China lawyerIn my first post, I discussed China’s efforts to build stronger economic ties with Mexico – and why Mexico should be clear-eyed about China’s motives. In my second post, I examined the current economic relationship between Mexico and China. In this post, I will discuss why the economic relationship between China and Mexico has made so little progress.

This entire post is in Spanish below.

At first blush, it is difficult to understand the disjunction between what has been said and what has actually been done. The two countries have signed an Integral Strategic Partnership, and China has explicitly offered its assistance should the Trump administration turn its back on Mexico. The Chinese ambassador to Mexico has claimed the two countries’ relationship is “better than ever,” but trade and investment levels are pitifully low, and for a variety of reasons those numbers are unlikely to change.

One huge reason Mexico’s relationship with China is unlikely to change is the existence – and proximity – of the United States. The United States has a huge (and growing) Hispanic population eager to consume a vast array of Mexican exports, whereas Chinese consumers are only interested in a few select Mexican products. Just look at the numbers. Mexico’s annual exports are worth $400 billion, and $291 billion of that goes to the United States. Only $8 billion goes to China. The American government has not exactly welcomed China’s attempts to establish closer ties with Mexico, and there are strong rumors Washington played a big role behind the scenes in the cancellation of the Mexico City-Queretaro rail and the Dragon Mart Cancun projects. Even if the Mexican and U.S. governments are not currently best of friends, our two countries will always be neighbors.

It is also true that Mexico and China have little economic synergy. China is Mexico’s direct competitor in the United States and for many of the same products. According to a study produced by UNAM, the University of California, Berkeley and the University of Miami, from 2000-2011 both the U.S. and Mexico suffered substantial losses in their respective export markets in the NAFTA region. The study identified 52 sectors in Mexico in which the U.S. was losing market share and China was gaining, creating the inference that Mexico was making efficiency gains and had become more competitive in U.S. markets. However, the study found that Mexico was also losing market share in the U.S. in those same 52 sectors. In other words, China was outcompeting both countries — in part because of its advantage in manpower and its government subsidies.

The disconnects are on both sides. Mexico has failed to attract meaningful investment from China and instead focuses on Chinese tourism. Chinese companies have made little effort to do anything in Mexico beyond selling products to Mexican consumers. Mexico has failed to take advantage of China as an export market and has fallen back on sending China non-value added items such as tequila, pork, and fruit. The Chinese government does not make it easy for Mexican companies to enter the Chinese market. And China’s economic model depends on being able to run huge trade surpluses. Combine with this the devaluation of the peso and the rise in gas prices, and the result has been inflation that makes Mexican exports less attractive overseas. According to the Inter-American Development Bank, Mexico’s exports fell 4% in 2016.

Part of the problem has nothing to do with China and everything to do with Mexico. 99.8% of all businesses in Mexico are small and medium-sized enterprises (SMEs) and the vast majority of them are unsophisticated companies, with little interest in or knowledge of how to operate on an international scale. When these companies do seek to engage with China, some (or all) of the following problems arise:

  • lack of due diligence about the Chinese market and possible business partners
  • poorly implemented corporate governance structures
  • failure to appreciate the paramount importance of IP protection, evidenced most often by discovering too late that a third party in China has registered “their” trademark
  • lack of cultural and language proficiency on the part of Mexican staff, leading to an inability to deal with Chinese authorities
  • inappropriate delegation of all responsibility for Chinese operations to poorly supervised Chinese staff
  • lack of transactional oversight due to (relatively) low dollar values

And though more and more Mexican nationals are going to China for education and training, few Mexican companies know what to do with them upon their return to Mexico.

Perhaps the biggest problem Mexican companies face in China – and frankly, the same problem bedevils Chinese companies going abroad – is that they think they can operate overseas the same way they do at home. I still remember the first matter I handled with my company: a Mexican enterprise was operating in China, but had no idea about their legal status in China or whether they were operating legally. Everything from company formation to payroll had been delegated to their Chinese accountant, and as a result they had hired staff without any written contracts, they were not contributing to social insurance or housing funds, and they were paying everyone in cash. It was just a matter of time before they were found out and had the book thrown at them.

Finally, a nontrivial number of Mexicans (and some Chinese) consultants want Sino-Mexican relations to remain in this relatively primitive state, because this will allow these consultants to continue as “indispensable” founts of wisdom and knowledge in an uncertain world.

The one bright spot is the .02% of Mexican enterprises which are not SMEs. These enterprises are the huge multinational corporations known as multilatinas, and they are already operating in China as part of their global strategy. Some of them are already selling more goods in China than in the U.S., and to a one they plan to focus even more on the Middle Kingdom in the years to come. They would not be doing this if they weren’t already doing well in China. As global companies they consider themselves able to compete on the global stage, and you know what? They’re right.

In my concluding post, I’ll look to the future and specifically on how to improve the China-Mexico business relationship.

The above post is by Adrián Cisneros Aguilar. Adrian is the founder/CEO of Chevaya (驰亚), an Asia-Pacific internationalisation services company. Adrián has a Doctor of Laws from Shanghai Jiao Tong University and an LL.M. in International and Chinese Law from Wuhan University.

 

En mi primer post, analicé los esfuerzos de China para estrechar los lazos económicos con México – y las razones por las que México debe estar plenamente consciente de los motivos de China. En mi segundo post, examiné el estado actual de la relación económica bilateral. En este post, hablaré acerca de por qué dicha relación económica ha progresado tan poco.

A primera vista, es difícil comprender la desunión entre lo que se ha dicho y lo que realmente se ha hecho. Ambos países han firmado una Asociación Estratégica Integral, y China ha ofrecido expresamente su ayuda en caso de que la administración Trump le dé la espalda a México. El Embajador chino ante este país ha declarado que la relación entre los dos países está “en su mejor momento histórico.” No obstante, los niveles de comercio e inversión están lastimosamente bajos, y por varias razones resulta improbable que las cifras cambien.

