China Risk & The New Reality

Related entries: Business Issues, Due Diligence, General, News, Risk & Law, Risky Business In China, Strategy

Things can move quickly in China, and yesterday’s opportunity can become today’s risk. One of the (sometime fast) drivers of China business risk is government, with policy and regulation occasionally crashing into the best laid business plans.

In the past week alone I have tweeted about news on the regulatory risk around investment in Chinese internet firms, the establishment of a new internet security and informatization leading group, selective censorship of US television shows, a crackdown on imported media generally, delayed approval for the import of genetically-modified crops, the introduction of unlimited fines for polluters…and yet more fallout from the official anti-corruption campaign.

I have also recently finished writing a book on China risk and due diligence (“Risky Business in China”), in which key themes include the impact of government on business (not least through policy, the Party, and the political rule of law), the new reality of heightened scrutiny for foreign companies (such as GSK), and the need for constant monitoring and regular evaluation of both political and commercial risks. As I note in the book:

“Fundamental political, economic and social shifts have changed the nature of the opportunities and risks for foreign businesses in China. The country has emerged as the second largest economy in the world, and as an important driver of global growth with strategic political interests in the region and beyond. Domestically China is undergoing a significant reform programme while managing a massive, urbanising population that has social media as a tool with which to express increasingly vocal aspirations and frustrations. Entrenched local interests and state-owned enterprises are not the easiest targets for the Chinese government to deal with. But well-known foreign companies that are found, under scrutiny, to be flouting the law, abusing dominant market positions, or discriminating against Chinese consumers, may be considered fair game.”

I summarised key strategy and risk issues in a recent interview on Business World (see below), and over the next few months I will be writing in more detail about the risks international businesses face in China, and how they can be mitigated with the application of various due diligence types and tools so that the potential rewards can still be enjoyed.

For more news and discussion on risk issues in China, join the Risky Business In China LinkedIn Group, and follow the @RiskyBizChina feed on Twitter.

Risky Business In China. A Guide To Due Diligence” will be published by Palgrave Macmillan in September 2014.

This post was originally published on LinkedIn’s publishing platform. Follow Jeremy Gordon’s posts here.

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