with the regulatory environment concerned. An errant Chinese investment is far more likely to fail due to a lack of understanding of the Chinese regulatory environment, poor business management, a failed product or at worst, financial deceit than criminal activities. Yet all can be avoided-both upfront, and ongoing.

Regulatory risk

China is an evolving market and one which is progressively becoming more open to foreign trade and investment. That's the good news. The bad news is the Chinese Government is difficult to pin down to deadlines or timeframes for the introduction of new legislation concerning the opening up of a particular area of industry. When laws are announced, the actual "implementing rules" as to the framework of the law can be delayed still further. However, most applications of China's investment laws and its treatment of foreign investment for manufacturing purposes are fairly well defined. It's the services angle that can still cause problems for investors in China and being able to define which regulatory authority is responsible for a particular area. It is also important to note that Chinese officials have set targets for the amount of foreign investment dollars they are expected to procure, and many may not be completely familiar with the actual investment law in the area of operations a business is involved with. This can and does lead to situations with government officials overextending or exaggerating their claims and ability to assist. Despite the fact a city mayor may have "endorsed" a project, it is still wise to have his interpretation of the law checked off with the state regulations. Many foreign investors have become attached to an over enthusiastic local official promising things that may not then occur. This can be immensely damaging to an investing business.

Criminal risk

As mentioned, unless the business operates in a criminal manner, and one is compliant with their home country regulations concerning fraud and so on, criminal risk for the investor in China is small. Breaking a regulation is likely to lead to a fine, not a lawsuit or imprisonment, unless it is very serious. However, any breach of regulations deliberate or accidental can have an effect on public relations, with newspapers and the wild nature of the Internet being a conduit for the spreading of bad news.

Other areas to be aware of are legal risk, financial risk and human resource risk.