The new reality of business risk in China requires a strategic approach and due diligence protection. This updated presentation (see the Slideshare link below) outlines some of the themes in my book, "Risky Business in China", highlighting the risks, and how they can be mitigated.

As I write in the book:

"There are many challenges that might keep China-focused mangers awake at night. Some of them, like the (lack of) quality of Beijing’s air, they can do little about. Others are the subject of much debate, planning and effort. It is helpful to map out the rage of concerns, and to put the key risks in the context of wider business issues.

China business news, and word-of-mouth reporting, suggests that market conditions continue to change quickly – as they always seem to have done. But a number of themes are consistently raised. These relate to issues such as rising costs, intellectual property rights (IPR) protection, market access, regulation and competition.

...The business challenges cover a range of economic, political, legal, operational and cultural issues. It is clear that costs are increasing across the board. The competition for qualified management and staff has also intensified, and is one of the factors making rising costs the top concern overall. The fact that this is happening in an environment of slowing growth in China and around the world only compounds the problem, and it is therefore hardly surprising to see that competition is becoming more intense from private companies as well as Chinese state-owned enterprises (SOEs). Or that perceived protectionist measures that hamper foreign firms’ ability to compete on a level playing field are worsening...

Legal issues are another common cause for concern, and range from IPR and licensing problems to the uncertainty and commercial risk presented by inconsistent enforcement... Other issues include changing bilateral relationships (which have commercial as well as political ramifications), corruption, and the longstanding debate over the value of the Chinese currency, the Renminbi (RMB).

...The picture painted may be fairly gloomy, but it is less so than elsewhere, and most remain focused on the light at the end of the tunnel. China presents more potential for growth, even if it is as a slower (but more sustainable) pace than in recent years. Companies can certainly not ignore the opportunity, either as a manufacturing base or as an emerging consumer market.

...While there are significant China challenges that some businesses would prefer to avoid altogether, the overall perception is that the potential rewards outweigh the risks. And that is likely to be true – at least for those companies that take an objective view of those risks, and proactive measures to mitigate them."

My recommendation is that companies take a much more strategic and proactive approach to risk management, and that they make better use of the due diligence tools that I highlight in "Risky Business in China".

“Risky Business In China. A Guide To Due Diligence” is by Palgrave Macmillan. For more news and discussion on risk issues in China, join the Risky Business In China LinkedIn Group, and follow the @RiskyBizChina feed on Twitter.

Jeremy Gordon will be speaking about China risk at Asia House in London on 10 September. Click here for details.