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China Online Gambling. Illegal But Everywhere.

Posted in China Business, Legal News

The below is an authorized re-do of an article, Upsurge in online gambling in China during the World Cup, written by Steve Dickinson and Arlo Kipfer for the Online Gambling Review.

 

Media reports state that online gambling in China soared during the recent World Cup. Interest was so intense that gambling income in Macao significantly declined, causing a major blow to the bottom line of major casinos that normally rely on a steady flow of high and low rollers from mainland China. The punters seem to have put their money into online gambling on the World Cup, with revenue at the People’s Republic of China (‘PRC’) government run lottery site increasing by over 80% during this period. Steve Dickinson and Arlo Kipfer of Harris Moure PLLC, China, explore the upsurge of online gambling in China during the World Cup given that gambling is illegal in China.

This then raises the big question: the Macao casinos exist because gambling is illegal in China. No substantial casino business exists in China, forcing punters to head to Macao. If gambling is illegal in China, how does online sports gambling work? If gambling is illegal in the PRC, how is it possible for the World Cup to have made such an impact? As always in China, the story is complex. It runs as follows.

The general ban on gambling in China is subject to one exception. The PRC government operates two legal lotteries: the China Welfare Lottery and the China Sports Lottery. The China Sports Lottery experienced its 20-year anniversary in April of this year. The sports lottery allows legal betting on all sporting events. By far the most popular is betting on football: both Chinese national football and the European leagues. As a result of this opportunity for legal gambling, China has become a nation of football fans. But these fans are bettors, not players.

At its inception, sports lottery tickets were sold at exclusive outlets found in all of China’s cities. The number of oudets has always served as a limitation in the number of potential customers. In order to expand access, the China Sports Lottery entered the online world in 2010. The new online rules allow licensed sports lottery vendors to partner with website providers to offer online lottery purchases. Such legal websites must be approved by government regulators and are subject to strict regulation. Due to the tight regulation, licensed sports lottery websites are still uncommon in China. As might be expected, the national lottery administration has monopolised access to its great profit.

During the World Cup craze in China, operators of the major retail sales websites in China saw an opportunity to cash in. These websites partnered with licensed local lottery vendors to offer their lottery products online through retail sales websites. The lottery sales were offered just like any other retail offering on the site. This form of lottery betting was technically in violation of the regulations. The website is licensed as a commercial website. The local lottery agent is licensed to sell lottery tickets. But, the regulations require specific approval to sell those lottery tickets online. No such approval was obtained, making sale on the major retail websites technically illegal.

However, there was money to be made and no one in China worried about the technical details. There is good reason for this. The major retail websites are well run, reducing to a minimum the chance of deceptive practices against the consumer. The government ultimately received a share of the proceeds through income earned by the local licensed vendor. The total income earned by the government was greatly increased due to the massive advertising power of the websites. In this setting, the government regulators had no motivation other than to say: send us the cheques.

It is not clear whether this very successful foray into the sale of sports lottery tickets on the part of the e-commerce giants will continue. The current feeling is that this was just a temporary event created by the unique interest of the Chinese people in the World Cup. However, the substantial income earned must be attractive to all involved and it is certainly possible that this semi legal sale of sports lottery tickets will continue.

But the story does not end here. From the gambler’s point of view, there is a major problem with betting in the China Sports Lottery: the payouts are low. The dedicated gambler is therefore provided with an incentive to seek a higher return. This higher return is offered by unauthorized online gambling websites. Take an example: a 100 RBM bet on Croatia to win its first game in the World Cup through the official sports lottery would have paid out about 8 RMB; the same bet made through an overseas online gambling site would have paid out about 60 RMB.

The Chinese bettor is therefore obviously attracted to betting on the foreign site. The only problem is that the site is illegal in China. It is illegal to access the site from China, it is illegal to send funds to the site from China and it is illegal to receive funds from the site in China. The PRC government has the technical ability to enforce these rules. Using the great firewall, access to foreign gambling sites can be blocked. Domestic websites that provide access to the foreign sites can be located and shut down. The major search engines like Baidu and Sina can be instructed to filters search terms that allow Chinese residents to find gambling sites. Banks and online payment services can be instructed to deny all payments to gambling sites and to refuse to accept payments from gambling sites.

