Political risk when doing business in china

In view of these risks, businesses that directly or indirectly provide goods and services to authorities in Xinjiang, or that have supply chain links to the region, are at risk of unintentionally facilitating or being otherwise complicit in human rights violations. Businesses with supply-chain links in Xinjiang face particular reputational, economic and legal risks due to extensive and credible evidence of forced labour programmes targeting Uyghur and other ethnic minorities.

This includes economic costs linked to reputational risks. Media and non-governmental organisation reports indicate that Uyghurs and other ethnic minorities have been forced to work in the cotton industry, as well as factories producing textiles, automobiles, and electronics. There is also evidence that some companies involved in the supply chains of solar equipment and polysilicon may be linked to forced labour.

Businesses engaging in joint-research and development activities in the fields of surveillance, biometrics, or tracking technology are at heightened risk of facilitating human rights violations due to evidence that invasive surveillance is being used in Xinjiang.

Businesses should be aware that conducting due diligence in Xinjiang is challenging due to: limits on access, including for auditors; the fact that it is highly unlikely that workers will be able or willing to speak freely; and the extent and severity of human rights violations occurring there. There have been reports of auditors being harassed, threatened and detained. Due to the nature of the situation in Xinjiang, traditional due diligence methods may not be effective in identifying human rights violations.

UK businesses should take full account of these challenges when considering whether they can implement necessary procedures and internal controls to ensure their operations do not directly or indirectly contribute to human rights violations. Businesses should consider collaborating with industry groups to share expertise and best practice in identifying and addressing risks of human rights violations, including forced labour. Businesses will also need to consider their corporate responsibilities under the UN Guiding Principles on Business and Human Rights as well as the OECD Guidelines for Multinational Enterprises when examining the risk of forced labour across their supply chains, and in making investment decisions.

In light of concerns around forced labour and other human rights violations in Xinjiang, other countries are also implementing new policy measures. These include designating individuals and entities under human rights sanctions regimes; restricting trade with specific companies; and prohibiting the import of certain goods.

If you have queries relating to sanctions imposed by the US or other states, you should consult relevant national guidance and legislation. You may also wish to take legal advice as appropriate. China is a member of the International Labour Organisation ILO and has ratified the two core conventions on child labour.

The Chinese government condemns child labour. But reports suggest child labour remains a problem, particularly in the manufacturing and service industries. Education law supports work-study programmes where this does not interfere with normal study, but some internship programmes appear to violate Chinese and ILO standards.

The Chinese government officially recognises 55 ethnic minority groups in China, in addition to the majority Han Chinese ethnic group. Chinese Labour Law specifically protects Chinese workers against discrimination on the basis of ethnicity, gender or religion. There are no applicable provisions against discrimination on the basis of sexuality or gender identity.

China is committed to preventing gender discrimination in the workplace under the International Covenant on Economic, Social and Cultural Rights, and the Convention of the Elimination of Discrimination Against Women. Domestic laws are in place to promote gender equality and prevent gender discrimination and sexual harassment.

China has an estimated million migrant workers, who have moved from rural to urban areas for work. Most are ineligible for many urban public services, and are employed in low-skilled, low-paid jobs in the secondary and tertiary sectors. Minimum wage guarantees are undermined by illegal employment practices. Migrant workers may be employed without a contract, or sign unfair contracts that stipulate a very low basic wage with long overtime needed to earn a living wage.

Withholding wages is illegal, but reportedly rife and frequently causes labour disputes. Recent reforms to the hukou system of household registration have alleviated, but not solved, the problem in some cities. The Guidelines for occupational health and safety are laid down in the Safe Production Law, which was revised in to establish a blacklist for companies with poor safety records, and the Occupational Disease Prevention Law, was revised and strengthened in In addition, enterprises wishing to set-up production in China must obtain a permit from provincial authorities under the Safety Production Permit Regulations, revised in Allegations of unsafe working environments and workplace abuses in a range of industries remain widespread.

These include excessive forced overtime; exposure to hazardous materials and inadequate safety management training. Official statistics show the number of industrial accidents is steadily declining, but approximately people are still killed every day in workplace accidents. Despite new regulations for filing workplace injury compensation claims, procedures remain complicated and time-consuming.

The right to organise, strike and engage in collective bargaining remains strictly limited in both law and practice. In recent years Chinese workers have become more assertive at the grassroots level about using collective action to secure their rights: illegal protests and strikes are relatively common and increasing in frequency. A number of labour NGOs operate informally to advise and support workers in labour disputes. In Guangdong Province, where most strikes occur, regulations on collective bargaining have been introduced.

They place a greater obligation on i employers to honour minimum wage requirements, working hour directives and social security payments and ii the unions to play an engaged role in dispute resolution.

China has increasingly sophisticated IP and legal systems which are used by large numbers of British companies to obtain IP protection and enforcement relief. However, IP problems still cost British business in China hundreds of millions of pounds each year. Damage is not restricted to businesses in the Chinese domestic market — IP-infringing Chinese businesses often have global export capacity.

