In the western world, it seems that a company can’t grow really big without doing business in China. This has been true for nearly two decades. Almost all global fortune 500 companies are now more or less having business presence in China. The Chinese market has event become a profit generator for some big companies, especially during the recession. General Motor is a good example. Exactly when GM filed chapter 7-11 in the US in 2008, General Motor China enjoyed the best performance in the Chinese market. It is certain that those big fortune companies did succeed in doing businesses in China. However, they succeeded because they are big. They have big exposures; they have big governmental connections; and, they have big bucks to spend on working with big government connections. If you are a small business and would like to do business in China in any forms, the scenario could be quite different. Why? Because you are small.
Here are 10 greatest risks of doing business in China. This blog is intended for small companies who are interested in doing business in China. If you have a big company, I mean big enough, you don’t need to worry about these risk.
1. There are great uncertainties in the real economy of China.
Let’s start with the brief history of Chin’s rapid economic growth in the recent year. As you all know, China started opening up and reform in the late 70′s. During the early stage of the reform, China did to certain extent take advantages of cheap labor to initiate its economic growth from export. But the export-propelled growth at that time was not quite as impressive as what it stands now. China’s rapid economic growth didn’t really start until commencing it’s land reform in the late 90′s. China never privatized land, but the long term (50-70 years) leasing of land use rights allowed Chinese government to rapidly expand its currency capacities. As a direct result, GDP growth skyrocketed because as a brand new business sector, the real estate was introduced into the Chinese economy. Subsequently, personal income started to rise dramatically, which in turn pushed real estate prices up constantly. Along with its export growth, China had enjoyed double-digit GDP growth for over 10 years.
China suffered very mildly in the recession as Chinese government pumped into a large lump sum of investments in rebuilding its infrastructures in virtually every major city. Its GDP growth rate slid back to single digit, but it was far better than any other countries in the world if judging by the GDP number. — to be continued