How will China’s slowing economy affect companies with overseas ambitions?

China-City-at-nightWhen you hear about the slowing down of the China economy, it’s often paraded alongside images of an inept government, grizzly bear markets and the end of cheap manufacturing. The mere mention of it conjures scenes of bandit Mongols storming the Great Wall and riding off with the country’s industries and financial markets. Such talk might drive expanding companies away from Asian waters – but should they really be so concerned about entering Hong Kong or mainland China?

No one can predict the markets with absolute assurance, though the consequences of some factors, such as the gradual rebalancing of China’s manufacturing sector, cannot be ignored. For that reason, the country’s GDP growth is expected to slow to 6.3 percent in 2016, according to the International Monetary Fund. That figure comes off the back of China’s official statement of the 2015 fiscal year, which reported that the country had missed its 7 percent target, landing instead at 6.8 percent. Daily figures for the Chinese economy have been unstable, and the year certainly didn’t start out well, with huge drops that were felt even in the American markets.

An uptick in litigation
There isn’t one defining factor that drives the economic slowdown, but the pieces that do matter are often so gargantuan and complex that they’re difficult to comprehend, even piecemeal. Forbes recently reported on one such issue: The amount of litigation between Chinese and Western companies has increased greatly over the last year and it’s resulting in increased risk and lowered credit. According to the source, the two biggest causes of litigation are underpayment by Western companies and a decrease in product quality by Chinese manufacturers looking to cut costs.

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