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Ethnic Profiling And China Business
2009-03-21 16:37:00
Make no mistake about it, even in these allegedly enlightened times, a whole lot of stereotyping and ethnic profiling goes on in international business. The other day, I was telling an American client how it was time for us to look start seizing assets of a Norwegian company that owed my client a lot of money and appeared to be making no effort to pay it. My client's explanation for not wanting to pursue litigation was that he has been dealing with Norwegians for twenty years and when they can pay, they always do: "I am not going seize assets from a Norwegian company." In the last six months or so, I have started hearing a lot of wrong-headed ethnic profiling from Asian companies (mostly Korean and Chinese) who are telling me they always believed American companies always pay. Sadly, some of these companies literally built their businesses on this belief, not even imagining that things could be otherwise. Let me explain. I met with a Chinese company owed mega-millions b...
More About: Business , China , Ethnic

Coke's Failed China Deal. Private Equity Will Live To Do Deals Anothe
2009-03-19 07:00:00
The South China Post did a story today on China's having used its antitrust law to block Coke's purchase of Huiyuan. The article is entitled, "China raises chills as Coke bid bottled up," and it talks about whether the blocking of this deal will signal the death of foreign private equity investments in China. My view is that it absolutely positively will not. In fact, a private equity company contacted me today regarding its desire to purchase a relatively small Chinese niche food company. They asked whether I thought the Coke deal would have any impact on their purchase and I predicted it would not. I told them I thought the company it was seeking to buy was way too regionalized, way too small, and way too insignificant in China's grand scheme of things for their to be any linkage at all with Coke's failed deal. The South China Post hints otherwise, but I attribute that to same-day overreaction: The article makes the requisite mention of how "US private equity firm Car...
More About: Private Equity , Live , Deal , Private

China Rejects Coke Deal. We Told You All This Long Ago.
2009-03-18 15:03:00
David Barboza of the New York Times is out with an excellent article that nicely sums up why China rejected Coca Cola's bid to purchase Huiyuan. The article is entitled China Blocks Coke Bid for Juice Maker, and it does a great job summarizing the rejection because it quotes China Law Blog's own Steve Dickinson and because it reaffirms what we have been saying all along. Barboza rightly notes that "very few foreign companies have taken full control of a major Chinese company....[but] "many legal analysts said they had expected the deal to be approved because China itself is moving aggressively this year to acquire foreign assets during the global economic downturn." It then quotes Steve: Steve Dickinson, a China-based lawyer at Harris & Moure, said China usually restricts foreign takeovers because of a longstanding belief that state assets should not be controlled by foreign entities. “China’s very open to green field investments, allowing foreign companies to start up b...
More About: Deal , Long , Told

China Company Owe You Money? A "New" Way To Get It.
2009-03-17 23:14:00
My firm just seized a large sum of money from an Asian company that has owed our client a large sum of money for some time. I cannot describe this case here because it is still ongoing, but it makes for a great example of a little known way to grab money from Chinese companies. Here is a hypothetical scenario, that is not at all uncommon for companies doing business in China : 1. US company buys product from China supplier. 2. US company sends $1 million to China supplier for order of widgets. 3. Widgets either never come or what does come is clearly not what was ordered. 4. Chinese company refuses to give any refund. What to do? Sue the Chinese company in the United States and secure a US judgment? Unless the Chinese company has assets in the United States or in a foreign country that recognizes US judgments, this probably will not make sense. This is because China does not enforce US judgments. For more on this, check out "Will Your US Judgment Be Enforced Abroad? No...
More About: Money , Company

China Business. Turns Out It Is Easy After All.
2009-03-14 04:15:00
I did a post the other day entitled, "China Business . We Never Said It Would Be Easy " In that post, I talked about how the global (and China's) economic downturn is accelerating legal problems for foreign businesses. Someone named Tim left the following comment, to which this post is addressed: I think there is a disconnect between your assertions of Beijing interests in not turning back the clock and what is happening on the ground in terms of FDI. At the local levels, we are beginning to see a reverse on policies regarding quantity vs. quality that was introduced in late 2007/early 2008. Mid-Summer ’08 it was almost impossible to setup an export-oriented trading company within a 2nd/3rd tier development zones in the Yangzi River Delta Region, now many of these areas are beginning to introduce incentives to draw in new investment: including 2/3 tax holidays, subsidized rents, etc. We are also beginning to see these incentives being offered in districts within Shanghai rega...

