After months of hoping to avoid it, the trade war with China is gearing up. There are many changes taking place in both Chinese stock markets and finance that will affect foreign businesses in particular for the forseeable future.
It has long been said that the Mandarin word for crisis, Wéijī, is closely related to the word for opportunity, Jīhuì. That sense of optimism and being quick on your feet is more important than ever to having a successful business in China.
The immediate concern
As the tariffs between China and the US take hold, the stock market and currency exchange is starting to look more bleak for investors in China. The currency, Yuan Renminbi, is falling sharply in value in order to make Chinese exports more attractive to American businesses.
This means that capital is going to be more difficult to obtain for any small business. It also means that exporters will have an edge to help them ride out the storm in coming months. Both of these mean that while there are still opportunities in China, they are changing.
It may seem like exports from China are bound to suffer, but they could well be where the opportunity arises. Because of strict controls on currency exchange, any business making money in China is going to have a hard time moving it out of the country. Profits in Renminbi will have to stay in Renminbi.
That makes it difficult for American service providers to invest in their businesses in China. But while it is hard to move currency, goods will continue to leave the nation. The falling Renminbi is targeted to keep them priced at a reasonable level even with additional tariffs placed on top of them.
The keys to successful business in China, as we have said many times, are rigid adherence to regulation and building partnerships. Partnering with an export company can be a good way to move profits from services in China into US Dollars even in a trade war. The importance of close relationships with exporters is actually increasing, not decreasing.
What are the risks?
As always, the risks are there for anyone investing in China. But for smaller entrepreneurs, there may be more of an advantage in the market. Where large companies might be targeted, smaller ones are less likely to face official sanction. Paying attention to the fundamentals is simply more important than ever.
A critical partnership will always be an attorney with experience in Chinese investment and business formation. The value of doing everything carefully and precisely is only increasing. With an eye to finding the new opportunities that arise from the developing crisis, there are still plenty of investments open to anyone willing to take on the risks.