Una poderosa razón por la cual es improbable que cambie el estado de la relación bilateral es la existencia –y cercanía- de los Estados Unidos. Este país tiene una enorme (y en aumento) población hispana deseosa de consumir una amplia gama de exportaciones mexicanas, mientras que el consumidor chino se interesa sólo en unos pocos productos mexicanos seleccionados. Basta echar un vistazo a las cifras: las exportaciones anuales de México alcanzan los $400 billones de dólares, de los cuales $291 billones van a la Unión Americana. Sólo $8 billones van a China. Además, el gobierno estadounidense no ha precisamente celebrado los intentos chinos para estrechar relaciones con México, y hay fuertes rumores de que Washington jugó un importante papel, tras bambalinas, en la cancelación de los proyectos del tren de alta velocidad CDMX-Querétaro y el Dragon Mart Cancún. Incluso si, actualmente, los gobiernos mexicano y estadounidense no son exactamente los mejores amigos, los dos países serán siempre vecinos.

Cierto es también que México y China presentan muy poca sinergia económica. China es competidor directo de México en EEUU y, en muchos casos, en los mismos productos. De acuerdo con un estudio publicado por la UNAM, la Universidad de California, Berkeley y la Universidad de Miami, de 2000 a 2011, tanto EEUU como México sufrieron pérdidas substanciales en sus respectivos mercados de exportación, dentro de la región TLCAN. El estudio identificó 52 sectores en México, en los cuales los EEUU estaban perdiendo participación de mercado, mientras que China estaba ganando. Esto llevó a suponer que México estaba generando aumentos a la eficiencia económica y se había vuelto más competitivo en el mercado estadounidense. Sin embargo, el estudio también halló que México estaba perdiendo participación en el mercado estadounidense en esos mismos 52 sectores. Dicho de otro modo, China estaba desplazando a ambos países – en parte debido a sus ventajas comparativas en mano de obra y subsidios gubernamentales.

Pero los desfasamientos con la realidad provienen de ambos lados. México no ha logrado atraer inversiones significativas de China y en cambio se concentra en el turismo chino. Las empresas chinas poco esfuerzo han hecho para hacer algo en México más allá de vender productos a los consumidores mexicanos. México no ha podido aprovechar a China como un mercado de exportación, contentándose con el envío de artículos sin valor agregado tales como el tequila, la carne de cerdo y las frutas. El gobierno chino no facilita que las empresas mexicanas penetren el mercado chino. Y el modelo económico de China depende de lograr grandes superávits comerciales. Combinemos esto con la devaluación del peso y el alza de los precios de la gasolina, y tenemos una inflación que ha hecho que las exportaciones mexicanas sean menos atractivas en el extranjero. Según el Banco Interamericano de Desarrollo, dichas exportaciones cayeron un 4% en 2016.

Parte del problema no tiene nada que ver con China y sí mucho que ver con México. 99.8% de todos los negocios en México son pequeñas y medianas empresas (PyMEs) y la gran mayoría de ellas son poco sofisticadas, con poco interés o conocimiento acerca de cómo operar a escala internacional. Y cuando resulta que estas empresas buscan entrar en contacto con China, aparecen algunos de los siguientes problemas (o todos):

· Una falta de due diligence con respecto al mercado chino y los posibles socios en el país.

· Estructuras de gobierno corporativo inexistentes o mal implementadas.

· Una inhabilidad para apreciar la importancia fundamental de la protección de la propiedad intelectual, frecuentemente evidenciada en el descubrimiento tardío de que un tercero en China ha registrado ya “su” marca.

· Falta de competencias culturales y lingüísticas por parte del personal mexicano, lo que lleva a una inhabilidad para tratar con las autoridades chinas.

· Una delegación inapropiada de toda la responsabilidad de las operaciones en China a personal local mal o no supervisado.

· Desatención en la implementación de estrategias por parte del gobierno y despachos especializados, debido al bajo monto de las transacciones, en comparación con aquéllas de otros países.

Y aunque más y más mexicanos están yendo a China en busca de educación y capacitación, pocas empresas mexicanas saben qué hacer con ellos a su regreso al país.

Ahora, quizá el mayor problema que enfrentan las empresas mexicanas en China -que, francamente, es el mismo problema que aqueja a las empresas chinas que salen- es que piensan que pueden operar en el extranjero de la misma manera que lo hacen en casa. Aún recuerdo el primer asunto que manejé con mi empresa: una empresa mexicana operaba en China, pero no tenía ni idea de su situación jurídica en China o de si operaban legalmente. Todo, desde la constitución de la empresa hasta la nómina, había sido delegado a su contadora china y, como resultado, habían contratado personal sin contratos por escrito, no contribuían al seguro social o de vivienda chinos, y pagaban a todos en efectivo. Era sólo cuestión de tiempo antes de que fueran descubiertos y sancionados severamente.

Finalmente, no pocos consultores mexicanos (y algunos chinos) están muy interesados en que la relación bilateral permanezca en este estado relativamente primitivo, porque esto permitirá que dichos consultores continúen como fuentes “imprescindibles” de sabiduría y conocimiento en un mundo incierto.

El lado positivo de todo esto es el .02% de las empresas mexicanas que no son PyMEs. Estas empresas son las grandes multinacionales conocidas como multilatinas, y ya están operando en China como parte de su estrategia global. Algunas de ellas ya venden más en China que en los Estados Unidos, y hasta planean enfocarse aún más en el Reino Medio (China) en los próximos años. No estarían haciendo esto si no estuvieran ya teniendo éxito en dicho país. Como las grandes multinacionales que son, se consideran capaces de competir en el escenario global. Y, ¿saben qué? Tienen razón.

En mi último post, echaré una mirada al futuro. Específicamente, a cómo mejorar la relación económica y de negocios de México y China.

Este post fue escrito por Adrián Cisneros Aguilar. Adrián es el fundador y Director General de Chevaya (驰亚), una empresa de servicios de internacionalización para Asia-Pacífico. Adrián es Doctor en Derecho por la Universidad Jiao Tong de Shanghái y Maestro en Derecho Internacional y Chino por la Universidad de Wuhan.

