Although recent reports show some decline in foreign investment business in May year over year, China is still important—but not as important as it was a few years ago. This is due to the less favorable operating conditions in the world’s second-largest economy.
Foreign Direct Investment (FDI) in manufacturing fell overall in the same period, but investment in services jumped. The service sector now accounts for more than half of China’s foreign direct investment.
Positive Investment Environment
China still has many advantages in attracting FDI, such as a stable political environment and the continued opening up of the market. The Chinese Commerce Ministry is continuing to work with other government agencies in cutting red tape, especially simplifying the investment approval system. With stronger global demand and government policies boosting companies’ confidence, China’s trade is likely to improve over time
Managing Risk in China
For risk managers already in China or whose companies are exploring investment in China there are a number of risk management issues that must be considered.
- With stronger insurance regulatory oversight, issues such as compliance to the Chinese non-admitted laws are becoming more and more important.
- There are also challenges in protecting company property, given that China is prone to natural catastrophes.
- Indications are that China is becoming a more litigious society and that liability claims are slowly rising.
Guest blogger Claude Gallello is Managing Director, Willis International, based in New York. He brings to Willis an in-depth knowledge of the European, Middle East and Far East markets and is experienced in international risk management programs, including programs involving directors and officers, professional indemnity, fiduciary and environmental.