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How To Fail In China Business.
2008-10-21 00:37:00
I like this list from the hitherto unknown (to me anyway) Lessons from the Road blog. The post is entitled, "The top 10 ways to keep from selling in China (or anywhere else)" and it is rife with common sense that applies to doing any sort of business internationally. My favorites: -- "Don’t spend any money. Use a “straight commission, no cure no pay” business model. After all, no one else is interested in the Chinese market, so remember that people are actually waiting around for your product." -- "Don’t bother with costly translations and interpreters. If these people don’t speak, read and write English, then it is your duty to modernize them." -- "Ignore local laws. Law is law, but business is business. Nothing hinders a deal more than difficult, ancient laws. To overcome Chinese resistance, force your laws down their throats." -- "Critique that government. Everyone admires the American sense of free speech. If you disagree with government policies or officials, do...
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China Logistics. It's ALL Here.
2008-10-20 17:51:00
Richard Brubaker over at All Roads Lead to China just loves logistics. I don't love it, but I respect its importance. Anyway, Rich has taken to listing out and linking to the important China related logistics stories every week, and I see that as such an important task that I am going to take to linking over to Rich's blog every time he does that. So if you want to know more about China logistics by going to some great links, then go here, to "Logistics News in Review."

China Reductions In Force (RIFs). A Warped View.
2008-10-20 12:50:00
One of the problems with being a lawyer is that we oftentimes only see or hear about things when they are a problem. This can give us a somewhat warped view on things, but so be it. So when I say that terminating your Chinese employee will lead to problems 100% of the time, you need to take it with a grain of salt. But from my perspective, every single time a company has up and terminated a Chinese employee, it has led to big problems. Of course, those clients who up and fired a Chinese employee without a problem never needed to call us, but I am not aware of any of those. What I am aware of is that foreign companies are terminating Chinese employees these days and it seems like these ex-employees are, nearly without exception, pursuing legal claims for these terminations, and, in many instances, retaining lawyers to assist. Based on what we are hearing out there, the chances of a foreign company doing well against a terminated Chinese employee in these cases are not good at a...
More About: China , Force , View

Vietnam Is The Next China, Part II. Only If You Completely Ignore Politica
2008-10-20 08:24:00
Long-time client, a manufacturer of small steel products, has for months been "threatening" to move his factory to Vietnam , either to replace an existing factory in China or as an adjunct. Company was unhappy with China's increasing taxes and labor rates. Just spoke with client this morning (yeah, I know it's Sunday but he was about to board a plane for China) and I asked him about Vietnam. His reply was essentially as follows. "Forget Vietnam. Too risky. We found we just can't handle the inflation and the politics. Yes, China is getting expensive, but I just feel it is more of a known entity for us. Not worth chasing a few dollars in savings." Again, I am NOT saying Vietnam is the wrong place for business, because it most certainly is not and a number of my firm's manufacturing, food, and high tech clients have done quite well there. But what I am saying is that the next time anyone acts as though Vietnam is necessarily better than China for your business, make sure ...
More About: Politica , Part

China's Troubled Food And Drug Trade.
2008-10-19 22:51:00
Absolutely excellent article on the Council for Foreign Relations website on China food and drug safety. The article is entitled, "China's Troubled Food and Drug Trade " and it does a superb job explaining the food safety issues surrounding China food and drugs. The lawyer in me sees the following as the "money" quotes: Some families have moved to sue the companies involved, though China's tort system only allows for direct economic damages. Such amounts are likely to be far smaller than the massive punitive damages allowed in the United States that often serve as a deterrent to companies. Market forces can still play a role in China. People's unwillingness to buy milk products over fear of which producers to trust has been a huge blow to the country's dairy industry. * * * * Liability issues for international companies using Chinese supplies are a growing concern. Jerome A. Cohen, a CFR adjunct senior fellow, writes that the...