China AttorneysBecause of this blog, our China lawyers get a fairly steady stream of China law questions from readers, mostly via emails but occasionally via blog comments as well. If we were to conduct research on all the questions we get asked and then comprehensively answer them, we would become overwhelmed. So what we usually do is provide a super fast general answer and, when it is easy to do so, a link or two to a blog post that may provide some additional guidance. We figure we might as well post some of these on here as well. On Fridays, like today.

I came across your blog while researching employment contracts in China. Is there a standard amount of notice employees are legally required to give their employer when breaking a contract in China, or does it depend on the company itself? Also if I am going to give less time than is legally required, is it standard to pay for those days to exit the contract professionally? And is it standard to give the full amount of time or even more?

You are asking essentially two questions. One is a social/employment/morale/reputational one and the other is a legal one. We don’t know the answer to the question of how much time you should give in your particular industry or locale (especially since we do not even know your industry or your locale), so we would urge you to ask around so as not to harm your future employment chances in China (and if yours is a small industry, perhaps worldwide as well). As for the legal side, it should be whatever the employment contract says, so long as the applicable national, provincial, or local laws do not override that, which any one or more of these very well might. I urge you to read our post, China Employment Law: Local and Not So Simple. Unlike in most countries, it is not uncommon for China employers to sue an employee who fails to provide the legally required notice for leaving, so it is generally a good idea either to give the full notice that is legally required, or reach a written agreement with your employer letting you off the hook (probably by your paying money) for not doing so.

 

Myanmar Thailand VietnamRobert Walsh, sometime Seattle resident and long-time friend of our law firm (we worked on a number of China deals together and we — Dan and Steve — met up with him on our last trip to Myanmar), has spent the last four years in Myanmar, where he operates a vibrant business consultancy. Robert is fluent in Chinese and Korean and, amazingly enough, Burmese (multiple dialects), having learned Burmese while working in the U.S. Embassy in Yangon many years ago.

Robert has been sending us email updates from Myanmar for some time and we post some of them on here. Back in 2014, it was Myanmar: Open For Business? and in 2013, it was Myanmar Foreign Investment. Difficult And Expensive, But Opportunities Are There. In our 2013 post I mentioned that my law firm had “been involved in a few Myanmar matters, but truth be told, Myanmar is a difficult place in which to do business and many of the companies going there are bigger companies mostly looking to get in now and make money later. In the last year.” Since that time, our Myanmar work has actually shrunk as interest in Myanmar by SMEs has greatly waned and their non-China Asia focus these days seems to be more on Thailand and Vietnam.

It was nevertheless great to get a bolt out of the blue from Robert this week in the form of a brand new Myanmar update, set forth below.

 

4 years water is under the bridge since we opened up shop in Rangoon.

A bunch of things have changed:

-Sanctions were relaxed, then finally revoked in toto back in October of last year. Now any foreign company that desires to do so can work with any of the formerly blacklisted military crony companies, jade/gems barons, or groups associated with narcotics trafficking. We’re seeing indications that this is happening already.

-Millions more cars on the road, newer Japanese for the most part, but Korean cars have moved in as well, and offer financing. Ford and Chevy are here with local or regional partners; not selling a lot.

-Supply of electricity has gotten steadily better, but this was achieved by a series of band-aid solutions using quickly built gas turbine or heavy fuel oil facilities.

-More places to stay, more restaurants for rich white people. Prices for hotels and rents on apartments have eased up now that supply roughly equals or exceeds demand.

-The November 2015 elections went off without a hitch, with the National League for Democracy (NLD) taking the lion’s share of seats. Daw Aung San Suu Kyi was not permitted to become president, but loopholes were found to allow her an equally powerful position. The finder of that set of loopholes, U Ko Ni, NLD’s senior lawyer, was gunned down outside the arrivals hall at Mingaladon airport last Sunday (January 29, 2017).

-The American Chamber of Commerce has a Myanmar chapter with over 100 members, but I’d say less than a dozen are really active. Sanctions or none, American business has not shown a tremendous interest in this place. Oil & Gas are here, but their presence and local footprint is no larger than it has to be to administer the constellation of service companies that follow in their wake. The only American manufacturer to date is Ball Corp, and they’re here just to make cans for Coke. Coke came in back in 2012 by acquiring a local soft drinks bottler.

-Japanese and Korean business are still by far the biggest foreign presence. Our best guess is that more than 3000 Korean families are here, not all coming out of Chaebol companies, most doing business on their own accounts. If we exclude Americans working for the embassy and USAID contractors, the number of hard-core American expats is probably less than 50.

-The largest sector in which American and European business is represented is what I and others term the “Aid and Development Industrial Complex”. An emerging sub-sector is the “Peace Process Participation Industrial Complex,” which attracts many nicely paid foreign consultants.

The lyrics are different, but the tune’s the same:

-Although the government has supposedly changed hands to civilians, many upper-level ministries out in the provinces don’t seem to have gotten the word, especially if they are headed by ex- (or not so ex-) military people. The farther away from the Naypyidaw flagpole, the more clearly this is evident.

-Laws may pass, but implementing instructions are slow to make it down to where the rubber meets the road.

-Doing anything land intensive requires one take up the diligent study of various land documents issued to owners over the past 160 years. In the fringe border areas, especially where there has been a lot of fighting since independence, land documents are especially puzzling.

-The IFC/World Bank has hosted a “Myanmar Business Forum” (MBF) with eight working groups along industrial sector lines. Its aim was to engage lawmakers and ministries to draft and pass law through the Union of Myanmar Federation of Chambers of Commerce and Industry (UMFCCI). I sat on the agricultural/forestry working group and we were actually able to get things done, in terms of getting implementing instructions for laws passed as long as 20 years ago. The most active working groups were for anything related to land tenure or hotels/tourism. Missing or poorly represented were agricultural finance and inputs (fertilizers, agrochemicals).