One source of risk is that most IP rights are territorial, that is they only give protection in the countries in which they have been granted or registered.

If you are thinking about trading internationally, then you should consider registering your IP rights in overseas markets. If you are a UK company selling to China, sourcing from China, or even attending the same trade fairs as Chinese companies, your IP is already exposed to risk of infringement. We distribute a monthly newsletter informing companies of IP regulatory updates in China. The Embassy supports over IP cases per year. Legal advice may also be obtained from legal services providers based in both the UK and China.

General information on IP is provided on our intellectual property page. Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world. In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK.

In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere. It created four prime offences:. The Act recognises that no bribery prevention regime will be capable of preventing bribery at all times. A company will have a full defence if it can show that despite a particular case of bribery it nevertheless had adequate procedures in place to prevent persons associated with it from bribing.

Companies must therefore make sure that they have strong, up-to-date and effective anti-bribery policies and systems in place to prevent bribery by persons associated with them. Since coming to power in China, President Xi Jinping has launched a wide-ranging anti-corruption drive.

But great risks are also inherent in most China ventures, and an overreliance on trust, opaque risk transfer strategies, and luck have caused the downfall of numerous companies operating or investing in China. To succeed in capturing opportunities and securing competitive advantage, foreign companies must manage their risk strategically and conduct appropriate due diligence on every aspect of their business. Companies that focus on maintaining the integrity, security, and resilience of their business will experience smoother and more efficient operations, greater transparency, and higher investment returns.

These companies will become brand leaders in the Chinese market and the standard bearers of their industry. China Business Review is the official magazine of the US-China Business Council, a nonprofit and nonpartisan trade association that represents more than American companies doing business in China. Trending Tags Intellectual Property innovation cybersecurity ecommerce tech. Home Corruption. November 1, Share on Facebook Share on Twitter Linkedin. Legal and regulatory risks Regulatory risk in China is high.

Social and cultural risks Business ethics and corporate governance The concept of business ethics is still fairly new in China. Transparency Chinese businesses are accustomed to operating behind closed doors, out of view of the justice system, investors, and potential partners. Partners and suppliers Prospective business partners in China will often freely admit that they are looking to the foreign partner to supply capital and technology.

Relationships Relationships or connections guanxi were once touted as the secret ingredient to success in China. Social accountability Though China has relatively robust laws on labor rights and health and safety, working conditions vary enormously across China, especially between rural and urban areas.

Intellectual property Both Chinese and foreign companies suffer as a result of weak IP protection in China. Money laundering Much of the capital fraudulently obtained by individuals in positions of power finds its way out of China via investment vehicles and private bank accounts.

Rewards come with risk Companies that plan to operate or invest in China can expect great opportunities in one of the most rapidly growing economies on the planet.

Next Post. From Reshoring to Rightshoring: Dr. Latest Podcasts. A look at export data to China at the Congressional district level November 5, What falling bilateral tech FDI means for companies October 26, Embassy of the United States — Beijing China. United States Chamber of Commerce — China. Providing international receivable management and debt collection services for exporters to more than countries including China.

For further information, contact [email protected]. This report represents a compilation of information from a wide variety of reputable sources. Close Search Box. Search for: Search Submit. Country Risk: China Country Risk. In October , China issued a white paper on planned judicial reform. Legal System China has a civil law system influenced by Soviet and continental European civil law systems. Interesting Facts About China China is considered by many historians to be the longest continuous civilization.

The Chinese invented paper, the compass, gunpowder and printing. Toilet paper was also invented in China in the late s, but it was for emperors only. Cricket fighting is a popular amusement in China. Many Chinese children keep crickets as pets. Despite its size, all of China is in one time zone.

The Chinese color for mourning and funerals is white rather than black. Martial arts are practiced throughout China and were largely developed from ancient farming and hunting methods.

Originating as far back as B. This lunar calendar originated in B. In addition, foreign corporations in China face reputational risks in their home countries. Just as Google, Microsoft, and Yahoo have been sharply criticized in the United States for allowing in some cases, helping the Chinese government to manipulate consumer use of the Internet, other firms may find themselves accused of contributing to unfair labor practices or unsafe environmental conditions.

We have seen many companies make the costly mistake of not managing political risks—a mistake that can be avoided. How can foreign companies and investors in China hedge these risks? To start, there are three things they should not do. First, they should work with their home governments to press the Chinese government to honor its commitment to open markets, institute basic economic rules of the road, enforce those rules it does have, and protect intellectual property rights.

Currying favor with the Chinese government by ignoring these issues is a short-term strategy that will eventually undermine foreign firms. Second, to minimize reputational risks at home, foreign companies should establish and firmly adhere to corporate responsibility standards. A number of businesses already have information technology systems that allow employees to work from home. During the SARS crisis in and , some companies were prepared to mitigate the damage of production stoppages by allowing people to work in shifts, minimizing the concentration of individuals in one place at any one time.

When these sorts of emergencies occur, some global corporations face pressures to allow expat employees to leave the country. Preparing Chinese workers to assume the functions vacated by foreign workers is essential for the continuity of operations.