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I am writing a paper introducing an internal computer modem into China. I have proposed contracting to have parts of the modem & microchip(s) manufactured from a company like SMIC, then having a local company mount the chips onto a printed circuit board and put the modem together. Finally it would be packed into a box (it's own science) with instructions and such depending if it would be sold as OEM (Original equipment manufacturer) additions to the computer or retail.
I need a risk analysis of each of the elements below:
1) Political/legal/regulatory risks
2) Exchange and repatriation of funds risks
3) Competitive risk assessment
4) Taxation and double taxation risks
5) Market risks (4 Ps)
6) Distribution/supply chain risks
7) Social/cultural risks
8) Cyber/technology
9) Physical environment
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1) Political/legal/regulatory risks
Since you are a new business that is introducing an internal modem in the Chinese market, there are legal risks. The Chinese law does not allow you to bill customers directly and so local agents and representatives are required. There is a risk that the agent may not be reliable and may not even be allowed by the law to act as an agent for you. In addition if there are equivocations in the contract the agent may exploit it. Moreover, the terms of contract may make the sale of modems unprofitable. Your company may face the risk of violating rules relating to agreements. You face the risk of dealing with corrupt officials or of violating Bureau of Industry and Security regulations on the transfer of dual-use technology.
2) Exchange and repatriation of funds risks
Not all companies in China have the right to provide payment in currency and you run the risk of being paid in local currency when you need to be paid in the US dollar. You can repatriate funds only after you receive your payment. If you agree to unsecured payments after delivery you run the risk of not receiving your payment. The usual terms of payment in China are 80% advance payment and 20% letter of credit. It is important to analyze the creditworthiness of the partners and customers before entering into a contract.
3) Competitive risk assessment
There is a serious competitive risk for your internal modem. SMIC participated in SEMICON China ...
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