The Rising Risk of Doing Business in China

As the People’s Republic of China (PRC) celebrated its first-ever National Security Day, anti-foreigner sentiment appears to have been made an official part of the Chinese state’s increased vigilance. A widely circulated cartoon depicted a stereotyped Western man seducing an unwitting Chinese woman into espionage (Weixin, April 17). Meanwhile the National People’s Congress enacted a new law further restricting non-governmental organizations (many of which have foreign funding or employees). This new legislation follows other laws on cyber security and terrorism that offer additional broad powers to the government to oversee and manage foreign companies invested in China (China Brief, January 25; China Brief, December 21, 2015).

Over the last several years, the risks associated with doing business in the PRC have risen due to Chinese suspicion of foreign business people and assets in China and escalating tensions with its major trading partners (China Brief, October 5, 2012). In the meantime, foreign investment appears to be cooling off as the Chinese economy shifts away from double-digit growth, though the PRC remains a compelling foreign business priority. However, stricter regulations and a seemingly desperate anti-espionage campaign may have led to detentions of foreigners, including the recent beating by State Security agents of an American diplomat. A review of how Chinese governments have dealt with foreigners on its soil in the past and a survey of recent developments indicate that a sea-change in how China treats foreigners may be underway.

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