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Sanlu's Lessons For Foreign Managers In China....Because Jail Is Proba
2009-02-09 06:43:00
By: Steve Dickinson The China Economic Review recently published this column by CLB's own Steve Dickinson, entitled, "Foreign Managers Are Not Above the Law." [subscription presently required] It bears mentioning that Steve wrote this article in China (where he lives and works) before the news of the Peanut Corporation of America's salmonella outbreak in the US. Here's Steve's column: The San Lu tainted milk scandal reached a typically Chinese conclusion on December 31, 2008. On that day, San Lu group chairperson Tian Wenhua and three other top group executives pleaded guilty to the crime of production and sale of substandard product. Since at least six deaths occurred, the defendants face a maximum penalty of life imprisonment or death. Resolution of the tainted milk scandal followed a fairly typical Chinese pattern: • San Lu was forced into a government-supervised bankruptcy. • An industry wide compensation fund was established and managed by the government. • ...
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China Law For Foreigners. Slip Sliding Away.
2009-02-06 17:05:00
For the last few years, one of the main themes of this blog has been how China has and will continue to increase its enforcement of its commercial laws, particularly as they apply to foreigners. We have written about the increase in crackdowns on those in China without the proper visa, about closing of unregistered businesses, the need to comply with the Labor Contract Law, and a stepping up of environmental enforcement. I'd like to take some of it back. In the last three months or so, the law for foreigners has definitely shifted a bit in China. It has not changed on the books, but it has changed out in the field and foreigners doing business in China and those considering doing business in China need to be aware of these changes and how they might impact their business. Without delving too deeply into legal philosophy, let me just state that there is real value in having written laws that are consistently enforced. This is true for all kinds of reasons, many of which shou...
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Which China City Is Best for Mordachai?
2009-02-04 07:44:00
Got a somewhat weird email today, but it makes sense, on some level, so here goes: Dear Mr. Harris: A question you may want to answer on your blog: If you were 25 again -- crisp J.D. in hand but, alas, no job -- which city in China would you move to? You've noted that there's more to China than Beijing and Shanghai but I was wondering where you thought the future was located. Mordachai Absalom (that would be a pseudonym) Tough question, actually, particularly since I do not know all that many of China's cities terribly well. Also, (and how's this for being a lawyer) much will depend on the individual and unique facts of your case. For instance, if you are a Chinese-American with an Uncle who heads up the Communist party in Chongqing, then I suggest you go to Chongqing. Or maybe you are not a Chinese-American, but your father-in-law heads up the party in Xiamen. Well then, I would recommend Xiamen. Now suppose you graduated first in your class from Harvard Law ...
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The Cities Of China. China's Cities. Metropolises In China.
2009-02-03 06:37:00
Well you get the point. The Little Red Book (a pretty cool new blog on advertising in China ) recently did a series of posts nicely setting out various mostly marketing type facts/statistics on some key China cities. So far, they have done "snapshots" of Xi'an, Wuhan, Tianjin, Shenyang, Shanghai, Nanjing, Jinan, Hangzhou, and Guangzhou. I am hoping they add Beijing, Qingdao, Dalian, Chengdu, Chongqing and Harbin.
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Doing Business In China Director's Conference. Beijing And Shanghai,
2009-02-02 07:29:00