Even though all these techniques of control are possible, during the World Cup Chinese citizens found that they had almost completely open access to wagering on the World Cup. Access to foreign online gambling sites entirely focused on Chinese citizens was entirely open. While specific numbers are not known, it is generally understood that the amount of betting on the World Cup by Chinese citizens on foreign sites actually dwarfed the amount legally wagered on the World Cup through the China Sports Lottery.

So how does a Chinese citizen make a bet through a foreign online gambling site? First, the Chinese gambler has to find a betting site written in Chinese and focused on Mainland Chinese bettors. Serious gamblers will learn the names of the most popular sites through the Chinese online forums dedicated to gambling. For newbies, a search on a Chinese search engine will result in hundreds of hits for online gambling sites. Normally, the potential better will be led to what is known as a portal site listing hundreds of online gambling sites. Normally, the potential bettor will be led to what is known as a portal site listing hundreds of online gambling sites. One click on the portal listing and the gambler will access the site of choice. Several sites have become overwhelmingly popular in China.

After the bettor finds a site, the next issue is determining how to place the bet. The RMB is not a convertible currency and gambling online is not legal. Not a problem. The site will provide clear instructions to the bettor on how to proceed. The system is simple and direct. The site will provide a list of online payment service providers (PSP) that have been approved to work with the site. The customer contacts his preferred service provider and sets up an account. The betting accounts normally require payment of a minimum deposit the customer will normally fund the account using a standard Chinese bank issued debit card. The deposit is made in RMB and the PSP handles the conversion into foreign currency, payment to the online gambling website and collection and payout of winnings.

The website is accessed in China with all communication in Chinese. For the major sites, there is a Chinese speaking voice operator available 24 hours a day. Payments are made and payouts are received in RMB, collection and bank processing are all handled online by an experienced operator, relieving the bettor of any need to discuss the process with bank personnel. A certain amount of fraud protection is provided by the PSP. Where the website is located in a country in which gambling is legal and supervised, there is even more protection from fraud.

The only issue is that the entire program is illegal under Chinese law. So far, the illegality does not seem to have had an impact on the business. Websites are adept at dealing with being blocked by operating with a large list of revolving URLs. PSP’s come and go using the same revolving URL technique. Chinese banks are desperate for deposits and processing fees and therefore cooperate with the PSP’s in ways that are difficult or impossible for the government regulators to monitor. Individual gamblers are prosecuted only when they have committed some other crime such as embezzlement of the funds used to fund their gambling addiction.

The World Cup has not introduced online gambling to China. Both legal domestic and illegal foreign online gambling were already well established. The effect of the tremendous publicity surrounding the World Cup instead introduced huge sectors of the Chinese public to online gambling. The support of online gambling on football provided by the China Sports Lottery convinced the Chinese public that online gambling is a safe form of amusement. The danger of this is that in the pursuit of higher returns the Chinese public will gravitate towards online gambling sites that are illegal in the country. This type of site is not regulated or supervised in any way and is often in the control of criminal organizations.

Reports are now coming out of China about deceptive practices arising from such sites that are typically based in SE Asia. Legal and social issues arising from gambling on such sites may cause the Chinese government to take more aggressive actions against illegal online gambling. The current anti-corruption drive in china focuses on control of overseas gambling, which also may lead to an additional push for regulation. For this reason, though the business is now thriving, there is no certainty about its future in China.

 

China’s Compliance Miracle: I Mostly Believe.

Posted in Legal News

A China client sent me the link to an article one of his employees had sent to him. My client’s email to me said only, “Is this true.” My response was even shorter: “Mostly yes.”

The article is from The FCPA Blog, entitled, Do you believe in compliance miracles? The article talks of how China and India are “fast becoming global leaders for anti-corruption compliance and enforcement. That’s gotta be a miracle.”

The article goes on to talk about how China’s corruption crackdown is happening with “real confidence, enthusiasm, and a sense of destiny.” Most importantly this fight against graft is “not a passing fad . . . . It’s real, and there’s no turning back.

The article notes how companies used to “make allowances” for doing business in China. This meant playing “by local rules” and that “meant greasing some palms.” Now though, if you grease palms in China, “you’ll probably get caught (the whistleblower culture has also gone global, after all)” and means that “you and your company are likely to be prosecuted and possibly ejected from the land”:

Thanks to authentic shifts in attitudes and practices. . .  global compliance and enforcement are now really . . . global. Goodbye and good riddance to one set of compliance practices for some parts of the world but another wink-and-nod set for . . .China. That two-tiered way of doing business undermined the idea of global compliance and compromised and degraded the role of compliance officers.