Searching For China Innovation. Don't Go Looking In Federal Way.
2008-10-19 21:53:00
David Wolf of Silicon Hutong has a very thoughtful post up on innovation in China . The post is entitled "Searching for China's Soul of innovation," and it nicely takes us through China's interrupted history of innovation and posits whether China will become a great innovator again, what it might take for that to happen, and what that might mean if it does. I agree with Wolf that China innovation is going to be with Chinese characteristics, not just some knock-off of US methods: So much of what is written about China and innovation today, whether by foreign or Chinese observers, is patronizingly prescriptive. If China wants to innovate, it must imitate - it must recreate the conditions that exist in high-tech hothouses of Silicon Valley, Boston's Route 128 corridor, Austin, and Seattle. There is some truth in that, but there seems something unnatural about trying to graft San Jose onto Shanghai, or Federal Way onto Tianjin. * * * * Perhaps the answer for China is t...
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How To Globally (And In China) Protect Your Trademark
2008-10-19 10:37:00
Now I know I am always writing on protecting trademarks in China , but that is because I have seen far too many companies make the mistake of believing they do not need to register their trademark in China either because they have registered it in the United States or because they are "just" manufacturing their product in China, not selling it there. Both beliefs are wrong and both beliefs can lead to the same result: someone in China being able to prevent you from using a name or mark you thought belonged to you. Anyway, Laurel Delany, of the always very informative Global Small Business Blog recently did a post on global trademark protection, entitled, "Globally: Protect Yourself." The piece does a nice job emphasizing the steps companies must take to protect their trademarks overseas and it links to Ms. Delany's story in this month's Entrepreneur Magazine. I actually have one tiny beef with the article though. It quotes US attorney Peter Sloane saying that "A pending [tra...
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Go To China. It's Better Than It Seems.
2008-10-19 04:25:00
I am just so glad James Fallows is writing about China . One hundred years from now, when the West is looking at why China is where it is, historians will read Fallows. In the most recent issue of Atlantic Monthly, in an article entitled, "Their Own Worst Enemy," Fallows does a great job explaining the disconnect between how the West sees China and how it really is. The article's subtitle is "As China prepares to take its place as the world’s dominant power, it faces confounding obstacles: its insularity and sheer stupidity in delivering the genuine good news about its own progress." China PR guru, ImageThief, in his post, "The tragedy of China's international communication," has this to say about Fallows' article and about China's lack of PR prowess: Fallows' point --and I agree with it-- is that the great tragedy of this is that there is much positive happening in China and many good stories to tell, but that they often get lost among the time-warp rhetoric, self-...

China Law. Hong Kong Law. One Of These Things Is Not Like The Other.
2008-10-19 03:58:00
IP wunderkind Danny Friedmann at IP Dragon does a very nice job laying out the primary differences between Hong Kong law and Mainland China law in his post, "How do the People’s Republic of China and Hong Kong relate to each other regarding IPRs." The super-quick summary is as follows: 1. Different as night and day. 2. Registering your intellectual property (IP) in Hong Kong will not protect you in Mainland China and vice-versa. A couple years ago I had an hour long conversation with a company regarding my firm assisting it in pursuing a trademark infringement lawsuit in China. It was not until I saw their actual trademark registrations that I discovered that when they were referring to "China," they really meant Hong Kong. This company had never registered its trademark in China and I had wasted an hour thinking it had a great case, when in fact it had no case at all. I have since learned to seek clarification as to what is meant by "China."
More About: Things

Sushi, Asian Innovation, QQ, And The Digital Silk Road.
2008-10-17 08:24:00
Benjamin Joffe of Plus Eight Star has put up his Powerpoint presentation from the recently completed OpenWebAsia08 conference in Seoul. The Powerpoint is entitled, "Collaboration Beyond Culture" and it is on innovation in Asia and the tendency of the West to ignore it, at its own peril. The presentation is quite persuasive, and as a sushi addict, I particularly appreciated Benjamin's inclusion of sushi as one of Asia's top inventions. Check it out.
More About: Innovation , Sushi , Asian , Digital , Road

