The risks of doing business on the mainland are substantial and have increased since the National Development and Reform Commission launched an investigation into US wireless technology firm Qualcomm, warned Policy and Regulatory Report, a news service subsidiary of Mergermarket. The international publisher of information on mergers and acquisitions said foreign companies looking to do business in China should be aware that its antitrust regulators were now stepping up enforcement of competition rules, adding there was an increased tendency by regulators to go after big firms suspected of antitrust infringements. Qualcomm announced on November 25 that the NDRC had launched a probe into the group relating to the mainland's anti-monopoly law. The statement came after reports that the NDRC will set up antitrust investigations in six industries - vehicles, aviation, home electric appliances, chemicals, telecommunications and pharmaceuticals. However, a study by Freshfields Bruckhaus Deringer, an international law firm, found that business risks in China were not as bad as in some other places around the world. The study found that 25 per cent of deals in China faced problems of various kinds, which compared favourably with a figure of 60 per cent in Indonesia, 43 per cent in Mexico and 83 per cent in India. The problems include regulatory investigations, government opposition and legal disputes. By comparison, in Argentina, the Democratic Republic of Congo, Uganda, Ukraine, Ghana and Israel, all deals faced problems, according to the study, although this was the result of a small sample size, said Edward Freeman, a Freshfields partner. Freshfields studied 132 deals valued at US$750 million or more in developing countries for its report. On average, 28 per cent of cross-border merger and acquisition deals in developing markets by globally listed companies are hit by setbacks such as regulatory investigations, government opposition and litigation, according to Freshfields. "While deals which encounter problems in China are often well publicised, there's a great many transactions that are being completed smoothly and are less well-known. When you consider China's position as a hotspot in the global economy, it's no surprise to see deal execution improving over time," said Freeman. Ben Wootliff, the Hong Kong head of Control Risks, a British risk consultancy, said China suffered many of the same problems as other developing markets. "Every week we are advising clients on numerous transactions in China that have gone wrong," he said. But John Batchelor, the Asia head of corporate finance at FTI Consulting, a global consulting firm, said China was no worse than any other jurisdiction in Asia. "We see a lot of problems for investors in China, but this is a function of it being the largest economy in the region. More recently, we have seen significant problems for investors in Indonesia, so investors' difficulties are not limited to China," he said. He cited an example where FTI was called in to assist an unnamed private equity investor that had lent a considerable sum to finance a delisting of a company based in China. Shortly after the delisting, a new set of auditors were unable to verify the bank balances of the firm and discovered that the family members that founded the company had misappropriated cash to fund various ventures including property speculation. "Our review indicated the company had significantly overstated its financial performance and cash balances and understated its liability position. It was running three accounting departments to prepare different versions of financial statements," Batchelor said. It often happened that investors conducted insufficient due diligence on the businesses they were investing in and the Chinese persons running it, he said. "This can often result in the investor being misled." Another problem foreign investors encountered in China was that it could be difficult for them to enforce their rights when problems arose, Batchelor said. "Achieving resolution through Chinese courts can be a frustrating and a time-consuming process," he said. "Generally, the major issue we see for investors in China is a breakdown in the relationship with their local partner."