I believe. Do you?

For more on what it takes to stay out of China’s jails by remaining compliant, check out the following:

China Legal Advice And The Role Of The “Grapevine”

Posted in Legal News

Every so often I go deep into the backend of this blog to review and delete the draft blog posts (some little more than an idea) that have yet to see the light of the Internet page, and shouldn’t.

I did that today and came across a post on a great article Phil Taylor (now a solicitor trainee at Eversheds), wrote for the International Bar Association, entitled, Asia: Adopting the Right Mindset. The article talks about how and when lawyers should and do consider “factors beyond the letter of the law” in advising their clients. I strongly urge you to read the entire article.

This article touches on how lawyers can best advise their clients regarding the legal issues they will face by doing business in a country where the law is unclear and/or constantly changing and/or where enforcement is spotty. Just about all countries qualify on some counts to some extent, but some countries are clearly less legalisitic than others. Phil extensively interviewed me regarding China legal advice and wrote the following about how our China lawyers typically interpret China’s laws:

In countries where the law is developing rapidly, new regulations can appear almost overnight. When this happens, experienced lawyers will look at how the authorities have enforced similar laws in the past to assess the actual risks to their client. A few years ago, for example, the Chinese government announced it was making all internet-to-internet telephony illegal. But believing that China’s public would never allow such a crackdown and therefore that it would never happen, Harris says he did not advise his clients not to talk on Skype.”They [the Chinese government] just threw it out there to see what would happen,” he says. “In this kind of situation we tell them what the law is, then we talk about our experience – and often we’ll say give us a couple of days and we’ll try to find out what’s going on.”

“You can’t rely as much on the law as it’s written – that doesn’t mean you can just ignore the law. There’s a grapevine among China lawyers: you call your lawyer friends, even if you’re sure what the law is, and ask them what they’ve been hearing,” Harris continues. “I’m happiest when the law and the grapevine say the same thing.”

*    *    *    *

An issue that can arise when helping a client form a company [typically a WFOE] in China is whether the investor can do any kind of business in the country before the company is fully set up. Although it is technically illegal to do so, many carry out some initial scoping work in the interim period. But if they are caught, Harris says, the authorities tend to take a pragmatic approach, and the investor will rarely suffer any consequences if the authorities know that a genuine company registration is pending. Experienced lawyers will explain this precedent to their clients, clarifying that this is no guarantee as to what may happen in the future and leaving it up to them to make the final risk assessment.

I have nothing to add to the above, but I would certainly love to hear how other lawyers deal with these issues.

China Company Indemnification From Product Defects. Yeah, Whatever.

Posted in Legal News

American lawyers love using indemnification provisions in product manufacturing agreements. They love them so much that they often use them in China manufacturing contracts (OEM Agreements) even though they do not work well at all there.

American lawyers often put in a provision stating that if there is a product recall, the Chinese company must indemnify the American company for any fees/costs/damages incurred by the American company arising from the recall. American lawyers also often put in a provision stating that if anyone is injured by a product defect, the Chinese company must indemnify the American company for any fees/costs/damages incurred by the American company arising from the defect.

These sorts of provisions sound so good and so safe. The only problem is that they aren’t.

If a Chinese manufacturing company breaches a contract in a way that damages the American buyer, then in principle the Chinese side is liable for all damages that flow directly from such a breach. This includes the types of damages in normal indemnity provisions. It is therefore usually unnecessary to include indemnity provisions in contracts that will be enforced in China using Chinese law. For why it usually makes sense to have your manufacturing contract be enforced in China, check out China OEM Agreements. Why Ours Are In Chinese. Flat Out.

American companies are quite reasonably concerned that if their Chinese manufacturer provides them with defective products they (the American companies) could suffer liability for damages in amounts much greater than the purchase price of the product. In that situation, a claim against the Chinese manufacturer for a refund of the product price or a repair or replacement of the products is not going to come close to being sufficient to cover the damages incurred. This is very real risk in purchasing products from China.

