Trade risks and legal risks for doing business with China

China is considered as the factory of the world, it is set to overtake the United States as the number one destination for manufacturing. Outsourcing production to China can be lucrative but you must be aware of the risks and challenges. This article will focus on trade risks and legal risks for doing business with China.

Doing Business in China

Risks in trading with China

As I explained in the introduction it is important to understand the possible difficulties you may encounter when you are doing business with China. One of the most important  risk faced by foreign investors are volatile political systems. The risk that a government is able to seize foreign  assets and nationalize the company. A perfect example is the nationalization of YPF (Repsol), Argentina’s largest energy firm, without the knowledge of Repsol. (Dries, 2016)
Other important things companies should pay  attention on are: commercial fraud, breaches of contract, intellectual property infringement and theft, bullying, intimidation, restrictions on movement and criminal charges for engaging in activities that may not contrite crimes under the law of the country of origin. (Australian Trade and Investment Commission, 2016)

Cultural aspects

The culture of China also plays a role in a potential trade risk when doing business with China. One important topic in the West when doing business is ethics. The way you should deal with ethical dilemmas and knowing what’s wrong and good. Ethics in China is not an important topic as of now.
In the west it is not done to assign family members in your company or select a family company to do a job, this is normal in China.
Furthermore  it is important to have your connexions in China in order to do business with China. To get those connexions it is important to have patience. It takes quite a while for the Chinese companies to trust the Western companies. It is important for a western company to build a relation with its partner company in China. So don’t be surprised if you get invited by you partner for a drink. (Dries, 2016)

Tips

To make a success of the business you want to set up in or with China it is important that you have the knowledge about doing business with China. If you don’t have the knowledge look for  somebody who has the knowledge of the Chinese market. This can be done by hiring a Chinese company who can arrange all the stuff and information you need. Furthermore it is important to seek professional advice , legal advice,  be aware of local regulations and try to understand the local practices.

Bibliography

Australian Trade and Investment Commission. (2016, October 7). China: Business risks. Retrieved from www.austrade.gov.au: https://www.austrade.gov.au/Australian/Export/Export-markets/Countries/China/Doing-business/Business-risks

Dries, R. (2016). Legal and trade risk in China. Legal and trade risk in China (p. 15). Deventer: Dries, Ruben.