Business Bankruptcy In China. The Five Fold Path.
2008-10-16 10:06:00
Will Lewis at Experience Not Logic dissects an Economist article to come up with four methods failing businesses in China employ when faced with having to shut down their business: 1. Informal Agreements With Employees and the Government. Work out an agreement with your employees and the relevant governmental bodies to allow you to shut down. 2. Court Supervised Bankruptcy Reorganization. The laws are too vague to give confidence to lenders seeking to lend to the troubled company, so this "relief" is virtually never undertaken. 3. Walk Away. Lock the gates and leave town and hope nobody follows. Hundreds of small Korean owned companies did this in Qingdao last year. 4. Informal Governmental Recapitalization. If you are too big or important to fail, get the local government to prop you up to save jobs and the local economy. I add my own fifth one, which is no doubt getting more difficult due to the credit crunch: 5. Get A Foreign Company To Buy You Out . Wh...
More About: Business , Fold , Path

China Business. I FEEL "The Second Wave."
2008-10-15 09:43:00
As a lawyer, I usually deal in facts, not feelings, but I've been pontificating about a feeling for the last few weeks, based mostly on an accumulation of facts and past experiences. The feeling I am getting is that Chinese companies are getting more sophisticated/businesslike/global. They are starting to play for the long haul. I recently had lunch with a good friend and long-time client who heads up the Seattle office of a Singapore based oil and gas company/supplier. Client was born and educated in Russia, but has lived in Seattle for around 15 years now and is very Americanized. We spent most of the lunch talking about schools for our kids, the upcoming election, and the economy. Towards the end of the lunch, my law firm partner, Charles Moure, brought over a local banker with whom he was having lunch in the same restaurant (in case there is anyone in Seattle who does not know this, but if you ever want to find either Charles or me at lunchtime, your safest bet is always...
More About: Business , China , Feel , Wave

Land Reform. It's A Coming. Sort Of?
2008-10-14 06:54:00
Not sure why the huge interest in this subject, but I have probably received more emails/comments asking if I am going to write about this than probably anything else ever. The "this" is China's expected changes to rural land laws. I was going to write about it after speaking with some of our food business clients who work with China, but I figure doing so now will stop the emails, so here goes. Forbes Magazine did a nice piece on this, and not just because they extensively quoted CLB's own Steve Dickinson in it. The article is entitled, "China Farmers Granted More Freedom On Land Rights," and it calls the anticipated laws a "major initiative to marketize China's countryside." It describes the reforms as follows: The reforms, approved at a Oct. 9-12 party meeting led by President Hu Jintao, still need to be greenlighted in March by the National People's Congress, China's legislative body, which has traditionally been a rubber-stamp institution. Land will remain owned by "t...
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What's New With China's Consumers
2008-10-13 20:03:00
McKinsey is just out with a new and very comprehensive survey and analysis of the Chinese consumer, entitled, "What's new with the Chinese consumer" (free registration required). Its subtitle is that "It’s hard for brand managers to keep pace with the shifting attitudes of Chinese consumers. But some trends can be discerned amid the noise." The upshot is that brand loyalty seems to be weakening in China and word of mouth is more important than television ads. Unfortunately, this survey was before the Sanlu milk scandal which must have impacted consumer sentiment. Go here to learn all.
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How The Downturn Will Impact China Internet Business.
2008-10-13 12:02:00
In a post at Ogilvy China Digital Watch, entitled, "David Wolf’s take on how the downturn will impact China’s Internet sector," Kaiser Kuo discusses a recent talk he had this with David Wolf of Silicon Hutong on this very subject. Not saying this makes their assessment flawless, but Kuo and Wolf are two of the most knowledgeable people out there on China's internet so when they talk, I listen. They are saying that foreign VC funding will decline and this will likely allow Chinese VC firms to gain inroads. Wolf also says that the smart money will cut back on advertising on other media before cutting back on internet advertising. During the dot.com boom, my firm represented a high flying Korean internet company. After a few weeks of effort (really way too little time), the Korean company had secured a $5 to $10 million commitment from a leading VC company. The next week the crash began and the Korean company ended up with zero. I can certainly see similar things happen...
More About: Business , Internet Business

