Risk of Doing Business in China

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Risks in Doing Business in China E &Y China Key Points For multinational companies, China’s market has started to come of age. Despite the opportunities along with China’s WTO entry and opening up, doing business in China remains very challenging at the operational level for MNCs. Regulatory Risks Managing the regulatory environment remains a real issue for foreign firms operating in China. They have to learn how to deal with red tape, “guanxi (relationship)” and make breakthrough in the thicket of regulations and restrictions. Entry Modes Different entry modes bring different risks and returns. Foreign enterprises should weigh and balance those risk factors. Mergers and Acquisitions With…show more content…
These issues affect all companies, but present the most serious challenge to small foreign firms that are new to China and lack international and country-specific experience. Larger firms are coming up with strategies to address these issues, if not resolve them. Regulatory Risks - Overview During the last few years much of the economy has been deregulated, a process that was well under way before December 2001, the date of China’s accession to the WTO. During the 1990s almost all of the former industrial ministries and state commissions were abolished, cutting the number of institutions and officials at the centre looking to be involved in business affairs. Some old school planning apparatchiks have no doubt survived but there are fewer options for them to slake their thirst for control. Many state-owned enterprises have been sold off and a large proportion of those that remain have lost market share to private domestic firms and foreign-invested enterprises (FIEs). China’s thicket of regulations has been cut back and the rules that remain have gradually become more institutionalized. The picture that characterized much of the 1980s and 1990s—everyone from multinational managers to Chinese officials groping their way forward, often making things up as they went along—is no longer representative of the business environment. Foreign firms in different sectors have greater understanding of the
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