Businesses moving into China are being warned to consider local laws and seek professional advice before setting up operations due to significant differences in regulations, advice that comes as Australian entrepreneur Matthew Ng has been accused of embezzlement by Chinese authorities.
It is the second Chinese scandal involving Australian businesses over the past year, with mining giant Rio Tinto accused of spying last year, resulting in four arrests and lengthy investigations.
Warren Cross, chief executive of Export Incentives, says businesses must consider the differences between both markets before heading over to China, and urges any business to seek even the most basic legal advice.
“My experience with companies dealing with China is that you’ve really got to have someone on the ground over there,” he says. “I’ve found that you need to really tap into local knowledge – you can’t just think it’ll be the same as any other market.”
Cross warns that like any country, regulations are different and Chinese authorities have much more power at the local level than they do in Australia.
“Even working out regulatory protocols is quite a task in itself, in the sense that local governments have much more power than they do here. You need to figure out how you’re going to go through all that before you arrive.”
“I wouldn’t advise anyone to go into China without doing the proper due diligence first. What I would recommend is actually speaking to someone who’s located there, such as AusTrade officials, who can help you through the process to avoid legal entanglements.”
Ng, who serves as chief executive of travel group Et-China, is now being held for questioning on grounds of embezzlement, The Australian has reported. According to a statement from the company itself, Ng has been detained but no further information is available.
“At present Et-china has no further information about the cause of his detention. As far as Et-china is aware at present Matthew Ng has not been charged with any offence,” the statement reads.
During this period non-executive director Chris Rose will serve as acting chief executive, the company said. “The Board are supportive of Matthew and are seeking an early resolution of this matter to enable him to resume his role as Chief Executive Officer as soon as possible,” Rose added.
Et-China has currently listed on the London Stock Exchange and is one of China’s largest travel companies. But according to various reports, the company has been embroiled in disputes between itself and the Guangzhou Lingnan International Enterprise Group, which wants control of one Et-China subsidiary.
Et-China has received funding from James Packer’s investment fund, Ellerston Capital.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
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