Barbie In China Writ Large.
2009-03-12 22:22:00
Many years ago, my youngest daughter, now 11, would email the same-aged daughter of a Chinese lawyer with whom I had worked on a couple of cases and with whom I had become friends. What always amazed me about the correspondence (emails sent to my daughter were translated into English by the Chinese lawyer) between the two girls was how amazingly similar their lives were. Both listed spaghetti as their favorite food, though the Chinese girl was far more impressed by McDonalds than was my daughter. Both loved the social life at school but did not particularly like anything else about it. Both were taking music lessons. Both were doing gymnastics. And both thought Barbie was the coolest thing since....well....since Barbie. I thought of these emails today after reading the China Herald's recent post, entitled, "One-child policy supports Barbie - Shaun Rein." The post links over to a CBS New interview with China market guru Shaun Rein, where Shaun talks about how China's one c...
More About: Large

China Business. We Never Said It Would Be Easy.
2009-03-10 16:34:00
Tough times make for tough business and China is certainly no exception. For foreign companies doing business in or with China, We are already seeing increasing problems and/or the likelihood of increasing problems in the following four areas: 1. Intellectual Property. Local software company (not one with which you are likely to be familiar). Tells me it wants to sue its employees in China over IP violations. The conversation went sort of like this: Me: What are the IP violations? Him: They stole all of our software. Me: What do you mean they stole all of your software? Him: We hired them to develop specialized __________industry software for us to market in China and they have taken all of the work for themselves. Me: Explain to me how this happened. Him: [After going off on a wild tangent for about five minutes] We started the company in China about two years ago. I hired Mr. Wang [name is made up] to head up our operations there and he eventually brought on a...
More About: Business , Easy

China Law Blog On China Business Show. Tuesday, March 10, At 2:00 pm PST.
2009-03-10 05:22:00
I am going to be interviewed tomorrow by the irrepressible Christine Lu regarding how China law impacts foreign businesses there. The interview will be a part of Christine's China Business Show . It will start at 2pm PST and go for 30 minutes. Go here to listen. If you cannot listen live, you can always listen later. Questions can be called in so think of some good ones. Don't miss it.
More About: Blog , March

China. Friend Or Foe? Opportunity Or Challenge? Or, Why Can't We All
2009-03-09 02:18:00
I got an email today from a client touting his success at sourcing wind energy components from China . My client's description of this project nicely sets forth why trade with China should not be oversimplified. Speaking of oversimplification, today is also the day before the final episode of this season's Dr. Drew's Sober House. And here's the connection: Rodney King is one of the residents of Sober House and he is also the person who so famously asked the very simple question as to "why can't we all just get along." If one really delves into the many layers involved in that question, it is not so simple after all. I see the US trade relationship with China the same way; the questions arising from it are not susceptible to easy answers. What I like so much about my client's wind energy email is that its very simplicity (especially because all I have to work from is the one email) makes it so easy to take his micro story to a macro level and to make concrete the benefits...
More About: Opportunity , Friend , Challenge , Friend or Foe

China Auto. Who Calls The Shots?
2009-03-07 19:04:00
Great discussion going on in the blogosphere regarding consolidation/globalization of China 's auto industry. I am of the strong view that the issues surrounding China's auto industry extend well beyond that particular industry as they pull in all sorts of issues, including China's companies going international, Chinese government involvement in industry, consumer sentiment, and how to handle manufacturing overcapacity. The ChinaBizGov blog has a new post on the auto industry that does an excellent job setting forth the various issues. The post is entitled, "Auto Industry Consolidation: Who Calls the Shots ?" and it has some great links to other blogs (Silicon Hutong, and Aimee Barnes) that have analyzed China auto. I strongly recommend this post.

