Many American companies create joint ventures in order to expand their market and lessen the risks that they face. Yet efforts by American companies to form joint ventures in China have often been problematic.
Many businesses have concerns about operational costs and regulatory scrutiny when doing business. This is not unique to doing business in any particular location. And while there are obstacles to doing business in China, there are also many reasons for why businesses wish to relocate there.
We have spoken many times about Chinese efforts to introduce legislation that provides greater protections for foreign businesses. However, there continues to be debate regarding the effectiveness of legislative efforts.
China has the power to control and even hamper business conducted by American companies. According to one news post, China has vamped up its regulations. They have also increased surprise inspections concerning American businesses. This is motivating American legislators to act.
With talks of trade wars between the U.S. and China, conducting business in China is becoming more difficult for American companies. This is in great part due to the Chinese government implementing tougher regulations. Chinese officials are also more likely to reject shipments after surprise inspections.
There are indications that Chinese officials may provide incentives for start-up companies doing business in their country. This is certainly true in the tech industry.
When American companies delay in doing business in China, it may only mean that other businesses from throughout the world will take advantage of the circumstances. American companies have been hesitant to enter into business negotiations in China. This may be a mistake since China is now the world’s second largest economy.
According to a CNBC article, China’s attempt to modernize the economy may face obstacles due to trade war talks. Such tensions are forcing China to rethink its economic strategy.
The United States continues in its efforts to place pressure on China on opening up its markets. This pressure was in evidence in the agreement the U.S. had with Mexico and Canada. In that agreement, the U.S. added a provision allowing nations to exit deals with a “non-market country.” According to U.S. officials, China would be one of these non-market countries.
Not everyone is pessimistic about trade relations between the United States and China. While American companies in China will definitely face challenges, China may still tread lightly when it comes to disrupting business.