Neural Network

In this paper, we identify the components of financial risk in China’s foreign investment, and then construct an index system of the risk. Using annual data from 1994-2008, we set up an early-warning system of financial risk of China’s foreign investment based on the Artificial Neural Network (ANN), which includes five models respectively measuring four aspects of financial risk and overall financial risk. To empirically test the early warning system, we predict the financial risk of China’s foreign investment in 2009 with the early-warning system and compare the result with the real condition. The outcome of the comparison shows that the early warning system properly describes the risk level of the financial risk of China's foreign investment in different respects