China Auto. Interview With Chrysler's Bill Russo
2009-03-05 23:13:00
Fascinating two part interview with Bill Russo, Chrysler 's "first Regional Vice President in Northeast Asia with over 20 years in the automotive industry"on the new and very promising Aimee Barnes blog. Post is entitled, "Link Up, Learn More: Interview with Bill Russo, Auto motive Industry Expert" and part one is found here, with part two here. Big takeaway: Russo sees it being 5-10 years before Chinese cars start really showing up in the United States and EU. Definitely recommended to anyone (and isn't that just about everyone?) interested in China 's automotive industry.

Will Your US Judgment Be Enforced Abroad? Not China, But Maybe.
2009-03-05 17:24:00
Domestic US lawyers frequently call my law firm asking us to help them enforce their just received US court judgment overseas. They are seeking to turn the US judgment into a judgment of the country where the defendant is located so they can, in turn, collect the money owed under the judgment. Way too often, however, these lawyers are operating under the assumption that all we need do is take the judgment to a foreign court and ask them to enter it as a new, local judgment. My response on taking US judgments to China is that there is no reason to do so because they have no value there. This is less true for Europe, where if one plays the cards absolutely correctly from the very beginning of the US court action, it is sometimes possible to convert a US judgment into a local one. My law partner, Nadja Vietz (who is a licensed attorney in Germany, Spain, and the United States -- think about that for just a minute!), just came out with a cover story for the Washington State Bar Jo...
More About: Judgment

China Plant Tours. Nine Reasons Why You Must See For Yourself.
2009-03-05 12:29:00
China Sourcing Blog recently did an uber-helpful post, entitled, "China Plant Tours : Why You Have to See for Yourself." The post calls for visiting the plant from which you will buy product, "before you place an order," for the following reasons: -- It makes sense to meet the people who you will be working with before you place an order. You will get to know their personality and will start building a relationship with them. As we know, good relationships (or guanxi in Chinese) play a crucial role in business in China - hence the value of a face-to-face meeting can never be underestimated. --You can inspect manufacturing areas to get an idea of raw material quality, workers’ skills, production capabilities and the internal QC process of the manufacturer. There is nothing better than to see it with your own eyes. -- You can find out to what extent your manufacturers subcontract their production to other plants by checking their work areas and warehouses, or by asking them durin...
More About: China , Reasons

China Food Safety: Executions Aren't Working So Let's Try New St
2009-03-04 09:59:00
This past weekend, to great fanfare, the Standing Committee of the National People's Congress ratified a new Food Safety Law for China . It likely will have little real world impact. China Law Blog's own Steve Dickinson wrote a Wall Street Journal article on this, entitled, "Food Fumble: China can't regulate away its safety problems." According to Steve, the problem is not in the laws, so now laws are likely to have little to no impact: All this activity looks good on paper, but it probably won't work. Even if one accepts that China's problem is a lack of centralized food regulation, there are few signs that any of these steps would address that shortcoming in practice. The law's text provides absolutely no details about how it will be implemented. The law includes no standards, no timeline, no budget, no procedure for obtaining the input of regulated parties and no clear way to resolve disputes. In China today, laws adopted on controversial topics are often vague and lea...
More About: Food Safety , Working

China Law: The Podcast Edition.
2009-03-03 15:15:00
Earlier this week, I participated in a most interesting podcast on China with Britain's most famous, most controversial, and most beloved law blogger, Charon QC. I used to always say that if and when I am ever reincarnated, I want to come back as a QC. Now I am thinking I would just settle for having a sophisticated British accent like Charon QC and the ability to write about my quasi-fictional self in the third person like this. cool whil. Go here for the interview. What do you think? Oh and for all you numerologists, what meaning should be drawn from the fact this was podcast #111 and the number of the house in which I grew up was 111?
More About: Podcast , Edition

Volkswagon Doubles Down In China. Should You?
2009-03-03 13:06:00
Easy for me to say because I am in a market sector (boutique law firms) which is actually seeing increasing market penetration and growth during and because of the economic downturn, but I think now is the time for foreign businesses to increase or commence their China market presence. And I know I am not alone in this. I know this because my firm has seen increased business over the last six months from new clients choosing to go into China now. These businesses are telling us essentially one or both of two things. One, China is their best chance for growth now. Two, they had been planning to go into China for years, but did not have sufficient personnel capacity to make their move. The downturn has freed up employee time domestically, and they are repositioning that time for their China move. I also know this because of an article I read on Volkswagen's increasing its China presence for similar reasons. China Stakes just came out with an article, entitled, "Volkswagen Ign...