– A second set of refinements to the Foreign Investment Laws were passed, but they do not help much. It still costs a lot of money to set up a business here. We have been doing a lot of work setting up companies as rep offices, once we were absolutely sure what the rules were, and what a rep office could/could not do. Most of our clients want our help in establishing a presence, opening a local banking account and administering expat immigration, and setting up shop. NGO’s are our biggest customers, as they now realize that registration as an NGO (as opposed to just a normal for profit company) rarely offers them anything and indeed adds restrictions on their movements and activities — in other words, not so different from China).

-Right now a fairly nasty set of visa and foreigners laws is up for passage. If pass as written, I think many foreigners will stay away or leave if already here. As it stands, many of the laws are currently on the books, and few expats are compliant because the government does not strictly enforce them. Should the government wish to do so, it can deport anyone and everyone who is not compliant, and do so at a moment’s notice. And we do see the government deporting foreigners who do things that excite their ire, usually for political or religious reasons, and occasionally for criminal behavior.

-Like it or not, there is plenty of unrest in this country, and large swathes of Kachin and Shan state are low-boil combat zones; the Kachin Independence Army (KIA) is still far from considering entering the National Ceasefire Agreement. A number of ethnic armed groups have signed the NCA and are now lapping up greenmail money and other territorial benefits, but the majority of them have not in fact been combat effective for a long time, decades in most cases. The KIA has formed a 5-member alliance of other groups that are equally belligerent and unwilling to sign the NCA under the government’s terms.

-In Rakhine state the slow-motion train wreck that is the Rohingya situation shows no sign of resolution anytime soon, and if anything, Trump’s election and anti-Muslim rhetoric has reduced inhibitions on the Burmese taking harsher action to force these people back into Bangladesh. Incidentally, slain NLD lawyer U Ko Ni was himself a Muslim, albeit from a family with generations-back residence in this country. The American embassy used to be pretty shrill in denouncing bad behavior towards the Rohingya, but since Trump’s election the United States has not said so much.

 

China lawyerIn my last post, I discussed China’s efforts to build stronger economic ties with Mexico – and why Mexico should be clear-eyed about China’s motives. In this post, I will take a closer look at the current economic relationship between Mexico and China.

This entire post is in Spanish below.

If you look at the numerous agreements between Mexico and China and all the announcements of impending business deals, you would think that China and Mexico have become major trading partners. In 2009, the two countries signed a bilateral investment treaty. In 2013, the two countries signed an Integral Strategic Partnership, and have since signed several ancillary agreements covering matters from consular protection and judicial assistance to securing access to the Chinese market for Mexican food products like avocado, pork, corn, and tequila. Meanwhile, China has been quite upfront about its broader regional strategy in Latin America to be a true economic partner for all countries.

But the numbers tell a different story. As of 2015, Mexico was running a trade deficit with China of more than $65 billion. From 1980 through 2016, the sum total of all Chinese investment in Mexico was $421.6 million – less than 0.1% of all FDI. Here’s a telling example: in 2014, the state-owned Mexican oil company PEMEX and three Chinese state-owned enterprise made a big splash by announcing a $5 billion Sino-Mex Energy Fund. To date, the fund has not announced an investment in a single project.

Two projects announced last year suggest the tide may be turning: the China Offshore Oil Corporation (a division of CNOOC) won two high-profile bids to extract oil from the Gulf of Mexico, and Beijing Automotive Industry Corporation, which already had a truck assembly plant in Veracruz, announced plans to increase sales in Mexico and perhaps build another plant. But are these projects signs of a new era of investment, or exceptions that prove the rule?

The Integral Strategic Partnership establishes a framework to strengthen cooperation between China and Mexico, and to resolve differences when conflicts arise. Of late, there’s been far more of the latter, with two particularly high-profile economic debacles. First, the Mexican government cancelled public bidding on the construction of the Mexico City-Queretaro high-speed railway, after initially awarding the bid to a Chinese group. Then the Mexican government imposed a $1.5 million fine and cancelled a huge Chinese mall development, the Dragon Mart Cancun, after finding the development was causing significant environmental damage. In the wake of these cancellations, more than a few Chinese colleagues and professors asked me whether Mexico and its president were truly friends of their country.

Meanwhile, Chinese money is pouring into other Latin American countries. According to the Latin America and Caribbean Economic Commission, China’s loans “have become the most important source of foreign financing for many Latin American countries, including Argentina, Brazil, Ecuador and Venezuela, surpassing international financial institutions already present in the region.”

The mismatch between rhetoric and reality in Mexico is particularly apparent when you consider that Chinese financing typically goes toward resource extraction, transportation infrastructure, and energy projects, which are all closely aligned with the Mexican government’s stated development plans. Something is going on, but it’s not a true economic partnership.

In my next post, I will discuss why the economic relationship between China and Mexico has made so little progress.

 

The above post is by Adrián Cisneros Aguilar. Adrian is the founder/CEO of Chevaya (驰亚), an Asia-Pacific internationalisation services company. Adrián has a Doctor of Laws from Shanghai Jiao Tong University and an LL.M. in International and Chinese Law from Wuhan University.

 

En el post anterior, hablé sobre los esfuerzos de China para construir lazos económicos más fuertes con México -y por qué México debería pensar claramente acerca de los motivos que China tiene para ello. En este post, echaré un vistazo más a detalle al estado actual de la relación económica Sino-mexicana.

Si uno analiza los numerosos acuerdos en vigor entre México y China y todos los anuncios de business deals inminentes, uno pensaría que los dos países se han vuelto importantes socios comerciales. En 2009, ambos países firmaron un Acuerdo de Promoción y Protección Recíproca de Inversiones. En 2013, firmaron un documento elevando la relación a Asociación Estratégica Integral, celebrando desde entonces numerosos acuerdos accesorios que cubren desde la protección consular y la asistencia jurídica mutua al acceso de productos agroalimentarios mexicanos al mercado chino, tales como aguacate, carne de cerdo, maíz y tequila. Mientras tanto, China ha sido bastante abierta acerca de su estrategia regional más amplia para América Latina, y que consiste en ser un verdadero socio económico para todos los países.

