China Law Blog
China Law for Business
How Risky Is China?
(Sep 2)
Excellent post by Rich Brubaker of the All Roads Lead to China blog on his discussion with
Neal Beatty entitled, "
Identifying, Measuring, and Taking Action on the Risks of China." It is the kind of post every company doing business in or even with China should read.
The post sets out an amazingly comprehensive (yet blissfully concise) list of risks businesses face in China:
Compliance & integrity issues: internal fraud (kickbacks and conflicts of interest are most common)
Corruption & Graft: recognized by the government in Beijing as a serious issue in China. And now an increasingly serious issue in the US and UK with the growing impact of anti-corruption laws.
IP issues - counterfeiting, internal theft of critical information, and the protection of your trade secrets are major issues
Business partners: Who really is your prospective JV partner? How did they accumulate their wealth? Does your partner or key staff have undeclared family or business connections to a competitor or...
Eight China Business Travel Tips.
(Sep 1)
The Dragon Business Network Blog did a post, entitled, "
7 Tips for Business Travel to China." Believing both that one was missing and that
eight is a lucky number, I added one more.
Here are the original seven:
Bring an unlocked mobile phone
Take taxis everywhere
Use Mguanxi to get around the city
Program 962288 into your phone, in Shanghai
Register with Ctrip
Know that some hotels cater to the domestic market, not foreigners
Treat yourself to a tailor-made suit
Is Ctrip necessarily better than elong?
For more on the seven, I urge you to read the full post
here.
And now for the eight tip. Enjoy yourself at least a bit. If at all possible, spend a few hours taking in some of the tourist sites. Walk around the city in which you find yourself. Enjoy the food. Get out of your hotel.
What else?
Chinese Companies In America. A TwoFish Rebuttal.
(Aug 30)
The other day I did
a post linking over to an article I recently wrote for the Wall Street Journal, entitled, "
Chinese Companies Court Disaster," [if you cannot read the whole article, email to yourself] on how Chinese companies are falling down badly when it comes to understanding the American legal system and using American lawyers appropriately.
Regular CLB reader and commenter TwoFish vehemently disagrees with me and he made this abundantly clear in two long comments (
here and
here) he left to that post. Though I am not backing down an inch (if anything, I wish I could give specific examples, but for attorney-client reasons, I cannot), I respect TwoFish's viewpoint and I think it so important it be heard, I am moving them from the comments section into this post. So without further ado here's TwoFish, along with me putting in my two cents worth in bold italics:
I don't think this is true at all. My personal experience is that large Chinese companies that are doing or planning ...
China Stock Experts. Where Are You?
(Aug 29)
An editor for a leading U.S. business magazine wrote me seeking my suggestions for good people to write, in English, about China's stock market. My response was to warn about the need to avoid bringing on any of the China investment amateurs who hold themselves out as experts.
I did not name any names for her and I do not plan on doing so here either, but I told her that those who are really in the business (and I know this through a very close relative who is really in the business) do not take these people seriously, nor do I. Respected stock analysts are those who devote their lives to it, putting in 60-80 hours a week and not becoming good until they have been doing it for a decade or more.
The Merrill Lynches and Goldman Sachs of the world have their China stock experts internally, but their advice is mostly confined to internal company documents provided to customers. Who out there is writing on Chinese stocks (even quasi-regularly) who knows whereof he or she speaks? Who,...
Chinese Companies Court U.S. Disaster.
(Aug 27)
I had an article published by the Wall Street Journal on how Chinese companies are mishandling their overseas legal matters. The article is entitled, "
Chinese Companies Court Disaster: Doing business in America means also learning how to navigate the U.S. legal system." I believe it requires a subscription to the Wall Street Journal, but I also think that you can email it to yourself and then view the entire article that way.
In it, I discuss how Chinese companies are coming over to the United States ill prepared for our legal system. Though this is true of most foreign companies that come to the United States, the huge differences between our two systems, and even the way Americans feel about China, have made things even tougher for Chinese companies:
Anecdotal evidence at my firm and others suggests lawsuits in the U.S. against Chinese companies are increasing. Chinese companies face certain general disadvantages that will be hard for them to overcome anytime soon. For instance...
Put China In Your Business Future. Philadelphia, September 8, 2010.
