China is an emerging market that has experienced unprecedented growth. Although it appears to be a modern and sophisticated country in the Tier 1 cities – Shanghai, Beijing and Shenzhen – it still suffers from many of the problems as other emerging markets:
1. A lack of independent institutions – non-governmental organisations (NGOs), consumer protection or judicial bodies – can lead to an absence of transparency in both state and local government operations;
2. A low trust-based society – Clear legislation that is enforced equitably encourages adherence to written, verbal and implied agreements.
3. In China, foreign-invested enterprises (FIEs) are in many cases held to a higher standard than their locally-invested counterparts, which often have local connections to officials who have a vested interest in their success;
4. The government’s – ultimately the Chinese Communist Party’s (CCP) – paramount concerns are to maintain stability and the legitimacy of its power.