These new laws in China will affect your business: BE PREPARED!

First of all let me specify one very important thing!

I love China, its people, the tradition, the culture and the food!

This article's purpose is not to bash China!

However, it's very important to bring to the attention of people looking forward to expand their business to China some of the laws that exist or are going to be implemented.

Some of these laws will, no matter what, affect your China operations.

Ok so, now that I have specified this, what am I talking about?

As you may already know, China is not really a free country when it comes down to business.

There are many "dos and don'ts" that you must be aware of.

Plus, recently, it seems that the CCP is tightening its grip on foreigners, both businesses and commoners.

Quoting this article from WSJ:

The legal and regulatory risk of doing business in China may be about to get a lot higher. The China Securities Regulatory Commission is implementing changes to its rules governing publicly offered securities investment funds. These rules include requiring foreign-owned fund managers such as BlackRock and Fidelity to create Communist Party cells when operating in China.

Ok, in this case we are talking about companies operating in securities and investment funds.

But, according to my 15 years long experience in China, when they start to test a new policy, if successful, they will expand it to other sectors as well!

And this policy is bound to be successful, simply because it gives more power to the politburo and to the country's "nomenklatura".

What is the inherent risk of these new laws for the western companies?

Well, for instance, as the article says:

the board of directors shall first seek for the opinion of the leading party group of the company

Many analists were wrong in saying that those laws would just apply to local companies.

So, if you are an investor and your funds are managed by some asset management firms with a subsidiary in China, both as a Wholly Owned Foreign Enterprise (WOFE) or as a Joint Venture, it means that the fate of your funds could be decided by the Party and not on the basis of a commercial sentiment.

Up to now these rules are just applied to foreign asset management firms: we'll just have to wait and see if they will be applied to other foreign companies as well.

One thing is for sure:

Doing business in China is not for the faint of heart.

You must be prepared and be sure that you have all the facts straight before embarking on a journey to China.

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