Global Navigation, a peer to peer resource for boards of directors of multinational corporations and an affiliate of Corporate Board Member magazine, is putting on a seminar on board-related issues involving China . Its agenda and the speakers are absolutely first rate and I plan to attend. China Law Blog's own Steve Dickinson will be speaking in Shanghai on China employment law issues on April 2. The speaking portion begins in Beijing , on Saturday March 28th, with Washington SyCip, Founder of the Asian Institute of Management and Founder of SVG & Co. (now part of Ernst & Young), speaking on "economic freedom versus political freedom in Asia." The next day, also in Beijing, will consist of the following: -- James (Jimmy) Hexter, Senior Partner of McKinsey & Company, on "Strategy to Operations: How to Create a Long-term Business in China." -- Allen Ge, President of Otis Elevator (China), on "How to Sell to China." -- Matthew Estes, CEO & Founder of Baoying BabyCare, Inc., o...
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The Death And Birth Of China Factories.
2009-01-31 14:28:00
Loretta Chao and Andrew Batson of the Wall Street Journal have written an excellent piece on what is going on these days with China factories. The article is entitled, "China's Small Factories Struggle," and it is about factories closing, factories changing to meet changing demand, and about factories starting up. Not news breaking by any means, but a piece well worth reading to get a sense of what is going on with China's factories.
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WTO China Piracy Ruling: It Ain't Worth A Thing....
2009-01-30 07:21:00
Forbes Magazine (which, BTW, does a consistently excellent job in covering China ) has a new and interesting article out, entitled, "U.S. Talks Up WTO Piracy Ruling , But It's All Wind" and subtitled, "Washington claims that the trade body took its side in a suit against China, yet the decision will not halt intellectual property theft." The article talks about how the United States government has been playing up its victory on two out of its three claims, but since it lost the one really important one, its victory claim is little more than spin control. To grossly oversimplify, the WTO ruled that China's criminal IP laws are not inconsistent with China's WTO obligations. China Law Blog's own Steve Dickinson is extensively quoted downplaying the U.S. "victory": The U.S. claim was trivial and hyper technical. They won on the hyper technical issue. The only serious issue was the criminal sanctions issue, and they lost on that one. So what this means is exactly nothing," sai...
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BREAKING NEWS: Obama Called Hu And Threw Geithner Under The China Bus.
2009-01-28 01:33:00
Got this news from a very close friend of mine who is very high up in the media, very connected, and very reliable. All I can say is that we go way, way back and I trust him implicitly (though he would also not be above feeding me something like this to make a fool out of me so he can laugh about it for years afterward -- perhaps in revenge for the time I .....). My friend got it from someone who my friend swears is very reliable but my friend does not know whether the story is true or not. I have changed considerably changed the language so as to erase potential identifiers: On the heels of Treasury Secretary Geithner's apparent designation of China as a currency manipulator at his confirmation hearing last week, President Obama called President Hu over the weekend to try and calm the waters. We at this time have no more information beyond confirmation of the call, but our sources tell us that President Obama did make the call in an effort to let President Hu know that the Un...
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Ox, Shmox, It's Gonna Be A Pox. Why I Have No Faith In Chinese Real E
2009-01-27 07:53:00
First, let me get my biases/perspectives out on the table. I am a lawyer. What this means is that no matter how much the media may tout me as riding some sort of second wave (check out this super-cool article!), my training compels me to look at everything with a jaundiced and conservative eye, particularly investments. I never lost a dime on the dot.com bust because by the time I was thinking I might at some point get comfortable enough to invest in a business I could not foresee ever developing a way to make a profit, the crash had already occurred. Many years ago, when my law firm (that's my money too) rented a condo in Qingdao and then in Shanghai, I looked at buying property in China, but always blanched. Though I saw China's long term potential for real estate, what with some 200-300 million more people expected to fill China's urban areas and all, I could never get past the rows of empty buildings and the fact that the rental rates were way too low in proportion to ...
More About: Faith , Chinese , Real , Gonna

