April in Paris, as the old song goes, is for lovers. April in Beijing is for keeping your head low and your eyes squinted. From March through May each year Beijing is the target of dust storms that blow yellow, gritty dirt from the Gobi desert in the northwest of China across China's northeast into Korea and as far as Seattle. The Dust Storms have always been a fixture of China's yearly seasonal hiccups - along with floods in the South; however, the past twenty years have seen a marked increase in the duration and intensity of the Dust Storms. The desert, in other words, is getting larger. One of the reasons is the deforestation of the already barren northwest, which has removed the top-soil anchors the land had depended on to support the fragile ecosystems. Another reason is the drop in the amount of rainfall the North has had, likely due to greater air pollution and the lack of foliage. Programs are underway to replant trees in the Northwest -- protected against the ravaging wind by mud-brick walls -- but results will take decades to appear.

The water crisis in the north of China has forced water prices to increase. The price increase impacts manufacturing facilities that are water-intensive, especially those that produce a great deal of waste water. It also impacts the water bills of hotels and restaurants, which are great consumers of water. The Chinese central government has started a construction program to pipe water from the sub-tropical south of China to the north to alleviate the water shortages.

Another natural resource China is sorely pressed to maintain is arable land. Two years ago the Central government in Beijing realized that local governments throughout China were practically giving land away to investors that wanted to build factories. I myself visited several sites on behalf of clients in which local government officials pointed out the land a client would be able to set up shop on once the farmers' homes had been demolished and the farmers re-located - with the farmers' homes just a few paces from where I stood. China has to rely on 5% of its land to feed 80% of its people; hence, land conservation has become an important feature in the development plans of many cities. Land prices have increased as a result of the moratorium on the transfer of land from farmers' use to commercial use, and economic development zones are much more selective about the kinds of industries they are willing to support in their areas: the more hi-tech and less-polluting the industry, the better.

Finally, there just doesn't seem to be enough electricity to go around. Certainly, part of the problem is poor distribution of what power there is. But another problem is that there is still not enough power being generated to keep up with the burgeoning demand of consumers and factories alike. Hence, many factories along the east coast have to shut down one or two days a week because the local power station simply cannot keep up with demand. Of course, this can make it difficult and costly for factories to meet production schedules. And though there are projects such as the Three Gorges Damn project to help meet power generation requirements along the east coast, the Damn project will not meet the rising demand of over a billion people and thousands of factories scrambling for a piece of the global economic pie. Power prices, then, are set to rise until nuclear facilities and well-regulated coal plants come on line in the decades ahead.

Businesses that want to take advantage of what they perceive of as low-cost opportunities in China need to heed the hidden costs of a country whose natural resources and infrastructure are under great stress. Model the costs ahead of any investment in China to avoid being caught in the dark when it comes time to start up operations.

Next month's discussion will focus on Risk #5: Cultural Misunderstandings.

The Top 7 Risks to Investing in China are: