspreiding van korrupsie, die herstrukturering van staatskorporasies en die onvermydelike gevolge van werksverliese.