USTR Report On China's WTO Compliance. This Is What The Damn Thing Sa
2009-01-27 07:26:00
The other day I did a post on the United States Trade Representative Office's (USTR) release of its report on China 's compliance with World Trade Organization (WTO) rules. The report is a daunting 115 pages and at the time we wrote about it, in our post entitled, "USTR Releases Its Report On China's WTO Compliance . Will Someone Please Read The Damn Thing ?" we had not read it, nor could we find anyone online who had. I am happy to report that Experience Not Logic has read it and commented on it and so if you are interested in learning the gist of if without having to read it yourself, I urge you to read, its post, entitled, USTR on China's WTO Compliance: Damn Thing in a Nutshell. For those wanting to read the report in its entirety, it can be found [in pdf] by clicking here.

How To Get A China Visa. It Ain't Easy....
2009-01-26 02:55:00
Post over at I Only Like China , entitled, "Visa troubles: trials, tribulations and tomfoolery," does a nice job comparing the various China visas and setting out the machinations one often has to go through to get one. In defense of China on this securing a United States visa is no easier/better.
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Hey Buddy Can You Spare A Yuan, Part III -- Is Micro-Finance China's N
2009-01-26 01:40:00
A couple years ago, we wrote about small business and consumer lending in China , in posts entitled, "Hey Buddy , Can you Spare a Yuan? The Sorry State of SME and Consumer Lending in China." and "Hey Buddy, Can you Spare a Yuan, Part II -- The Sorry State of SME and Consumer Lending in China." Since I wrote those two posts, lending in China has gotten marginally better and, among other things, China has loosened up a bit in terms of allowing foreign entities to engage in microfinancing. Micro financing involves just what it implies: very small loans, usually to assist a very small, usually home based business. The big banks in China (and it is pretty much exclusively big banks in China) have no interest in small loans, which usually means small businesspeople must secure their funding from either family and/or friends, or from loan sharks. I was recently invited to a Seattle networking event by Wokai (but unfortunately could not go) and have since learned more about that organizati...
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Obama And Geithner On China. Election Hangover Or The Way Things Will Be?
2009-01-25 20:27:00
James Fallows writes an interesting piece, entitled, "Broader point about Geithner, Obama , China , and 'manipulation'" setting out his concerns on how the Obama administration is treating/going to treat China. To summarize what Fallows says (and hey, if I am not summarizing it properly, go ahead and attribute it to me) is that Obama is clearly capable of nuance. The key financial and diplomatic people Obama has brought into his administration are clearly capable of nuance (i.e. Geithner, Hillary Clinton, et. al.). Obama and his people have done a good job so far in recognizing the complexity of the issues facing the administration, and in seeking to formulate practical solutions to resolve those issues. But here is where the disconnect starts. During the election campaign, Obama's expressed views on China were both simplistic and jingoistic. For examples of this, check out the following: -- Barack Obama On China. Say It Ain't So . . . .Oh But It Is. -- Obama And Clinto...
More About: Election , Things , Hangover

Is Your China Business Recession Resistant? What Is?
2009-01-24 17:53:00
One of the things I have always found fascinating is how macro economic issues can have such widely varying micro economic impacts. By this I mean that when an economy starts tanking, let's say 10%, the impact on individual businesses can be all over the map. I remember becoming starkly aware of this during the 1997 Asian Crisis, as I spent a considerable amount of time in Korea that year. The news was doing a story on the drop in imported goods coming into Korea. Now I do not remember the numbers very well at all, but I think imports had declined about 20%. But the really interesting part was how unevenly this fall in imports was among various products. The one that stands out for me is that some fruit (I am 99% sure it was either kumquats or quinces) had gone from $20 million in imports the year before to absolutely zero. Zero. The reason given for this was that it was a luxury and that such luxuries were no longer in demand. Some staple food products had seen virtually ...
More About: Business , China , Recession

China Bribes And Transparency.... Or Why The FCPA Matters.
2009-01-23 17:34:00
China Journal has an excellent interview with Alexandra A. Wrage, president of Trace International, a nonprofit group that works with corporations to reduce bribery as they do business abroad. The post is entitled, "Bribes and Transparency on Chinese Holidays: A Primer," and it sets out the basics of the US Foreign Corrupt Practices Act (FCPA), and some of the most important things to do and to avoid to remain in compliance with it. I highly recommend it for Americans who does business overseas.
More About: China , Matters

