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China’s Top 5 Business Law Trends For 2010*

Posted in Legal News

With few exceptions, the business law trends I see for China in 2010 are not all that different from what I would have seen last year or even the year before. The Chinese government’s primary goal is to stay in power (I think this is true of virtually all governments) and that goal usually drives the enactment and enforcement of its laws. The big, overarching trend I see for China in 2010 is its continuing to more strictly enforce its laws, particularly those that apply to business, and even more so those that apply to foreigners.

The Chinese government wants to satisfy its own citizens so as to maintain its own legitimacy and one of the best ways to do that is to show a desire to protect the citizenry against foreigners. China’s current economic strength is leading many in its government to believe China has little to no need for foreign investment and so I see law enforcement against foreigners continuing to increase.

I see the following five key things happening on China’s business law front in 2010:

1. China will step up even further its crackdown on foreigners in China violating its visa/immigration laws. If you lack an employee visa, you may be at risk.

2. China will increase its efforts to root out and shut down illegal and unregistered foreign businesses. I have seen ample evidence of this already happening in the last 3-6 months and I have no doubt this will continue. Providing jobs to Chinese citizens does not let you off the hook.

3. China will increase its tax collection efforts. This has been going on at a rapidly accelerating pace over the last six months or so. If your China operations are not making a healthy profit, do not be surprised if the government imputes healthy profits to it. In particular, the government will look very closely at your transfer pricing and in many cases it will not like what it sees.

4. China now sees itself as a full-fledged economic power and with that perception we can expect it will be stepping up its anti-monopoly monitoring of mergers and acquisitions. I predict China will seek to impose at least some conditions on all mergers and acquisitions that touch on China, if only just to show that it can.

5. The number of cases brought by employees and resolved in their favor will continue rapidly increasing. This will be particularly true with respect to foreign companies as this will be a great way for the government to show its willingness to protect its own.

* This is my December 31, 2009, post on Shanghaiist.

  • pt

    Amazing as always. Thanks.

  • http://www.jtnfa.com Jeff Cai

    Thanks for sharing your insights. An interesting question. Will the Ministry of Justice and its local branches across China step up efforts this year to enforce laws against foreign law firms in China who provide de facto China law advice instead of information about China legal environment. Many local firms already complain about loss of business to foreign law offices. Curious to know your thoughts on this.

  • http://newviewit.com Derek Hildenbrand

    After 5 years in Beijing I had enough of the government and left before the Olympics last year. It was pretty obvious back then that foreigners were starting to get the boot.
    Happy decision as I’m now sitting on the beach in Costa Rica running my internet businesses.
    China’s loss… I was dumping lots of money into the economy and had to take it somewhere else. It was nice to ride the growth wave up to the Olympics, but China’s days might be numbered with all the restrictions and nationalist policies against foreigners.
    From what I saw Chinese innovation, creativity, and management all need foreign talent because the locals just don’t get it.

  • Juliana

    It looks like you are going to turn out to be right on most if not all of these. Nice picks.

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  • Elizabeth Carter

    China has moved 80% in online industry. They used to do each and everything on internet, b2b marketplace are very popular in china as china produces large volume of products and so they improve their exports and profit.

  • Burton

    So far, so true, especially on your prediction on tax collection. It’s unbelievable to me how in just the last few years China has gone from not really collecting much in taxes to being a total bear on them. China has become a real country, at least in regards to foreign companies.

  • ssssss

    What are the trends for 2011?

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