The problem though is that you cannot expect to get a Chinese court to find a Chinese company liable for such damages. Foreign judges generally — and Chinese judges in particular — think that American courts are out of control with the damages they impose in product liability cases. So even when a Chinese manufacturer has clearly breached its contract (lead paint in children’s toys for example), Chinese courts and Chinese arbitrators typically limit the damage award to nothing more that the direct cost: a refund, a repair or a replacement, plus maybe reimbursement of penalties imposed against the American company for something like a late delivery. Chinese courts and Chinese arbitrators almost never will enter an award covering losses from product liability claims, whether those claims are made by consumers or by a government.

Usually, the best way for American companies to protect themselves from product liability and product recall claims is by securing the right insurance, with the premium costs viewed as part of the cost of doing business in China. You can try to get your Chinese manufacturer to pay your insurance premiums, but in our experience few Chinese manufacturers will agree to this and those that do will somehow raise their product pricing to cover it.

Sorry, indemnification lovers….

China Employment Contracts: Do Not Try This At Home, Part II

Posted in Basics of China Business Law, Legal News

Did a post yesterday explaining why I got so upset with the idea of an American domestic lawyer writing the employment contracts for his company’s China WFOE. That post, China Employment Contracts: Do Not Try This At Home, listed out a few of the more important things I was pretty certain this lawyer would miss in his contracts.

In response to that post, a reader emailed me to  ask what “really” goes into a Chinese employment contract. This post responds to that email and highlights what is “really” involved in drafting China employment contracts. The below is the email we send to clients that retain us to draft China employment contracts for their China WFOE, setting out the initial information we need to get started on drafting their employee contracts and Rules and Regulations.

I. Basic Information

Please provide the following information:

A.   Name and registered address of the WFOE, in English and Chinese.

B.   A one paragraph statement of: 1) the number of employees, 2) the duties and title of each employee, 3) the pay scale/rate for each employee, and 4) the nationality of each employee.

C.    The hours that you expect each employee to work. Standard working hours in China follow a 40-hour workweek: 8 hours a day and 5 days a week. If you anticipate any significant exceptions to that, please explain.

D.   The name and title of the person who will execute the employee agreements on behalf of the WFOE. Usually, the WFOE’s general manager will execute all employee agreements except for his or her own, which will be executed by the WFOE’s legal representative

II. Employee-Specific Information

A.   Required Information

For each employee, please provide the following information:

a.    The employee’s name and title, in English and Chinese.

b.    The employee’s registered permanent address, in English and Chinese.

c.    The employee’s contact address (if different from the above), in English and Chinese.

d.    The employee’s phone number and email address.

e.    The employee’s national ID number (身份证号码). I recommend getting a scan of the national ID card itself (身份证).

f.     The employee’s gender, citizenship, and date of birth.

g.    The employee’s place of work, if different from the WFOE address, in both English and Chinese.

h.    The term of the employment agreement, including the start date.

i.      The amount of wages during the standard employment term, converted into a monthly wage.

j.      The date that wages will be paid during the standard employment term.

k.     Whether the employee will be paid on a 12-month or 13-month schedule (more on this below).

l.      The term of the probation period.

m.   The wages during the probation period, converted into a monthly wage.

n.    Whether you would like to explore the possibility of an alternative working hours system (that is, an alternative to the standard of 5 days/week, 8 hours/day). The availability of this option will depend on the employee’s title and job duties.

o.    Whether you would like to explore the possibility of a non-compete agreement (more on this below).

p.    Whether you would like to have an education reimbursement agreement (more on this below).

q.    The employee’s relevant bank account information.

B.  Employment Term and Probation Period. The term of the probation period is roughly proportional to the term of the agreement. The maximum probation period is 6 months. To have a maximum-length probation period, an employment agreement must have a term of at least 3 years. At the end of the probation period, you can terminate the employee with no further issues. At the end of the initial employment term, you can terminate the employee and pay severance or you can sign the employee to another agreement.

We will need to confirm with the labor bureau in your specific city, but in most Chinese cities, once you have engaged the employee for two terms, once the third term starts, you are required to retain the employee up to mandatory retirement age. Termination during that period requires good cause.