China Joint Ventures And The Hotel California Effect.
2009-01-23 05:34:00
By way of explanation, here are the key lines from the Eagles' song, Hotel California : We are programmed to receive. You can checkout any time you like, But you can never leave! China Economics Blog used the term, Hotel California effect (borrowing from a scholarly article) to describe the problems foreigners so often have in getting their money out of China. I love that term (both because it so well describes things and because it combines law and music) and I have since used that term many times with clients who insist something in China "must be legal" because so and so did it or because the local government is encouraging them to do it. If my using lyrical symbolism fails, I flat out tell them that, "of course, China will take your money, but the problem will be when you try to take it out." I then tell them of the person who came to us after having sold his condo that he had purchased illegally and having been told by all of the banks that he would not be able to deposit...
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USTR Releases Its Report On China's WTO Compliance. Will Someone Plea
2009-01-21 06:52:00
Professor Clarke at the Chinese Law Prof Blog did a post linking over to the United States Trade Representative Office's just released report to Congress on China 's compliance (and non-compliance) with its WTO obligations. It consists of 115 pages and Professor Clarke states that he has no comments because he has not read it yet. I have not read it yet either and so I would love to hear from anyone who has (or does). The full report can be found [in pdf] by clicking here.
More About: Report , Compliance

China's New Labor Law. On The Mat, But Not Down For The Count.
2009-01-19 17:54:00
In early December, 2008, in "China 's New Labor Contract Law. Harmonized Out Of Existence?"we wrote about hearing from clients how local officials were giving them broad hints that they would not be too tough on enforcing China's new Labor Contract Law, so long as those companies maintained their employment numbers. We covered this issue again, in "China's Labor Laws. Worry Me Or Worry Me Not," a few weeks ago, after more clients reported the same thing to us. For those seeking additional confirmation that China is going to be loosening up on its enforcement of its labor laws, the Wall Street Journal just did a story, entitled, "Factory Closures Strain China's Labor Law." Again, though, our position is that foreign companies will almost certainly be required to continue to abide by at least some portions of the new labor law and that it is not a good business practice to violate the labor laws even if promised immunity by local officials. In particular, we believe it rema...
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Taking Depositions In China. It Can Be Done. Just Kidding.
2009-01-19 13:34:00
Not sure how I missed this until now, but Experience Not Logic did an excellent series of posts on taking depositions in China , here, here, here, and here. The first post sets out the issue: Here's the scenario: you're a litigator preparing a case in the United States. You have reached the onerous task of discovery. A key witness is located in the PRC. You, or your adversary, need to take the Chinese witness's deposition. The witness is unable to come to the U.S., and their deposition must be taken in China. How do you go about taking this deposition, or preventing the other party from taking the deposition? Though deposing a Chinese witness in China for a US court case is possible, the post goes on to say that only one such deposition has actually occurred in the last 25 years: Only one limited deposition of a Chinese citizen in China has been allowed in 25+ years of China signing agreements allowing depositions to be taken. There is a very good reason for this. Depositi...
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Tort Liability For China Counterfeit Goods?
2009-01-19 09:30:00
Blogger Ryan McLaughlin (and my firm's webmaster) recently posted on media coverage of the death of his beloved Golden Retriever, believed to have been caused by a package of Optima dog food. Mars makes Optima dog food, but it does not ship it or sell it in China . Mars does sell Optima to Taiwan, however, and it is not clear if the Optima dog food Ryan purchased in Suzhou, China, came from real Optima dog food sent to Taiwan (which may have been compromised by poor storage or age) or was counterfeit. So here's the question. Might it make sense to bring a claim against a US product manufacturer in a US court based on its failure to monitor its brand worldwide? Can one argue that Mars was negligent in not doing more to prevent its product from being sold in China or in preventing counterfeits from being sold? Has there ever been such a case? Please understand that that I have absolutely NO evidence one way or the other regarding Mars' actions involving Optima, I ...
More About: Goods , Tort