Las cifras, sin embargo, cuentan una historia diferente. A 2015, México tenía ya un déficit comercial con China de más de 65 billones de dólares. De 1990 al 2016, el total acumulado de la inversión directa china en México era de 421.6 mdd – menos del 0.1% de toda la Inversión Extranjera Directa (IED) recibida por nuestro país en el mismo periodo. He aquí un ejemplo revelador de lo que digo: en 2014, la petrolera estatal mexicana PEMEX y tres empresas estatales chinas anunciaron con bombo y platillo la creación de un Fondo de Energía Sino-mexicano de 5 billones de dólares. Hasta la fecha, el fondo no ha anunciado una inversión en un solo proyecto.

Dos proyectos anunciados el año pasado sugieren que la tendencia pueda estar cambiando: la China Offshore Oil Corporation (una parte relacionada de la China National Offshore Corp.) ganó dos publicitadas licitaciones para extraer petróleo del Golfo de México, mientras que la Beijing Automotive Industry Corporation, que ya contaba con una planta de ensamble en Veracruz, anunció planes para incrementar sus ventas en el país y quizá hasta construir una nueva planta. Hace sólo una semana, se anunciaba la construcción de una planta de JAC Motors, en el Estado de Hidalgo, financiada en parte por el magnate Carlos Slim.

La Asociación Estratégica Integral establece un marco para el fortalecimiento de la cooperación bilateral, así como para resolver diferencias en caso de conflicto. En fechas recientes, ha habido bastante más de estas últimas, con dos muy sonadas debacles económicas. La primera fue la cancelación, por parte del gobierno mexicano, de la licitación para la construcción del tren de alta velocidad CDMX-Querétaro, tras haber sido dicha licitación adjudicada a un conglomerado chino. Luego, el gobierno mexicano canceló un enorme desarrollo comercial, el Dragon Mart Cancún, de ribete imponiendo una multa de 1.5 mdd, tras encontrar que el proyecto estaba causando un daño medioambiental significativo. A raíz de estas cancelaciones, varios colegas y profesores chinos me preguntaron si México y su presidente eran verdaderamente amigos de su país.

Mientras tanto, el dinero de China está llegando a raudales a otros países latinoamericanos. De acuerdo con la Comisión Económica para América Latina y el Caribe (Cepal), los préstamos chinos se han convertido en la fuente más importante de financiamiento externo para muchos países de América Latina, incluyendo Argentina, Brasil, Ecuador y Venezuela, y sobrepasando a instituciones financieras internacionales bien consolidadas en la región.

La enorme discrepancia entre retórica y realidad en México es particularmente evidente cuando se considera que el financiamiento chino generalmente se destina a proyectos de extracción de recursos, infraestructura de transporte y energía, todos ellos alineados con el Plan Nacional de Desarrollo del gobierno mexicano. Sí, es claro que está ocurriendo algo, mas no se trata de una verdadera asociación económica.

En mi próximo post, hablaré acerca de los motivos por los cuales China y México han avanzado tan poco en su relación económica bilateral.

 

Adrián es fundador/Director Gral. de Chevaya (驰亚), empresa de servicios de internacionalización en Asia-Pacífico. Con experiencia práctica y teórica en China, Adrián es Doctor en Derecho por la Universidad Jiaotong de Shanghái y Maestro en Derecho Internacional y Chino por la Universidad de Wuhan, siendo el primer mexicano en obtener estos grados en China

China and MexicoThe following is a guest post by Adrián Cisneros Aguilar.* A Spanish language translation is directly below the English version.

Mexico and China have never had particularly close economic ties. But recent comments by Qiu Xiaoqi, China’s Ambassador to Mexico, suggest things may be about to change. After referencing President Trump’s threat to reject the TPP and renegotiate NAFTA, Ambassador Qiu stated that China would be Mexico’s “ally in Asia” and was “willing to redouble efforts … to boost the development of relationships in the coming years.” These statements followed Chinese President Xi Jinping presenting the China-led Regional Comprehensive Economic Partnership (RCEP) as an alternative to TPP, and making state visits to Ecuador, Peru and Chile.

Mexican media seized upon Ambassador Qiu’s statements as evidence of a new era of Sino-Mexican friendship, particularly in light of the perceived hostility toward Mexico from President Trump. So-called “China consultants” in Mexico have also tried to capitalize, promoting their events with slogans such as: “if Trump erects a wall, China extends you a bridge.” Chinese oil companies have made no secret of their desire to participate in Mexico’s petroleum industry. And meaningful high-level meetings are taking place between the Chinese and Mexican governments Last month, State Councillor Yang Jiechi, met with then-Minister of Foreign Relations Claudia Ruiz-Massieu to resolve lingering issues relating to ill-fated Chinese projects in Mexico such as the Mexico City-Queretaro high-speed railway and the Dragon Mart Cancun, and discuss the adoption of an ambitious joint action program. As a major Mexican newspaper pointed out: “everything points to a good flirtation between Mexico and China.”

In part, this flirtation is driven by Mexicans’ fear that Donald Trump may seriously curtail access to the U.S., their largest market. Even some of my most open-minded clients have started talking about closing their accounts in the US and including China as part of their international strategy. Regardless of whether they’ve previously done business with or in China.