China Real Estate. Newsweek Says It's All Good.
2008-10-13 06:36:00
One of the advantages to living in a city without a decent newspaper is that until only a few weeks ago, virtually every article on local real estate would quote a local realtor talking about how the market is fine and how now is the time to buy a house. As a homeowner, reading those articles always made me feel a little bit better. Lately though, even our two local papers are starting to catch on. Newsweek is apparently a bit slower as it just came out with an article with all of the requisite quotes from realtors telling us how China is different and why real estate will always be a great investment in China. The article is entitled, "Great Expectations," and subtitled, "Real estate around the world may be on the skids, but China's homeowners are feeling little pain." One of the best things that ever happened to me occurred during my first year of legal practice. I worked on a massive case representing the FDIC in trying to figure out who was liable for the collapse o...
More About: Estate , Real Estate , Good

Shanghai's Maglev In Real Time
2008-10-12 23:27:00
The fastest I have ever gone on ground was in the Shanghai Maglev. It really is pretty amazing to be going past cars on a highway as though the cars are standing still. In its post, "Ride with me on the Shanghai Maglev," the Little Red Blog, shows us video of a Shanghai Maglev ride. It really is the next best thing to being there. Check it out.
More About: Time , Real , Real Time , MagLev

China's Service Sector Will Reign, Part XIX -- NBA In Full Court Press
2008-10-12 19:27:00
Since this is number 19 of this series, it should be pretty obvious by now that I am strongly of the view that China is ripe for foreign service businesses. Yesterday's New York Times has an interesting story, entitled, "N.B.A. and Part ner to Help Build 12 Arenas in China," on how National Basketball Association (NBA) and AEG Worldwide are teaming up to design and build "at least a dozen arenas in China. The NBA's explanation for doing this makes complete sense and it holds true for virtually any service business: Stern said the league was looking to capitalize on a growing urban Chinese middle class with increasing disposal income. “China is an enormous market with enormous potential, not only for basketball but for entertainment venues,” he said in an interview. If only 1% of China's 1.3 billion attend an NBA game....
More About: Press , Service , Full

Pollution In China's Cities. The Good, The Bad, The Ugly, The Feng Sh
2008-10-11 17:59:00
China Environmental Law Blog just did a post, entitled, "China's Blacklisted Cities ," on a recently released environmental report from China's Ministry of Environmental Protection. The report calls out the following cities for their pollution problems: Bad Air: * Bayannur and Ulanqab, Inner Mongolia * Baiyin, Gansu * Urumqi, Xinjiang * Huanggang, Hubei Bad Water: * Hengshui and Cangzhou, Hebei * Linfen, Shanxi * Fuyang, Anhui * Tongchuan, Shaanxi * Wuwei, Gansu The report lists the following cities as having the highest "satisfaction rate" (greater than 90%) in terms of pollution: * Linyi, Dongying, Rizhao and Yantai, Shandong Province * Daqing, and Heihe, Heilongjiang Province My firm has a good client in Yantai and so I have been there a few times and I have to say it is one of my favorite Chinese cities. It has great buildings, great waterfront views, great weather, great beer and apples, and, what has always struck me as cl...
More About: China , Pollution , Good , Ugly

Asia's (China) Seven Supply Chain Challenges
2008-10-09 18:25:00
Asia Logistics Wrap is on part two of a very thoughtful seven part series on Asian supply chain challenges. For those involved in moving products into, within, or out of Asia, I strongly urge you to start reading this series. Part I is here and Part II is here. Asia Logistics Wrap's post stems from this post on Bob Ferrari's Supply Chain Matters Blog.
More About: Asia , China

The "New" American In China.
2008-10-09 13:13:00
Very interesting article in Esquire Magazine, entitled, "The New American " and subtitled, "Young entrepreneurial Americans are doing something they have not done much before. They are leaving. And even more than our government, our military, or our movies, they are expanding American influence in the world. Even in a crazy place like Shanghai." (h/t to All Roads) The article is about Barrett Comiskey of the Nicobar Group, (full disclosure: Nicobar is a long-time client of my firm) and how he and his company have adapted so well to China . The article does a great job conveying Shanghai's excitement (both good and bad) and explaining why so many young Americans/Westerners are going there to make their mark. It's Esquire Magazine and it makes for a great read.

