Political Risk Rises in China

Might the same thing happen to American companies in China someday during some diplomatic flare-up between the two countries?

China has long been a favored destination for multinationals, including U.S. companies, anxious to tap into the world’s biggest national market and use China’s industrious but relatively low-wage workforce to manufacture goods for sale back home or in other developed markets. But investing in China has always carried political risk for companies from most countries. As Japanese companies know, and are learning once again, when China has a dispute with another country, it can impact companies from that country that operate inside China as Chinese officials, either overtly or behind the scenes, use the network of Communist Party officials who are still placed in all schools, state companies and other organizations to stir up latent Chinese xenophobia and nationalist rage.