I am of course bothered by the trajectory of current events in the United States, but at the same time I don’t see much clear thinking about what China really wants from Mexico, and whether the kinds of ties proposed by China are really strategically sound for Mexico. China’s recent statements unsettle me for the following reasons:

  1. They assume Mexico is desperate for a new trading partner to hedge against losing access to the U.S. economy; that is, without the U.S. the Mexican economy is doomed.
  2. They assume Mexico requires another country to be its protector. Our economy may not be a juggernaut, but neither is it in dire straits. Many of our recent problems stem from the dramatic devaluation of the Mexican peso versus the US dollar after the presidential election.
  3. They improperly frame the current debate as a choice between the US and China. I am a firm believer in regional integration, particularly with China and other Asia-Pacific countries, because I think it makes Mexican companies more productive and more competitive. But President Xi’s and Ambassador Qiu’s statement that Mexican companies ought to turn to China only because the US is closing is wrongheaded. It should be in Mexico’s interest to go to China regardless of what happens with the U.S.
  4. They play upon Mexico’s inability to think beyond absolute terms: everything is either a “threat” or an “opportunity.” A more rational approach accepts that every bilateral relationship has ups and downs. But when the Mexican government states that “whatever Mexico and China achieve in their trade relationship will be the starting point for a new world economic order” and that the inauguration of President Trump “represents both the need to set new horizons and reinforce new paths [to] face this threat” (emphasis mine), we fall back on hyperbole when we should be confronting the true implications of making deals with China and the U.S.
  5. They are simply not based in reality. My own experience, which I see reflected in many pieces here on the China Law Blog, is that it is becoming more difficult to do business in and with China. Mexico’s trade deficit with China is almost  insurmountable, and investment flows between Mexico and China are virtually non-existent and show no signs of improving. Language and cultural barriers make it difficult for Mexicans and Chinese to follow each other’s laws and regulations, as do “unwritten” rules necessary to conduct business. And misconceptions prevent both Mexican and Chinese companies from realizing the full spectrum of business opportunities in the other’s market.

In my next post, I’ll take a closer look at the current economic relationship between Mexico and China.

 

*Adrián Cisneros Aguilar is the founder/CEO of Chevaya (驰亚), an Asia-Pacific internationalisation services company. Adrián has a Doctor of Laws from Shanghai Jiao Tong University and an LL.M. in International and Chinese Law from Wuhan University.

 


México y China nunca han disfrutado de lazos económicos especialmente estrechos. Pero, recientes declaraciones del Embajador de China en México, Sr. Qiu Xiaoqi, llevan a pensar que la situación está a punto de cambiar. Tras hacer referencia a la amenaza del Presidente Trump de rechazar el TPP y renegociar el TLCAN, el Embajador Qiu declaró que México tendría en China “un aliado en Asia”, y estaría dispuesta a “aumentar esfuerzos…para inyectar nueva energía en el desarrollo de estas relaciones en los próximos años.” Estas declaraciones siguieron a la presentación, por parte del Presidente Xi Jinping, del Acuerdo Comprehensivo Económico Regional (RCEP), liderado por China, como una alternativa al TPP, así como de visitas a Ecuador, Perú y Chile.

Los medios mexicanos tomaron las declaraciones del Embajador Qiu como la prueba de una nueva era en la amistad Sino-Mexicana, en especial a la luz de la percibida hostilidad hacia México de parte del Presidente Trump. Los supuestos “consultores sobre China” en México han tratado también de sacar partido de esto, promoviendo sus eventos con eslóganes como: “si Trump levanta un muro, China te tiende un puente.” Las petroleras chinas no han ocultado su deseo de participar en el sector de hidrocarburos de México. Y, reuniones significativas de alto nivel han tenido lugar entre los gobiernos de China y México. El mes pasado, el Consejero de Estado, Sr. Yang Jiechi, se reunió con la entonces Canciller, Sra. Claudia Ruiz-Massieu para resolver desencuentros pendientes en relación a proyectos fallidos chinos, tales como el tren de alta velocidad CDMX-Querétaro y el Dragon Mart Cancún, así como discutir la adopción de un ambicioso programa de trabajo conjunto. Como señaló un importante periódico mexicano: “todo indica que hay un buen coqueteo entre México y China.”

En parte, este coqueteo es impulsado por el miedo de los mexicanos a que Donald Trump restrinja el acceso los EE.UU., su más grande mercado, lo cual ha causado que muchas empresas del país incluyan a China en su estrategia internacional, en buena medida para cubrir sus apuestas respecto a los Estados Unidos.

Aun cuando estoy molesto por el curso actual de los acontecimientos en EE.UU., no veo mucho análisis objetivo acerca de lo que China realmente quiere de México, como tampoco estoy seguro de si la clase de lazos que China propone son estratégicamente adecuados para el país. Las recientes declaraciones de China me incomodan por las siguientes razones:

  1. Porque dan por sentado que México está buscando desesperadamente un nuevo socio comercial para resguardarse frente a la pérdida de acceso a la economía estadounidense. En otras palabras, que la economía de México está perdida sin los EE.UU.
  2. Porque asumen que México necesita de otro país para protegerlo. Nuestra economía no estará boyante, pero tampoco se encuentra en tantos apuros. Muchos de nuestros problemas recientes se derivan de la dramática devaluación del peso mexicano frente al dólar americano, tras las elecciones en ese país.
  3. Porque categorizan erróneamente al debate actual como una elección a hacerse entre México y China. Yo soy un firme creyente en que México debe integrarse con China y otros países de Asia-Pacífico, pues creo que ello volverá a las empresas mexicanas más productivas y competitivas. Sin embargo, el discurso del Presidente Xi y del Embajador Qiu respecto a que las empresas mexicanas deberían voltear a China solamente porque EE.UU. se está cerrando para ellas es equivocado y obstinado. Debería ser en interés de México que éste se acerque a China, independientemente de lo que ocurra en los EE.UU.
  4. Porque juegan con la incapacidad de México de pensar más allá de términos absolutos: todo es ya sea una “amenaza” o una “oportunidad.” Un enfoque más racional acepta que toda relación bilateral tiene sus altas y bajas. Pero, cuando el Gobierno mexicano declara que “lo que China y México logren hacer en su relación comercial será el punto de partida para un nuevo orden económico mundial” y que la toma de posesión del Presidente Trump “representa al mismo tiempo la necesidad de plantear nuevos horizontes y reforzar ante esta amenaza nuevos caminos” (énfasis añadido), seguimos cayendo en lo mismo, cuando deberíamos estar enfrentando las verdaderas implicaciones de hacer tratos con China y EE.UU.
  5. Porque simplemente no están fincadas en la realidad. Mi propia experiencia –y que veo reflejada en muchos de las entradas aquí en el China Law Blog– es que se está volviendo más y más difícil hacer negocios en y con China, y que las empresas que tienen éxito en este sentido son aquéllas que proceden con cautela. El déficit comercial de México con China es casi insuperable, mientras que los flujos de inversión entre ambos países prácticamente no existen y no muestran signos de aumentar. Las barreras de lenguaje y culturales dificultan a mexicanos y chinos el cumplimiento de la legislación del otro, así como de las “reglas no escritas” necesarias para hacer negocios. Finalmente, conceptos erróneos impiden a las empresas de ambos países visualizar el espectro completo de oportunidades de negocio en los mercados de cada país.

