First, it was poisoned pet food; then, toxic toys. Now, labor and materials costs are rising, thanks to a feeble dollar. The government cut back on lending. It snowed, and the country shut down worse than Washington D.C. right before a Super Bowl. There's a race on right now as to who is having a worse year China or Roger Clemens. After a year of one supply chain problem after another, the bloom is off the rose in the case of China–or maybe U.S. companies are just beginning to take a more financially mature approach to doing business there. Either way, executives no longer have visions of China expansion dancing in their heads.

For companies with a long-term commitment, the goal has been to develop a rapport with Chinese officials and bankers to interject a capital-markets approach to financial challenges. While most U.S. companies have regarded China as a large outsourcing vendor, the potential of China's domestic market is awakening. Eventually, the Chinese economy could be as big or bigger than the U.S economy, portending dramatic changes in U.S.-China relations.

In this three-story special report, Treasury & Risk editors look at three critical areas: liquidity management, supply chain risk and foreign exchange. We have entered Phase Two in doing business in China. The ooh-aah is gone, and the hard work has begun.