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The Risks of Doing Business in China

For many global companies, China represents a highly attractive market in terms of size and growth rate. Yet China ranks lower in terms of economic freedom and higher in political risk than do some other countries. Despite these risks, hundreds of companies have established manufacturing operations in China. Assume that you are President of an auto manufacturer planning to build a $U.S. 800 million plant in China. You are discussing this project with your good friend who is intelligent, but has no background in international business. Discuss each of the main risk factors that should be considered in order to make this decision.

Here is a link to useful information from the World Bank on the ease of doing business in many different countries:

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A major risk factor that should be considered in making this business decision is the competition that Chinese auto manufacturers will provide in this area. This is largely due to the fact that the Chinese government will provide as many favorable advantages to its domestic businesses as possible, while ensuring that there are obstacles for foreign businesses to navigate. One of these obstacles would be the fees or taxes that the Chinese government will make foreign automakers pay in order to operate in China. This is an ...

Solution Summary

This solution describes some of the risks that are inherent with doing business in China.