China's New Investment Rules. Second Tier Is First Rate And The Servi
2008-10-06 02:04:00
Paul Denlinger over at China Vortex has a good post up on where to invest in China going forward. The post is entitled, "The New Investment Rules For China," and it sets out the following seven rules for China investing: 1. "Avoid Shanghai and Beijing." They both have plenty of smart people, but staff turnover and costs are just too high. 2. Look at the "20 major city markets in China" like "Dalian, Hangzhou, Ningbo, Xiamen, Guangzhou, Wuhan, Nanchang, Chongqing, Chengdu, Fuzhou, Kunming, Nanning, Nanjing, etc." And Qingdao. 3. Because Guangdong and Zhejiang are the two largest manufacturing provinces in China, these they "are going to be hit hard because of their dependency on the US market." 4. If you are a private equity or hedge fund investor, you need to think about investment horizons. If you can offer investments which create jobs and upgrade the skill force, you are in a good position. 5. "China’s hardware development and infrastructure are very impressiv...
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I Heart Henry Paulson. China Is His Thing.
2008-10-06 01:35:00
Not for anything he has said or done on the bailout, on which even those of us who agree it was necessary cannot truly be happy about. No, I like him for his opinions on what the United States must do in terms of its relations with China . Paulson just came out with a very thoughtful piece in Foreign Affairs Magazine, entitled, "A Strategic Economic Engagement: Strengthening U.S.-Chinese Ties." The summary nicely summarizes the article as follows: "The prosperity of the United States and China depends on helping China further integrate into the global economic system." (h/t to The Black China Hand) Paulson says that no matter how one views China, engagement is the best policy: Some people suggest that China is a threat that must be countered or contained. Others argue that its growth is an opportunity for the U.S. economy and that Washington should manage this rising power through engagement. I believe that engagement is the only path to success. This is the kind of artic...
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The Ten Warning Signs Of A Bad China Deal
2008-10-05 07:52:00
The always excellent (but far too infrequent) Chinese Negotiation Blog recently posted on ten warning signs of an impending bad China deal in a post entitled, "Negotiating in China Can Get Complicated Fast." The post starts out stating two important and fairly obvious (though too often ignored) truths: -- Many westerners who enter into a negotiation with a Chinese counter-party are so sensitive to cultural and interpersonal issues that they lose sight of business issues. -- The key to success in China is to walk away from bad deals and find good ones. The fact is that many newcomers to China business have trouble spotting the red flags and danger zones that indicate a deal is about to fall apart. The result is that they hang in there and keep negotiating with inappropriate counter-parties until they end up with a bad compromise and a disastrous deal. The post then sets out ten warning signs of what will almost certainly turn out to be a bad China deal: 1. Terms that will...
More About: Signs , Warning Signs , Deal , Warning

What's Gonna Happen To China's Economy? I Dunno.
2008-10-03 08:59:00
I am not a fan of economic predictions, mostly because they are virtually always slanted towards what is happening right now and also because they are wrong at least as often as they are right. However, I do occasionally find them interesting, and there is an interesting analysis of China 's economy over at the 3q2u Blog, entitled, "What's happening in China's economy?" The post does a nice job analyzing what is driving China's economy right now and I agree with its emphasizing real estate over the stock markets. Many more of China's citizens own real estate than invest in stocks and if there is a plunge in China real estate values, it will have a major impact. In its post, "If The US Economy Goes Down, So Does China’s," China Vortex rightly described it as "a well-presented systematic presentation" and talks about how US problems will harm China. I agree with all that as I am of the view that there is no way China can escape the US/Europe slowdown unharmed, but I veh...
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Vietnam Is The Next China. Only If You Completely Ignore Logistics.
2008-10-01 14:00:00
Third Party Logistics News recently posted on how those considering Vietnam ese manufacturing should look long and hard at Vietnam's logistics problems. The post is entitled, "Vietnam : Lack of logistics infrastructure = higher logistics costs," and it contains good advice for those considering Vietnam. It concludes what I always conclude. Vietnam is great for some things and not so great for other things and nobody should just be rushing in: Anybody who has been reading our blog since its inception knows that we’ve always cautioned against “rushing” into China and evaluating the pros and cons for going in carefully before making that decision. We’ve never advocated avoiding China, simply that people should think twice and consider carefully before making that jump - for some companies, it just might not make sense. As China moves to higher-end manufacturing and costs in general have continued to rise, some companies have been tripping over themselves in their rush t...