The probation period should be treated seriously and no employee should be taken beyond the probation period unless you are certain that he or she will work out under the terms of this employee agreement. For new employees, we generally recommend a term of three years and a probation period of six months. Many of our foreign clients choose to do an initial term of only one year, and most end up regretting that decision.

C.    Monthly Salary. As noted above, you will need to convert each employee’s annual salary into a monthly wage. In many parts of China, it is customary to pay the salary on a 13-month basis, with the final month paid just prior to the Chinese New Year. Either approach is acceptable, but it is important to state clearly in the contract what you will be doing. Many employees expect a “New Year’s Bonus” and failure to pay it (if expected) can cause problems. This expectation varies by the industry (manufacturing vs. office work), the type of employees (blue collar vs. white collar), and the geographic location (north vs. south). Note that paying on a 13-month basis does not obligate you to pay more in salary; you would just divide the annual salary by 13 instead of 12.

III. Documents To Be Drafted

Our standard employment package includes the following documents:

– A.   Universal Documents

a.    Labor Contract. The employment agreement to be used with all employees, with different options selected with respect to the employee’s working location, the availability of alternative working hours systems, the length of the probation period, and the term of the agreement itself.

Because the employment rules vary from city to city in China. We will work with you and/or your HR department to go over the above issues and determine how to tailor the initial set of agreements.

b.    Trade Secrecy and Intellectual Property Protection Agreement. Self-explanatory, but tailored for use in China. We can further customize it if you have specific confidentiality policies or procedures.

c.    Rules and Regulations. This is a long and complex document that is basically a handbook on Chinese labor law. China is not an at-will employment jurisdiction. Employees are employed subject to contract and can be terminated only if they violate that contract. The rules and regulations set out the full set of terms that govern the employment relationship. Most of the content in this document is required by Chinese law and is therefore not optional. We can do some customization of this document, but not much.

d.    Confirmation of Receipt. A one-page document stating that the employee has received and understood the contents of the Rules and Regulations.

– B.  Optional Documents

a.    Non-competition Agreement. Chinese law allows for non-compete agreements, but the terms are restricted as follows:

  • As a general rule, only management staff may be covered.
  • The term is limited to two years.
  • Compensation must be paid to the employee during the entire term of restriction. The amount of compensation is not defined by law, but many cities have de facto rules.

Let us know if you are interested in non-competition agreements for any of your employees.

b.    Education Reimbursement Agreement. This agreement would be applicable in the following scenario: you pay major expenses for an employee’s employment-related education or training, but after the training is complete, the employee quits. In such a situation, you can require that the employee reimburse your company for the education expenses. To do this, however, you must first have in place a written education reimbursement agreement.

Let us know if you are interested in education reimbursement agreements for any of your employees.

Note that though our employment agreements contain basic anti-corruption language, they are not a substitute for full-fledged China  compliance program. If you do not already have such a program in place for China, we strongly advise that we also provide you with an anti-corruption manual to give to your employees, as well as anti-corruption training.

China’s Film Industry Online, Part I

Posted in China Film Industry

China’s theatrical box office market may be huge but the ancillary revenues (i.e. non-box office) are still relatively small in China. This is the first in a series of posts on developments in China’s digital ancillaries in a lead-up to the US-China Film Summit, which I will be attending along with a number of other lawyers from my firm and a talk I will be giving on China’s film industry before the Beverly Hills Bar Association on November 3. In this first post, I seek to provide a frame of reference for a discussion of ancillaries in China.

In recent years, a market-based Chinese film industry has started to emerge from the shadows of the older, centralized and state-funded model. As Professor Eric Priest pointed out recently in Copyright Extremophiles, this may even be contributing to an expansion of acceptable content for China’s censors. Censorship aside, we are seeing a growing foreign interest in developing Chinese programs intended predominantly or solely for the Chinese market. This desire to produce content for the Chinese market brings with it an appreciation of the need for intensive co-development of programs with Chinese creatives from the very outset; not, as is too often the case, using a script written in English and hastily translated into Chinese before a trip to Beijing. On the flip side, China is increasingly recognizing and coveting Hollywood’s expertise and finesse accumulated over more than 100 years. All of these things are driving co-development deals with a view to producing content with both Chinese domestic appeal and international flare.

Whether they are producing programs for the domestic market alone or Hollywood blockbusters to be imported under China’s 34-picture quota, copyright stakeholders, both foreign and Chinese, must keep an eye on all revenue streams available in China, not just the box office.

