Risk Management in China: Applying International Best Practice to Foreign-Invested Projects

Chinese contractors operating overseas have experienced difficulties in adjusting to the international environment. This, in fact, mirrors earlier international experiences of western firms entering new markets. So, as with much in life, the main lessons have already been learned by our predecessors and the challenge is to pass them on to the next generation. One of the key differences in moving from a relatively mature and well-regulated construction environment, as China is, to a range of different and largely immature markets is the need to become much more aware of risks that in the home market, to a large degree, are covered by an established legal, regulatory and operating environment. To understand the differences, it is first necessary to understand the characteristics of the home market. In China, there are many features of the system that effectively provide a safety net to contractors who fail to perform. This paper describes how the operating environment in China, in many respects, provides a poor grounding for Chinese contractors moving overseas and, hence, how important it is for such firms to adopt a rigorous approach to risk management as will be covered by other papers.