Why China Will Remain Stable. No Problemo.
2009-03-02 13:06:00
Though I studiously (okay, somewhat studiously) try to avoid the big think questions on this blog, I am getting so tired of the media litany that an economic downturn in China essentially guarantees political instability. I am getting tired of it because I vehemently disagree with it. I actually never thought of this until a few weeks ago when I was on a panel at the Kellogg School of Management's "Greater China Business Conference." It was nearing the end of the day and some student posed this question to me and the two China business experts, Jeff Day and Shi Han: Do you see China's economic downturn leading to political instability? My first thought was why ask this of me? My second thought was why ask this of us? I eventually answered essentially/somewhat as follows: No. I think that so long as the Chinese people believe Beijing is doing what it can to ameliorate the impact of the downturn, there will be no political insurrection against Beijing. I think that percepti...

China Law. What's Insurance Got To Do With It?
2009-03-01 13:56:00
When I was learning the law, I was trained to hate insurance. One of my law professors, whom I greatly respected, would say that insurance law is to law as military music is to music. Those who went straight from my law school to insurance companies were invariably in the bottom quartile in class rank. I saw their job as claiming someone's wrecked Honda Accord was worth $6,200, not $7,000. I eventually came to realize that insurance has a legitimate place in the practice of law. When clients come to my firm with a risk of being sued, or after having been sued, or even on issues requiring they sue, insurance nearly always pops into my head. My firm has been having to deal with insurance issues more and more as the bad economy sends us more defective international product and international fraud cases. We usually call in outside lawyer help to assist us on the insurance side of these issues. Insurance has always been a fairly big issue in the OEM contracts we write with Chi...
More About: China

Five Things To Do Now To Strengthen Your China Product Operations
2009-02-28 17:41:00
Kevin Lehrer and Jonathan Allen, over at 5 Horizons Group, recently wrote an excellent newsletter article entitled, "Keep Operations Strong Amidst Global Challenges." They graciously agreed to allow us to re-publish it here, with a few China Law Blog changes to make it more China-centric. Here goes: Without question, the consumer goods industry has been whacked by an economic chill on both sides of the ocean. In the United States, declining sales, inventory cut-backs, and limited credit are affecting demand at an exponential rate. Meanwhile, in China, the decline in exports has caused significant instability, widespread factory closures, and a growing unrest among a labor force that has lost millions of jobs over the past year. Meanwhile, there is the U.S. entrepreneur/small-business/not-so-small business fighting to keep its sales moving forward, while keeping operating costs to a minimum. The challenge, however, is that in pursuit of minimizing costs, companies of all siz...
More About: Product , Things

The Business Side Of China Law Practice
2009-02-27 07:01:00
Got an email the other day from Andrew P. Fennell, of Savills Property Services (Shenzhen) Limited, in which Andrew posed the following to me: I wanted to follow-up with a quick question and ask for your opinion on the operation of foreign law fims in China . If you've done a blog post on this before I became a reader, I apologize for the redundancy. However, if you haven't, this might be an interesting topic. I've noticed that the presence of foreign law firms is growing rapidly in the Chinese market. However, it seems that the scope of services --and expertise-- that foreign firms can offer here must be quite limited as compared to their local counterparts. What kind of services can they hope to offer, now and in the future? Do you think the China based offices of these firms are currently profitable? Or are they losing money with the hopes that over the years, they will have established the necessary expertise and local network to turn these operations into profitable...
More About: Business , Practice , Side

China's Courts: "Populist Vehicle or Party Puppet?"
2009-02-25 02:18:00
The US-Asia Law Institute website has a webcast entitled, “China ’s Changing Courts : Populist Vehicle or Party Puppet ?” It features a truly stellar panel of China law scholars, including Prof. Ben Liebman of Columbia Law School, Prof. Xin “Frank” He of the City University of Hong Kong School of Law, Prof. Nicholas C. Howson of the University of Michigan School of Law, Prof. Carl Minzner of Washington University School of Law, and Rachel E. Stern, a Ph.D. candidate at the University of California, Berkeley. The panelists will be answering questions submitted by Wednesday, February 25, 2009 to usasialaw@nyu.edu, with the subject line "Court Panel Question." Answers will be posted by March 2, 2009. I have yet to listen to it, but I would love to hear from those who do.