En mi próximo post, echaré un vistazo más a detalle a la situación actual de la relación económica entre México y China.

 

Adrián es fundador/Director Gral. de Chevaya (驰亚), empresa de servicios de internacionalización en Asia-Pacífico. Con experiencia práctica y teórica en China, Adrián es Doctor en Derecho por la Universidad Jiaotong de Shanghái y Maestro en Derecho Internacional y Chino por la Universidad de Wuhan, siendo el primer mexicano en obtener estos grados en China

China media and entertainment lawOur Beijing-based entertainment attorney, Mathew Alderson, will be speaking on a panel at Southwestern Law School in Los Angeles on January 19th. The panel is entitled “China and Hollywood: Distribution and Censorship in a Cross-Pacific Partnership“.

Mathew’s panel is part of the Southwestern Law School’s 14th Annual Media Law Conference, whose theme this year is: Keeping the Beat in a Crazy Year: Blurred Lines and Border Crossings.

Mathew’s panel will focus on how to work within China’s legal system on new productions and on how to deal with the unique challenges China presents when doing productions there. The event will be moderated by Covington’s Nicholas Francescon. The other panelists will be J. Martin Willhite, General Counsel and COO of Legendary Pictures, and Sheri Jeffrey from Hogan Lovells. The Conference is presented by the Biederman Entertainment and Media Law Institute and the Media Law Resource Centre.

If you are interested in China media and entertainment law or media and entertainment law generally (particularly IP law), you should go. The conference runs from 1 pm until 7 pm, with the post-event reception scheduled to last until 8 p.m. Go to this link to register.

We hope to see you there.

China arbitrationThe below is a summary of recent decisions impacting China arbitration.

Anti-monopoly disputes are not arbitrable in China

In August 2016, the Jiangsu Provincial Higher People’s Court held that anti-monopoly cases involve the public interest and therefore such disputes cannot be arbitrated between private parties. The court was hearing a case where the plaintiff had entered into a distribution ggreement with a manufacturer that contained an arbitration clause. The plaintiff sued the defendant in Nanjing Intermediate People’s Court accusing it of abuse of market dominance. Defendant alleged the court lacked jurisdiction as there was an arbitration agreement between the parties. The court not only rejected the jurisdiction objection but it also rejected the request for arbitration becuase the agreement designated more than one arbitral institute which made the arbitration agreement invalid.

The Jiangsu Provincial Higher Court affirmed the Intermediate Court’s ruling on appeal and listed the following three reasons why anti­monopoly cases may not be arbitrated:

  1. Relevant laws and judicial interpretations expressly provide for civil litigation to resolve civil monopoly disputes.
  2. Public policy considerations favor litigation over arbitration.
  3. Anit-monopoly cases involve the public interest, third­-party interests and consumer interests and therefore override the preference of the parties for private dispute resolution under the arbitration clause.

Failing to Specify The Arbitral Seat in An Arbitration Clause May Result in an Unenforceable Award: 

In Wicor Holding A.G. v. Taizhou Haopu Investment Limited the Taizhou Intermediate People’s Court refused to enforce an ICC arbitration award because the arbitration clause in the Joint Venture Agreement was invalid for having failed to specify the arbitral body for the arbitration. The Joint Venture Agreement mandated that the parties’ disputes be arbitrated “in accordance with ICC mediation and arbitration rules“ but the Court found this did not clearly specify that the ICC be the arbitral body and without a clear choice for the seat of arbitration, the arbitration provision was deemed invalid. The Supreme People’s Court upheld this ruling and since the ICC award was improperly rendered on the basis that the arbitration agreement was valid, enforcing the award would contradict the social and public policy of China.

Editor’s Note: The clear lesson from this decision — and one we have many times emphasized on these pages, is that there is a right way and a wrong way to write an arbitration provision and you will pay the price if you write one incorrectly. We estimate that around half of the China contracts our China lawyers review or see contain arbitration provisions with readily identifiable errors.

SCIA Updates its Rules to Hear Investor-State Arbitrations.

The Shenzhen Court of International Arbitration (SCIA) published updated rules that will enable it to hear investor-state disputes and to administer arbitrations under UNCITRAL rules. These updated rules went into effect in December 2016 and they make SCIA the first arbitral body in mainland China to administer investor-state disputes.

* This post was guest-written by Chris Campbell, a foreign legal consultant who graduated from Tsinghua University with an LLM in Chinese law and international arbitration. Chris has worked on various projects related to trade and International Arbitration in mainland China, Hong Kong, and East Timor.

 

China Lawyers

 

From all of us, to all of you,

Happy Hanukkah, Festivus, Kwanza, and Winter Solstice, and Merry Christmas too!

ENJOY the season/holidays!

Cómo proteger su IP en China y de China

El próximo 16 de diciembre daré una charla en una de mis ciudades favoritas y sobre uno de los temas que más me apasionan: Cómo proteger su IP en China y de China. Esta ponencia se enfocará en la protección de la propiedad intelectual relacionada con el hardware y los productos del Internet de las Cosas (IoT), pero tendrá una aplicación homogénea a casi cualquier producto o servicio. Pulse aquí para registrarse.

