Inside China foreign businessmen have certainly noticed local government in China taking a harder edge to dealing with foreigners with visas and business approvals. The Rio Tinto case is an extreme point to consider, especially in light of the sensitivity of negotiations on a benchmark price for iron ore.

Reuters recently identified 5 political risks to watch out for in the China adventure 2010. Trade and currency disputes, especially between China and the United States. The article councils looking out for signs that positions are hardening between the two sides as an important determinant in whether relations will become incindiery.

The article also considers the possibility of fallout from the dispute with Google. If reports begin streaming from Beijing of foreign deals scuppered or delayed – especially in the media sector – be sure the Google effect is at play.

Of course, the old bogie man of social stability is a conventional sanity check on whether Chinese leadership will make a dramatic decision. Watch out for signs that inflation or housing costs may be getting out of hand.

Health problems caused by excessive pollution has always been a flash point at local levels. Some foreign companies may find themselves suddenly caught up in a spontaneous government dragnet to close down or spoil the usual suspects.

Meanwhile, issues like Google and Rio Tinto forewarn that the leadership has not yet learned how to sap the political charge from business dealings.

So, though the promise of China’s vast marketplace is still worth the risk, foreign companies need to make sure they have their exit strategies updated if their investments in any way lay near the third-rail of national prerogative in China.

Further reading: Reuters, FT

See also:

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