China’s Risk Reality

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

Things can change quickly in China, but the need to adapt is no longer just about maximising the market opportunity – it is also increasingly about managing risks. Recent, widely reported cases have covered Anti-Monopoly Law (AML) investigations into companies such as Qualcomm, Microsoft, Audi and Mercedes-Benz, as well as government procurement bans on foreign software, IT and consulting services. Aston Martin, KFC, McDonald’s and others have suffered supply chain failures, whilst companies such as GSK endured corporate scandals. Foreign executives have been detained and jailed, while other companies have fallen victim to more traditional accounting frauds. Caterpillar lost hundreds of millions of dollars in 2013 following its purchase of ERA Mining Machinery.

A wide range of risks clearly need to be taken into account when assessing the China business landscape, but much of the latest news has been focused on the AML investigations that have been launched into the activities of foreign companies. These investigations have prompted much discussion about the country’s (perhaps political) rule of law and “level” playing field. The European Chamber of Commerce in China recently issued a strong statement saying that it has “received numerous alarming anecdotal accounts from a number of sectors that administrative intimidation tactics are being used to impel companies to accept punishments and remedies without full hearings…the European business community is also increasingly considering the question of whether foreign companies are being disproportionately targeted in the investigations”…

(See the full post on LinkedIn)

The article is by Jeremy Gordon, a director of China Business Services and China Edge, and author of “Risky Business in China, a Guide to Due Diligence” (Palgrave, September 2014).

Jeremy will be speaking about business risk in China at Chatham House on 23 October.

This article originally appeared in the October 2014 edition of China-Britain Business Focus, the magazine of the China-Britain Business Council and the British Chamber of Commerce in China, and is part of a China risk series on LinkedIn.

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