Mi ponencia es un Hardware Massive Event (un grupo verdaderamente maravilloso – con el que tuve la oportunidad de realizar una ponencia en el Hardware Massive de Shenzhen justo el mes pasado). Hardware Massive describe el evento de la siguiente manera:

Nuestro destacado ponente será Dan Harris, miembro fundador de Harris Bricken (www.harrisbricken.com), un firma internacional de abogados con oficinas en Seattle, Barcelona, Beijing, Portland y San Francisco que se centra en representar a nivel internacional a compañías europeas y estadounidenses, así como a compañías extranjeras (incluyendo empresas chinas) en los Estados Unidos. Dan publica y expone con asiduidad sobre derecho internacional, con un enfoque en la protección de los negocios extranjeros y sus operaciones internacionales. También es un bloguero prolífico ampliamente seguido, y publica como co-autor el premiado blog “China Law Blog”. www.chinalawblog.com

Dan ha sido entrevistado sobre asuntos relacionados con el derecho internacional por la Revista Fortune Magazine, The Wall Street Journal, Fox News, CBC, BBC World, Revista Forbes y CNN, entre otros. Varios de sus artículos sobre derecho internacional se publicaron en revistas líderes como el Wall Street Journal, el Bloomberg Law Reports, Forbes Magazine y el National Law Journal.

Descripción de la Ponencia: Ya sea produciendo o bien vendiendo productos en China, las compañías extranjeras que establecen negocios en o con China necesitan saber cómo proteger su tecnología y su propiedad intelectual para evitar que ésta sea falsificada, pirateada o malversada. Hay riesgos sustanciales que las compañías deben identificar y encarar para proteger sus valiosos activos en IP. Entender el mundo de la IP en China y cómo defender sus derechos e intereses puede ser una excelente apuesta a largo plazo.

 

Un artículo reciente publicado en Quartz Magazine estableció que la mejor forma de enfrentarse el robo de la IP en China es básicamente no hacer nada, ya que hay muy poco que uno pueda hacer al respecto. Algunas compañías chinas harán todo lo posible para apropiarse de su IP, y nuestro ponente no discutirá dicha realidad . Pero, en lugar de quedarse sentado viendo como alguien se apropia de sus ideas, Dan, de forma práctica y vehemente sostiene que si se toman los pasos legales adecuados, Usted puede proteger su IP de forma efectiva: no tiene sentido pasar por todo lo que implica crear y desarrollar su producto sólo para regalarlo. En su ponencia, Dan explicará formas de proteger su IP en China y de China. Proveerá métodos que son factibles y que de hecho funcionan, incluso para las “Startups” que se atreven a fabricar en China por primera vez.

La agenda del evento es la siguiente:

17:45-18:00: Inscripción y Networking

18:00-18:10: Introducción por Ignasi Pascual

18:10-19:00: Dan Harris: “Cómo proteger su IP en China” con sesión de preguntas y respuestas.

19:00-20:00: Bebidas con networking y turno de preguntas

Para mayor información acerca de este evento, por favor diríjase aquí. ¡Espero verle!

 

China lawyersOn this Thanksgiving Day, we want to take a time out to express those things related to China for which we are thankful. Just to be clear, we are focusing on China, not because we think China takes priority over everything else (because it does not), but merely because this is a China blog. So with that caveat, here goes:

1. We are thankful for our readers, here and on our Linkedin and Facebook pages. We are thankful for your loyalty and we are especially thankful for being able to interact with you. We are thankful for your comments and your emails, from which we learn all sorts of new things and from which we are challenged. But most of all, we are thankful and we are honored that you trust us for your information. Before we even started this blog, way back in January, 2006, we wrote the following Mission Statement for it:

We want to start a conversation with, for and about the person who wants practical information on starting and growing a business in or involved with China.

We will be challenging various misconceptions the West has about law in China, including that the law in China does not really matter or that guanxi can supplant it. We will help you figure out how you can use the law as both a shield and a sword. We will give insights to achieve practical solutions, while doing our best to entertain. We know lawyers are not popular, and though we are ourselves really quite likable, we recognize the need to avoid those things that incite lawyer hatred. We will strive to avoid legal jargon and namby-pamby language that attempts to camouflage our views or to avoid controversy.

We want our blog to be a place for both conversation and controversy. We expect many of you will disagree with us much of the time and we are fine with that. We will always strive to avoid boring you or being unwilling to take a stand. We are not going to be afraid of being wrong—in fact, we want you to tell us when and how we are wrong. If you want “legalese” or long strings of caveats, you are going to have to pay exorbitant legal fees to get that elsewhere.

We will tell you more than just that the law is this and this is what needs to be done to comply. We will discuss how the laws as written may say one thing, but our experience dictates something else. We will tell you when you need to do more than just follow the law to succeed, and we will set out exactly what that something else is. We will regale you with stories about the Chinese lawyers with whom we work, the foreign and Chinese businesspeople with whom we deal, and even the places we go. There will be times where our lawyer ethical rules will make us unable to name names, but we will always work to tell the full story.

It has become a blog cliché to implore readers for their input, but it is so important we must join the crowd on this. We do not purport to know everything about Chinese law. That is impossible. Our strengths are forming companies in Chinadrafting international contracts with Chinese companies (in English and in Chinese), intellectual property protection and international litigation and arbitration. We welcome your comments, suggestions and ideas on any area of law relating to conducting business in China. China is anything but monolithic and we will be relying in large part on you, our readers, to round out this site with your own stories.

In plain language, we ask that you write us early and often. We will review your comments before we post them, but that does NOT mean you should not criticize us or disagree with us. Our review will be to filter out comments that are without substance and/or personally abusive. We want to encourage a high level of discussion, but we will not ban or delete your comments just because you come after us.

You, our readers, have exceeded our wildest dreams by not only commenting often, but commenting with intelligence.

2. We are thankful that whenever relations between the United States seem to be on the brink, both countries seem to re-realize the importance of the other and pull back, even if just a little.

3. We are thankful for each and every award we have received, both as China bloggers and as China lawyers because we know none of those would have been possible without you.

4. Most of all, we are thankful for all the great friends we have made through this blog and through our work, who are far far far too numerous to mention. You are our everything.

Again, thank you from all of us (both in the U.S. and in China) to all of you!

May each and every one of you have a Happy Thanksgiving.