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34 Country starter pack Getting started in China Common areas of risk When doing business overseas, Australians must consider multiple areas of risks and associated potential difficulties. These include: Political risk: how stable is the market politically, economically and socially? • Government and international enforced trade embargos may affect the flow of goods and services and could affect your delivery of goods and getting paid • Another potential consideration is whether the country complies with international law requirements, such as on human rights, trade sanctions and recognition of personal property rights. Legal and regulatory risk: Challenges may arise due to differing legal and regulatory systems. For example: • Common law systems versus civil law systems, IP issues, taxation and auditing requirements • Differences in contract law: get tailored advice on contract terms due to differences with contract laws • Access to courts and dispute resolution mechanisms: some countries may not permit local litigation or place restrictions on the types of claims that can be made. Bribery, graft and corruption risk: • Bribery, graft and corruption are illegal in most countries. Under Australian law (Division 70 of the Criminal Code Act 1995) you can face criminal prosecution in Australia for bribing a public official in another country. Exchange rate risk: How will adverse movements in exchange rates impact on your profits? Non-payment risk: What is the likelihood of your suppliers or customers defaulting or becoming insolvent? environment that is China. Efic highlights China’s key risks as the evolving banking system and business regulations. This is in combination with a weak judicial system that makes it more difficult to enforce contracts. Other challenges include rigidities in infrastructure and labour markets and a potentially volatile currency – all accentuated by the devolution of power to regional and local bodies. While corruption is a significant concern, the Chinese Government is actively focusing on improving transparency and due diligence across government and business. Transparency International's Corruption Perceptions Index 2014 ranked China 100th out of 175 countries in 2014 on the perceived level of public sector corruption (1 being least corrupt and 175 most corrupt). China was ranked ahead of Indonesia (107) and Vietnam (117) but behind other Asian countries such as Thailand and the Philippines (both 85). China’s sovereign risk is considered reasonably low, with a credit rating of AA-/ Stable from Standard & Poor’s. Difficulties with getting construction permits and initial set-up processes can be a particular concern for Australian businesses in China. The World Bank’s Doing Business Report ranks different countries according to how easy or difficult it is to open and run a small to medium-size business when complying with relevant regulations. In 2015, China was ranked 128th out of 189 countries (1 being the best) for starting a business, and a very low 179th for obtaining construction permits. However, China was ranked 90th for doing business overall, up three places from 2014. It rates quite good on enforcing contracts (35th) and registering property (37th). And relative to other large, developing countries, it ranks well for trading across borders at 98th. India was ranked 126th and Russia 155th.
Country starter pack Getting started in China 35 KEY RISKS TO EXPORTERS AND INVESTORS Sovereign default risk Currency risk Currency inconvertibility risk Business cycle risk Systemic banking risk Difficulty enforcing contracts Very low Low Moderate High Source: Efic 2013 BUSINESS CLIMATE INDICATORS* GOVERNANCE INDICATORS Control of corruption Government effectiveness Rule of law Political stability and absence of violence Regulatory quality Voice and accountability 0 25 50 75 0 25 50 75 China Emerging and developing Asia Source: World Bank & Efic *Country percentile rank
Page 1 and 2: PEOPLE'S REPUBLIC OF China COUNTRY
Page 3 and 4: 9.6 million square kmS GDP 2014 SUR
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Country starter pack Business pract
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Country starter pack Visiting China
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Country starter pack Engage with us
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Country starter pack Engage with us
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© August 2015, Asialink Business.
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China

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