SXSW @ M1NT Shanghai. February 28 at 9:00 pm.
2009-02-24 20:19:00
What a great excuse for a party! On February 28, from 9 pm until 11:30 pm at M1NT Shanghai The Chinese Business Network and Symbio will be putting on "an official pre-SXSW cocktail...to highlight China's tech sector presence at SXSW Interactive Festival in Austin, TX in March." This year at SXSW, beginning at 2pm on March 16th (in Room 8.... what a lucky number!) there will be a China panel entitled, "International Business in China for Fun and Profit." I will be on that panel, along with the following: * Christine Lu - Founder, The China Business Network * Andrew Lih - Author, Wikipedia Revolution * Sage Brennan - Co-Founder, Mobile Monday Shanghai Unfortunately, I will be the only panelist not at the event, as I previously committed to a China trip in late March. The party is limited to the first 150 who sign up. Go here to sign up and for further information. For only 200 RMB, you will be able to partake of the following: * An opportunity to ...

How To Recharge Your China Mobile Card
2009-02-23 09:20:00
Unable to read either Mandarin or Chinglish well enough to recharge your China Mobile card? I recommend you read the China Ginger post, entitled, "How to recharge a China Mobile card in English," with step by step instructions (in English) on how to do exactly that. If this does not work, you can do what I usually do when I am in to China -- use someone else's phone or pay around $3.00 a minute on my AT&T iPhone.
More About: Card

Getting Your Consumer Product Into China.
2009-02-23 01:00:00
Silk Road International has an excellent post on importing consumer products into China . The post is entitled, "Q & A about Importing into China," and it starts out discussing why importing Western product into China is so rife with opportunity. To grossly summarize, more and more Chinese will pay for the better quality and higher prestige Western goods offer. The post then provides a very helpful discussion on the difficulties of importing product into China and then doles out the following tips: • Read Xiao Lu’s book [Elite China] —no matter what you’re importing. [Bottom Line: Know the market] • Find a trust-worthy partner. Take the time (months) to do DD on this one. This one person, more than anything else you do, could sink/steal/make your business. • Pick one region or one domestic distributor to start out with. China’s big, don’t get greedy. • Build some serious guanxi with the port and regional officials that you’re going to be using....
More About: Product , Consumer

Did "Pure Fabrication" Move The Yuan Market?
2009-02-18 23:15:00
The internet is abuzz with recent news that Chris Devonshire-Ellis of China Briefing may have influenced movement in the Yuan-Dollar conversion rate by what is being described by Chinese governmental authorities on the China Banking Regulatory Commission website as a "pure fabrication:" To summarize, China Briefing Magazine did a post claiming to have interviewed a Chinese governmental official who talked of the Yuan weakening to around CNY6.9-CNY7.0 against the dollar. The Chinese government subsequently went on record denying this and even appearing to deny any such interview took place Or as stated by The Wall Street Journal in its initial story: In a China Briefing story Wednesday, China Banking Regulatory Commission Chairman Liu Mingkang was quoted as saying the yuan may weaken to around CNY6.9-CNY7.0 against the U.S. dollar. The CBRC denied its chairman had been interviewed by China Briefing. Later Wednesday, China Briefing issued a clarification on its Web site, backing...
More About: Market , Move , Pure

