Risk of Doing Business in China
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 newly issued M&A regulations and laws, foreign enterprises have more alternatives to acquire domestic corporations. They are starting to use mergers and acquisitions in the same way that they do elsewhere. However, many factors exist to discourage foreign firms from fully utilizing the advantages, such as poor standards of corporate governance, inadequate due diligence process and evaluation matters.
Tax Arrangement
In different phases and regions, FIEs enjoy different preferential tax rates. How to fully utilize the tax holiday and other concessional arrangements to maximize profit is a crucial question facing foreign corporations.
Human Capital Constraints
Finding and retaining human resources remains one of the most taxing day-to-day issues facing foreign companies in China. On the demand side, foreign firms are no longer the automatic choice for ambitious people. At the same time, the supply of skilled workers is very limited. Foreign firms face spiralling wage costs for skilled employees.
Environmental Protection
The government has more than on one occasion stressed economic growth while protecting environment. Those that could maintain clean production or adopt energy saving technologies will more and more enjoy a
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 newly issued M&A regulations and laws, foreign enterprises have more alternatives to acquire domestic corporations. They are starting to use mergers and acquisitions in the same way that they do elsewhere. However, many factors exist to discourage foreign firms from fully utilizing the advantages, such as poor standards of corporate governance, inadequate due diligence process and evaluation matters.
Tax Arrangement
In different phases and regions, FIEs enjoy different preferential tax rates. How to fully utilize the tax holiday and other concessional arrangements to maximize profit is a crucial question facing foreign corporations.
Human Capital Constraints
Finding and retaining human resources remains one of the most taxing day-to-day issues facing foreign companies in China. On the demand side, foreign firms are no longer the automatic choice for ambitious people. At the same time, the supply of skilled workers is very limited. Foreign firms face spiralling wage costs for skilled employees.
Environmental Protection
The government has more than on one occasion stressed economic growth while protecting environment. Those that could maintain clean production or adopt energy saving technologies will more and more enjoy a