Topics:   Risk Management

Topics:   Risk Management

April 20, 2021

What Directors Most Need to Know About Doing Business in China

April 20, 2021

In the deeply reported story “Weighing the Pros and Cons of Doing Business in Xi Jinping’s China” in the current issue of Directorship magazine, author Gregor McQueen warns that companies should plan for future shocks: “As dependence on revenue from Chinese operations increases, this perpetuates the potential impact of business interruptions.” He identifies three “gray rhino” risks for business in general, as well: China’s human rights and democracy issues, more frequently emerging infectious diseases, and rising sea levels affecting manufacturing hubs.

For US-based directors who may serve on the boards of companies with interests in China, McQueen notes that while opportunities exist in the People’s Republic of China (PRC), they vary greatly depending on industry sector. The political risks are significant and can be critical. Directorship magazine’s inability to obtain comments for the story from experienced directors highlights the extent to which care must be taken in making public statements for fear of government or local consumer retaliation against businesses operating in the PRC. Examples of retaliation for certain public statements or stances involve the National Basketball Association and clothing retailer H&M.

Authoritarian politics drive all policy and Xi Jinping and the Chinese Communist Party (CCP) control everything. As former professor of the Central Party School, which educates top CCP leaders, Cai Xia said after fleeing in 2020, “Over the course of his [Xi’s] tenure, the regime has degenerated further into a political oligarchy bent on holding on to power through brutality and ruthlessness. It has grown even more repressive and dictatorial. A personality cult now surrounds Xi, who has tightened the party’s grip on ideology and eliminated what little space there was for political speech and civil society. People who haven’t lived in mainland China for the past eight years can hardly understand how brutal the regime has become, how many quiet tragedies it has authored.”

Read the full story here.


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