China Cracking Down On Illegal Foreigners. Duh.
2009-01-18 20:48:00
Twice last week I got calls from companies wanting to get legal in China . URGENTLY. One company is in Shandong province, the other is in Shanghai. Both have been operating illegally in China for years. I asked both "why now?" and they both gave essentially the same response: I want to register my business in China so I can work in China legally. I'm hearing that the government has begun and will be stepping up its efforts to root out foreigners here illegally. With both, we then discussed how a crackdown on foreigners in China will play well politically as a counterweight to its tightening job market. Chinese citizens are not going to take kindly to its government allowing illegal foreigners to "take jobs" from the locals. The People's Daily wrote on this the other day, in an article entitled, "Illegal workers identified," in what I see as the government's opening salvo/warning on the issue of foreigners working illegally in China. (h/t China Economic Review Editor's J...
More About: Cracking , Foreigners

China: On Why To Stay Current On Your Rabies Shot
2009-01-18 19:23:00
Tim Johnson, at the always interesting China Rises, recently wrote on the upsurge in rabies cases in China in a post entitled, "Rabies explodes in China." (h/t Time China Blog) Much of this increased incidence of rabies has been in Southern China. Are your rabies shots up to date?
More About: Current , Shot , Stay

Chinese Drywall. If You Think That Is Bad.....Just Wait.
2009-01-15 21:41:00
Absurdity, Allegory and China is doing an excellent job in covering the recent problems with Chinese drywall that have cropped up in Florida. AAC has done a series of posts on this issue, the most recent one, entitled, "Just Follow the Links," which, as its name implies, links over to the previous ones. As I am always saying, lawyers make for excellent canaries in terms of what is happening and what is going to happen. This is because we oftentimes hear of things from our clients before they become public, through either litigation or an announced deal. My law firm has been hearing much more about and/or getting much more work in four areas relating to China. Only one relates to the drywall problem, but all four directly relate to the downturn in the economy. Here goes. First, we are hearing of even more incidences (yes that is possible) of China quality control problems. Chinese companies that are strapped for cash are the most likely to skimp on quality and with more Chin...
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The Latest On Foreign Direct Investment (FDI) In China
2009-01-14 03:25:00
The following is an outline of a talk co-blogger Steve Dickinson gave yesterday at The China Economic Review" forum on "Foreign Direct Investment in China: Optimizing FDI strategy in the current economic climate." UPDATE AND FORECAST OF REGULATORY FRAMEWORK FOR FDI IN CHINA I. Major features of the current FDI system in China as of January 1, 2009. The PRC FDI system dramatically changed during the period of 2006 to 2008. The main features of that change are: A. Tax neutral FDI policy. In 2008, China reversed its prior tax policy concerning FDI. Under the old policy, foreign investors were taxed at a lower rate than domestic investors. Investors in specific regions such as Pudong were provided with various tax exemptions. All this was eliminated in the new income tax code, which mandates a neutral FDI investment framework: no incentives based on nationality or region. Incentives are instead provided for specific encouraged business activities. A limited exception to this pol...
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Trademarks In China. A Whole Lotta Ways To Go.
2009-01-12 19:44:00
Foreign companies contemplating doing business in China are getting more sophisticated about the need to register their trademarks in China. I think. I say this because the number of companies contacting my firm who think the have a trademark in China simply by virtue of the fact that they may have one in Puducah has drastically declined. So if our post, entitled, "China Trademarks -- Do You Feel Lucky? Do You?" was China trademarking 101, this post, on what to trademark, should be China trademarking 102. IP Dragon blog did a post, entitled, Trademarks in China: Nomen Est Omen that nicely sets out the basic alternatives companies face in deciding what to trademark in China, using Shell Oil Company as the example: If Shell wants to sell their products in China they can do three things: -- Register only your non-Chinese name, this is unwise, because it invites Chinese counterfeiters to jump into the vacuum; -- Register also a translation of the meaning of the mark int...