China’s ancillary revenues have been small by world standards. Just how small is hard to say. According to Liu Chi, in a recent and comprehensive paper entitled Challenges for the Chinese Film Industry after 2013, ancillaries made up only 10% of China’s total 2013 film business revenue, with 90% of revenue coming from box office. According to the MPAA, China’s 2013 box office was $3.6 billion. That would mean ancillaries were worth about 400 million out of a total Chinese market of about $4 billion.  Compare this to the US, where ancillaries account for most of a film’s revenue. Again, precise figures are hard to come by but ancillaries are sometimes taken as accounting for around 75% of revenue, with box office representing the remaining 25%. According to the MPAA, in 2013 the box office in the US and Canada was $10.9 billion. That would mean that ancillaries were worth $32.7 billion in a total North American market of around $43.6 billion. China’s 2013 box office grew 27% on the previous year while North America’s grew only 1%. There is vast scope for further growth in China’s box office and, with it, the ancillaries market.

Despite the dominance of China’s box office as a source of film revenue, some of the most interesting developments here in China are occurring in areas of ancillary exploitation, particularly digital home entertainment. These developments are even more striking given China’s woeful internet speeds — China’s average internet connection speed is ranked 79th globally and 10th in the Asia Pacific Region. See Make Way for the Mobile Shopper, by Devon LaBuik.

My next posts in this series will explore these developments.

China Employment Contracts: Do Not Try This At Home

Posted in Legal News

Had a conversation the other day with the in-house counsel for a relatively small American company. This lawyer thanked me for the China Law Blog and said that he had used it to write his company’s employee contracts. I was stunned by this statement and to avoid me saying something I might later regret, I immediately changed the subject.

I have by now calmed down just barely enough to write this post.

Here is a list of the crazy risks this lawyer took by writing his company’s own China employment contracts, even though he clearly is not himself a China lawyer, nor does he have any real experience with China law:

1. He speaks no Chinese so whatever he wrote would need to be translated into Chinese (I am going to assume that he at least did this). Unless he hired an experienced Chinese employment lawyer to do the translation, the odds that the translation will actually work are about 10,000 to 1.

2. I wish that I had asked him whether he also drafted the Rules and Regulations for his company’s China employees. A China employment contract without Rules and Regulations is of virtually no value for a company. I’m betting that he did not.

3. Did his employment contract and Rules and Regulations include provisions regarding the FCPA, China anti-corruption laws, expense reimbursements, education reimbursements, housing reimbursements, overtime, vacations, bonuses, trade secrets, non-competes, etc.? If they did, what in the world made this lawyer think that he knew how any of these are supposed to work in China?

4. Did he check with the local labor bureau to determine its position on various employment law matters? These labor bureaus are all over the map on countless employment issues and the positions of these labor bureaus truly matters. I am virtually certain he did not.

One of our China-based lawyers, Grace Yang, spends several hours each week keeping up to date with China’s employment laws and regulations and maintaining strong contacts with local labor bureaus throughout China. She has conveyed a small portion of that knowledge via the following China employment law posts:

Please understand that your reading all of the above posts will not give you the knowledge you need to draft a China employee contract, just as reading a medical book or two does not qualify you to perform surgery.

China Copyrights: China Piracy Means Whack A Mole

Posted in Legal News, Recommended Reading

Just read a really good, really comprehensive article on China copyright law with a focus on the music industry, entitled, Whack-A-Mole: A Brief History of Music Piracy in China.

Its conclusion says it all, but I certainly suggest you read the whole thing:

In short, piracy’s root causes evade simple explanations and solutions, and piracy remains a serious obstacle to the successful monetisation of creative works in China. For their part, copyright owners in China can do little more than focus on the pragmatics of how to subsist as “copyright extremophiles,” surviving in inhospitable conditions.

 If you are interested in China IP law, I recommend that you read it.

Teaching English In China: Be Careful

Posted in China Business, Legal News

Every few weeks one of our China lawyers gets a somewhat frantic email from an English teacher in China and we hate them. We hate them because the English teacher is invariably in some terrible situation and the only way we can help is to spend massive amounts of attorney time on their case, which makes no sense for anyone.