Shanghai To Replace New York As World's Financial Center. I Don'
2008-10-01 12:28:00
Interesting Washington Post article by Ariana Cha, on how Shanghai might eventually replace New York as a world financial center. The article is entitled, "Financial Hubs See an Opening Up at the Top: Wall Street's Long, Dominant Run Is Fading, Global Financiers Say," and it talks about how Wall Street is falling and others are rising, and it devotes much of its ink to Shanghai. Trendsniff also has a good post on this. I do not see Shanghai becoming a top tier financial center within the next ten years. In ten years, New York and London will still be the World financial centers and Singapore, Hong Kong and Tokyo will still be the big three in Asia. I could write a long post on why I think this is true, but it would be far easier for me to simply state that I see knocking New York and London off their thrones as the equivalent of knocking Mercedes and BMW off theirs -- it is just too difficult. Will Shanghai be a top one, two or three financial center within the next ten year...

China's Service Sector Will Reign, Part XVIII -- WWE And Skimpy Bikini
2008-10-01 08:11:00
Sex sells. anonymous Sex and violence sells everywhere. Dan Harris Back when we first started this blog about three and a half years ago, I felt somewhat like a voice calling in the wilderness whenever we would tout how companies needed to look at China for more than just factories. Now, this idea has pretty much become common currency and so, though this is Number 18 in our series, this is only the second one we have done this year. And though I cannot speak for China's market as a whole (can anyone really do that?), I can say that my own law firm's business mix has become decidedly more tilted towards service businesses over the last few years. But it was a Shenzhen Undercover post, entitled, "WWE Wresting is in CHINA! WHAT?!?!" that prompted me to trot out Part 18 of this long running series. Seems the World Wrestling Entertainment (WWE) is now playing on Chinese television and though Shenzhen Undercover's reaction to this was one of shock, my first thought ...
More About: Bikini , Service , Service Sector

So You Want To Be An International (China) Lawyer? Part III
2008-09-30 15:36:00
I am frequently emailed by college students, law students and even practitioners, seeking advice on what it takes to become an international lawyer. It seems the lawyer behind the Counterfeit Chic blog (an excellent blog, BTW) gets even more of these regarding "fashion law" and she gives answers in her post, entitled, "Fashion Law." How can I get into fashion law?" Several times each week -- more during interview season -- a Counterfeit Chic reader asks me this question. I've heard from aspiring law students, current law students, recent graduates, law firm associates disillusioned with their current jobs, law partners interested in a new group of clients, and former lawyers who've spent quite enough time at home changing diapers, thank you very much. I've received messages from parents seeking advice for their children, colleagues seeking advice for their students, and innamorati seeking advice for the objects of their affection. Your emails have come from every continen...
More About: International , China , Lawyer , Part

How To Handle Bad Product From Your China Supplier.
2008-09-29 09:31:00
Very interesting post by David Dayton over at Silk Road International, entitled, "Recent Chinese Negotiation Tactics: Translated!" The post is on the responses (excuses?) Chinese companies give when Westerners complain to them about product quality. David handles sourcing and quality control for mostly Western companies doing business in Asia and his post focuses on dealing with these responses while still within a supplier/buyer relationship. My job as lawyer on most quality control problems usually does not start until the relationship is pretty much over. Over the years, I have handled countless quality dispute cases against Chinese companies and I have heard nearly all of the same exclamations David lists. I have been brought in to threaten legal action in an effort to get the money back. We usually do this by first writing a demand letter to the Chinese company stating that we have been brought on to get our client a full refund and if we do not have that within ___ d...
More About: China , Product , Handle , Supplier