China's Labor Laws. Worry Me Or Worry Me Not.
2009-01-11 06:08:00
About a month ago, we did a post entitled, "China 's New Labor Contract Law. Harmonized Out Of Existence?" In that post, we (I say we here because some of what I was reporting was coming to me from co-blogger Steve Dickinson who is based in China) talked about how local and provincial authorities were giving out broad hints that they were not going to be all that keen about strictly enforcing China's labor laws other than those related to preventing layoffs: We have talked so much about the labor law because it applies to every business in China with an employee. Complying with the law is relatively easy and the penalties for failing to comply can be so harsh. But last week, a long-time client of ours with a factory in Shandong Province (just outside Qingdao) told me of how a Chinese government employee had essentially told him not to worry so much about China's labor contract law. The gist of the government employee's statements to our client was that so long as this company ...
More About: Laws , Worry

How To Have A China Ready Supply Chain
2009-01-11 02:21:00
The most recent issue of Supply & Demand Chain Executive Magazine has a really informative article by Steven Ganster on China . The article is entitled, "The China-ready Supply Chain : Key attributes to ensure a high degree of readiness for doing business well with China," and it does an excellent job setting out what foreign companies must be on the lookout for "doing business well with China and getting excellent performance from your supply chain." The article very nicely sets out the following four key challenges to address to make your supply chain China-ready and then sets out to explain how to meet these four challenges: -- China's vast and complex market landscape. China crams its 1.3 billion citizens (estimates of China's population range from 1.2 to 1.5 billion, the margin of error being the size of the United States) into a space the size of the continental United States, and it boasts more than 170 cities with a population exceeding 1 million residents. Almost 70 per...
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China Law Blog As Flavor Of The Week
2009-01-09 03:03:00
At the end of every year and the beginning of the new one, many (most?) blogs do a post extolling the previous year's posts, their own blog's longevity and/or ever increasing readership, and talking about how great it is to blog for such smart/astute/wonderful people, and why this blog is so different from all the other blogs out there. I have never much liked those posts for the simple reason that I do believe most people find them terribly interesting. But hey, when someone else pretty much gives me a forum to go off on most of this stuff and does a great job writing it all up, and when that someone is legal writer extraordinaire, "Mister Thorne,", well then, it just wouldn't be neighborly of me not to link over and tell everyone to go there if they want to find out what makes China Law Blog tick. Or not. The post is entitled, "Dan Harris -- A Flavor ful Blawgger" and you should check it out.... If you think it might be interesting. On a somewhat similar note, and seeing ...
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A Shanghai Event: China FDI For 2009. January 13, 2009.
2009-01-07 19:08:00
On January 13, from 2:00 pm until 6:00 pm, The China Economic Review will be putting on a seminar/forum, entitled, "Foreign Direct Investment in China: Optimizing FDI strategy in the current economic climate." Do NOT miss it. China Economic Review describes it as follows: Foreign Direct Investment has always been a major contributor to China’s economic development, but it’s fallen for the first time. What will be the impact of the global economic downturn on China’s FDI inflows in 2009? Will China’s efforts to stimulate domestic demand be effective in attracting more investment? How will you improve your return on investment in the new economic climate? China Economic Review has invited leading experts to talk about issues and solutions from the unique perspective of investment in mainland China. This half-day interactive and case study-oriented conference will provide valuable knowledge and practical advice on how to optimize your FDI strategy and increase returns ...
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Promising China Blog: ChinaBizGov
2009-01-06 18:11:00
Of those who comment on our blog, I never remember who agrees or disagrees with me on issues, but I always remember those who make me think. That is why I remember G.E. Anderson and that is why I was so happy to learn (from Professor Donald Clarke, the brains behind the Chinese Law Professor Blog ) that G.E. Anderson has just started his own blog. Anderson's blog is China BizGov and its tagline is "Highlighting interesting issues in business-government relations in Greater China." Anderson describes himself as a "China specialist, former CFO, and PhD Candidate in Political Science at UCLA. Research focuses on state-owned enterprises, corporate governance and China's auto industry." It took me only one post to know I was going to like this blog. The post is today's post, entitled, "Privatization of Central SASAC Assets," in which Anderson talks about a conversation he recently had with a journalist out of Beijing on whether China is moving away from privatization, without rea...