Our typical email comes from an English teacher who has not been paid for three months and then gets fired and whose school refuses to give them the papers necessary for the teacher to move on to another job, unless and until the teacher signs an agreement settling back wages for pennies (and that’s if the teacher is lucky) on the dollar.

The teacher is usually writing to see whether they have “a good case” and to see what they “should do.”

Our response is usually something like the following:

If what you say is true and you performed three months of work and you have not been paid for that, then yes you have a good case, at least legally. But for you to collect on your back wages you will need to hire and probably pay a local attorney to assist you. That attorney will likely write a demand letter to your former employer, demanding it pay your back wages and handle all necessary paperwork to allow you to get another job right away. But the problem with this is that your employer will probably ignore the demand letter and that then means that you will almost certainly need to sue to get any recourse and by the time you sue and get your case heard, you will be sitting in China with no job and no real ability to get a job and I am guessing that is not acceptable to you. So probably the best thing for you would be to do whatever you can to get your ex-employer to complete your paperwork as quickly as possible. I suggest you retain a Chinese lawyer for this as it does not make sense for you to pay American lawyer rates to have our China attorneys work this case for you.

The above situation is by far the most common. The second most common is something along the following lines (this is an amalgamation of various emails we have received):

I am seeking your advice regarding the following situation.

I teach after school English to elementary students in ______[Chinese city].

Yesterday, I was taken to the police station with two coworkers and we were questioned and told that we were working illegally. Though I have a Z visa, it turns out that it is not under the right company name and it says that I do one thing though I am doing another.

I clarified with the police officer that returning to work the next day would be illegal and they confirmed it.

That was followed by my company going and bearing gifts to the police and setting up a system whereby for future inspections the police will call ahead to give the company an opportunity to send its foreign staff away before the police come.

The fine was to be issued today and we were told that we did not have to go to the police, but a letter later in the day said we will go tomorrow. The company will cover the fine.

I had a long drawn out conversation with my bosses where they explained Chinese culture to me and in their words, “there is a legal written law and a social law and the legal law is antiquated and doesn’t work anymore so the social law functions to help people get what they need in society.”

I was assured by my company that it was safe to return to work and that no more trouble would come my way. I would not be surprised if this is true, but the ethics of it is driving me crazy.  Is this really how business is done in China or should I be seeking other employment?

Are there any legal companies in China or is this the norm? And when I look for another job how do I confirm whether my potential future employers are legit or not?  Is there a list of properly legal companies?

Our typical response to this sort of email is something like the following:

Your instincts are right. Your employer is violating Chinese law up and down and though it appears to have so far gotten away with it, that may not continue and if it does not, you might find yourself in a very unpleasant situation. It is almost always a really bad idea to be operating illegally in a foreign country and it seems that is what you are doing.

Bottom Line: Don’t take a job in China without first making sure that both your employer and your job will be on the up and up.

China’s Legal, Regulatory and Cultural Aspects: November 1 in Los Angeles

Posted in Events

On Saturday, November 1, University of Southern California’s Pharmacy School will be putting on a China event focused on medical related issues, entitled, “Exploring China: Legal, Regulatory and Cultural Aspects.” It will focus extensively on China medical issues and it will take place in PSC 108, at the School of Pharmacy, USC Health Sciences Campus, 1985 Zonal Avenue, in Los Angeles.

The following people will be speaking on the following topics:

  • Frances Richmond, PhD, Director of the Director, International Center for Regulatory Science, will give the welcome address.
  • Helen Niu, MD, PhD, from Allergan, will speak on China’s Role in the Biomedical Industry
  • Annie Yin, DBA, from Medtronic, will speak on Medical Device Regulation
  • Yang Cao, PhD, from China Pharmaceutical University, will speak on China’s Health System and Policy
  • Ni Yuan, MSC, from  China Pharmaceutical University, will speak on Medical Insurance System in China
  • Yingfeng Zhu, Evaluator, Shanghai FDA, will speak on Medical Device Registration
  • Gerald Loeb, MD, USC, will speak on Innovation and Start-Ups

And I will speak on The Practical Aspects of Chinese Law and also on Intellectual Property Considerations

There will then be a panel discussion at 4:00 p.m. and a networking dinner at 5:00 p.m., for which a separate registration is required. I spoke last year at USC and I am confident this is going to be a great event. Come one, come all. Click here.