Want To Succeed In China Business? Make Sure Your Business Is Legal.
2009-02-18 01:05:00
Just got back from Chicago/Evanston, where I was on a panel at Northwestern's University's Kellogg School of Management's Greater China Business Conference. The Conference was excellent and I am sure I will be referring to it again over the next few days. At one point during my panel, an audience member asked how foreign companies in China can stay on top of China's ever-changing business laws. My response was essentially, "any way they can." My firm has handled far too many matters involving foreign businesses that have gone way too far in their China businesses without making sufficient efforts to learn of laws that will apply to them. One company boasted to us of the $250,000 marketing study it had done proving the viability of their business, only to have us tell them their business was completely prohibited to foreigners. Another company with a factory already built and ready to go came to us after having been told they needed all sorts of government approvals before t...
More About: Legal , Make

China Patent Reform. When China is Good.....
2009-02-13 14:21:00
Regular readers know that CLB generally does not like to write much about upcoming laws. There are three reasons for this. One, there are plenty of existing laws about which to write and those, for obvious reasons, tend to be more central. Two, upcoming China laws often never come. Three, it is difficult to write about a law without having seen it in action first. On top of that, I generally avoid writing about patent laws because I am not a patent lawyer. But I am going to violate all of the above by pointing out an excellent Wall Street Journal opinion piece, entitled, "Patent Reform With Chinese Characteristics: Beijing's amended intellectual property law holds dangers." The piece is written by Ronald A. Cass, dean emeritus of Boston University School of Law, president of Cass & Associates, and former vice-chairman of the U.S. International Trade Commission. The reason I so much like this article is because it so clearly explains much of the current patent situation in...
More About: Good

China Law And Corruption. You'd Better Know Which Way The Wind Blows.
2009-02-13 06:28:00
By Dan Harris and Steve Dickinson There's an expression out there about tides exposing things but I know if I try to use it I will muck it up, so I'm going to quote from that which I know: Bob Dylan: Johnny's in the basement Mixing up the medicine I'm on the pavement Thinking about the government The man in the trench coat Badge out, laid off Says he's got a bad cough Wants to get it paid off Look out kid It's somethin' you did God knows when But you're doin' it again You better duck down the alley way Lookin' for a new friend The man in the coon-skin cap In the big pen Wants eleven dollar bills You only got ten. Maggie comes fleet foot Face full of black soot Talkin' that the heat put Plants in the bed but The phone's tapped anyway Maggie says that many say They must bust in early May Orders from the D. A. Look out kid Don't matter what you did Walk on your tip toes Don't try "No Doz" Better stay away from those That carry around a fire hose Keep a clean nose Watch...
More About: China , Wind , Corruption

Managing Your China Business Through The Downturn
2009-02-11 20:00:00
Ft.com has a very helpful article on how to handle the economic downturn in China and in India, written by Jayashankar M. Swaminathan, professor of operations, technology and innovation management at the University of North Carolina’s Kenan-Flagler Business School (h/t to CalPolyMBA blog) The article is entitled, "Managing in a downturn:Looking long term on the passage to ‘Chindia.’" and it sets out "five suggestions that can help companies design a [long term strategy. Focus on the sector, not the economy. The impact of the downturn in China will vary sharply depending on the sector. Infrastructure is still hot. I know I keep saying this and even I myself have troubling believing it, but so far, China's downturn has had very little impact on my firm's clients largely because we have very few clients in Guangdong Province. Our tech work (internet and gaming clients) is growing. Reassess offshoring. "Companies must use this opportunity to carefully consider the s...

The WTO, China's Media, Copyrights And Other IP. It's A Control
2009-02-10 07:35:00
By Steve Dickinson As we previously reported, the WTO decision in the copyright claim brought by the U.S. against China was recently released. As expected, the U.S. claims victory since it prevailed on two of three claims. However, careful review shows the U.S. lost. As usual, however, the WTO case was a part of a larger strategy, so the question of who won or lost is probably not relevant. The U.S. WTO case had one serious issue: the argument that Chinese criminal sanctions are not severe enough to deter piracy. The other two issues were trivial and technical. The U.S. lost on the serious issue and won on the trivial issues. This means the U.S. lost the case. So we should just say that: the U.S. lost. However, it was a foregone conclusion the U.S. would lose on the criminal sanctions issue. No WTO panel is going to tell a country how to organize its criminal system. The U.S. knew this from the start. So why did the U.S. bring the action at all since it knew it would lose? Chin...
More About: Media , Control , Copyrights