The entry of the People's Republic of China into the World Trade Organization (WTO) in 2001 has reduced the risks faced by Multinational Enterprises' (MNEs) operating in China, but not substantially. While China has taken various measures to open its economy in compliance with the WTO, it has not gone far enough. For instance, with its currency, and its enforcement of Chinese firms to follow the WTO rules is questionable. The term risk in this case encompasses the following area: legal and regulatory, business, intellectual property infringement, liability and corruption in China. This essay will argue that while entry into the WTO has improved the business climate somewhat, the risks for MNEs doing business in China are still relatively high. This is due to three main reasons, the undervalued Chinese currency which makes Chinese exports cheaper than foreign competitors, the law of infringement of property rights is not being enforced and finally the illegal subsidies in major export industries given by the Chinese government to the Chinese firms support unfair trade competition in the international market.
China's economic reform began in 1978 with its leader, Chairman Deng Xiaoping allowing some liberalization of the agriculture sectors and manufacturing industries from complete state control. The economic reform consisted of a transformation to a more market-oriented economy which included opening up many sectors of the economy to foreign competition. Eventually this lead to China joining the WTO. Today, the result of these reforms is China possessing one of the fastest growing and largest economies in the world despite being governed by a communist party. As the market continues to open up, MNEs can expect great opportunities in China but there significant gre ...