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China Investment Opportunities: Setting Ourselves Up for Success

As China is getting more assertive and the government’s stimulus money is buoying the economy, the China investment opportunities seem to be getting more difficult.

As ChinaLawBlog’s Dan Harris reports, hurdles are increasingly being placed in the path of foreign companies wanting to operate in China Clive Palmer’s recent run-in with Li Xiaolin (chairwoman of China Power group, and daughter of former premier Li Peng) is instructive: He was trying to show his prowess by pointing out the export contract he had signed, only to clarify its being a framework agreement.

Lessons to take away from this incident are rather more complicated than just increasing difficulty, however. As pointed out by John Garnaut (in the Sydney Morning Herald, Feb. 15, 2009) investment in China cannot be completely removed from politics – and business with China increasingly has to be done on Chinese terms.

As Australia’s “The Age” pointed out, cooperation is commonly approached the Western way, focusing on legal contracts. As in politics, China’s increasing standing has led to a belief that China should now be just like any other business environment, but it may be becoming even less so.

Going in for a quick buck and treating the Chinese business partner as unequal is raising rather more reminiscences of China’s past weakness nowadays, making things more difficult. On the other hand, especially in this environment that is apparently focused on mutual benefit and cooperation between equal partners, building trust over time becomes all the more important.

Things still need to be done to be legally airtight (ChinaLawBlog has great examples for this, e.g. here or here), but also with a better engagement in the Chinese way of doing things through guanxi (relationships).

Clive Palmer’s travails also provide another lesson: Even if the investment climate in China is getting rougher, China continues to grow and develop – and look for future investment partners. China investment opportunities will, no doubt, continue to present themselves to smart Western business executives who understand the differences between, and the similarities with their “Western business mindset.”

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