(Aug 27)
On Wednesday, September 8, 2010,
The China Business Network will be putting on a China Event at the Cira Center in Philadelphia, entitled, "
Put China in Your Business Future." It is shaping up as a great event, and I urge you all to attend. I am going to be on one of the panels so if you are interested in going and wish a discount, please email me.
The day is going to begin with CEO panels on China Health/Biotech and China Clean Tech/Green Tech.
The CEO Health panel will consist of the following:
Martyn Greenacre, Chairman, BMP Sunstone
Dr. Mike Butler, CEO, Xceleron
Dr. Ian Hau, CEO, Orchestrall
Dr. Jun Huangpu, of the Mainline Chinese Culture Center, will be moderating.
The CEO Clean Tech and Green Tech CEO Panel will consist of the following:
Elinor Haider, CEO, NovaThermal
Dr. Stephen Hammer, Executive Director, Joint US-China Cooperation on Clean Energy (JUCCCE)
Bill Chandler, CEO, Transition Energy
This session will be moderated by
Terry Cooke, CEO, GC3 Strategy
I ...
Cracking Down On Illegal Land Use In China. Do You Really Still Feel Lucky, Foreign Punk?
(Aug 25)
The following is an amalgamation of a number (maybe 5 or 6) of conversations I have had over the years with people wanting to register a WFOE (Wholly Foreign Owned Entity) in China fast:
Potential Client: Can you help me register a WFOE in China.
Me: Yes. Not a problem. Do you have a lease yet? Do you know that a legitimate lease is required for the approval of a WFOE?
Potential Client: I know that but we are in a real hurry here.
Me: Okay. But do you have a lease.
Potential Client: We have a lease but I don't think it technically will qualify.
Me: What do you mean?
Potential Client: The land is zoned agricultural but my Chinese partner has secured all the okays to allow us to use it for our factory.
Me: Not a good idea. Trust me on that.
Potential Client: The factory has been there for two years without a problem and my Chinese partner assures me that the local government is fine with it.
Me: Don't do it. Right now, the local government is okay with it. But what if the current ma...
The Basics On Doing Business In China.
(Aug 25)
Beijinger Magazine recently did a really nice article on our blog,entitled, "
Blogging the Law." The article is mostly an interview with me and it nicely distills the basics for doing business in China.
On the business side, it first addresses China's current climate for foreign businesses:
How would you describe the government's present attitude towards foreign investment?
China's attitude towards foreign investment ebbs and flows. If I were to describe China's attitude towards foreign investment right now in one word, it would be "neutral." If your project is going to contribute good jobs for China and you are going to go in correctly, which means you are following the various laws, then your chances of securing the proper approvals are extremely high. If you think you can just waltz in because you are bringing in 100 mediocre jobs, you will likely fail.
It then discusses China joint ventures and why they tend to be so problematic:
Why are joint ventures so troublesome?
We are ...
China Supply Chain Problems. Maybe It's All In Your Head.
(Aug 24)
Received a very nice email this morning from Keith, a Birmingham, Alabama 3L with a quite good blog called
An Associate's Mind. Keith was writing to pass on a blog post on China supply chain problems.
The post is "
Supply Chain Risk: Culture Shock," and it is on an academic article that posits that many supply chain issues that arise between China and the West are caused by cultural differences. The article reviewed ascribes the problems to supply relational risk caused by the following prime differences between the West and China:
Family orientation vs self-interest.
Guanxi network vs multiple institutions-
Guanxi building process vs Western relationship-building process.
I must say that the article does an excellent job defining guanxi, which it describes as "a special type of relationship that bonds the exchange partners through reciprocal exchange of favours and mutual obligations a special type of relationship that bonds theexchange partners through reciprocal exchange of favo...
Shutting Down A China WFOE. The Potential Repercussions.
(Aug 24)
Not sure why, but my firm has done more business shutting down WFOEs (a/k/a WOFEs) over the last three months than in any other 12 month (not three month) period. We also have been getting a whole slew of questions regarding the logistics in shutting down China operations. I know the recession has something to do with this increase, but why did it not pick up its full force until around three months ago?
China has very clear rules about what must be done to shut down a WFOE and a failure to follow those rules (which mostly involve paying off all back wages and taxes) can lead to all sorts of problems, ranging from the government keeping your equipment to a local government locking you in a room (I am NOT kidding here) until money gets wired from home.
We have dealt with more than a few locked room cases and we have learned that negotiating on the dollar amount leads to a much faster resolution than trying to explain the niceties of corporate entity protection.
Got an interesting em...
