China Law Blog - China Law for Business

I think (and hope) this is the first time we have used an exclamation point in a blog post title and I assure you that this will not become common. I just am so impressed by the idea and the ingenuity and the hard work and the sheer helpfullness of the AllSet Chinese Grammar Wiki. I first learned of the Wiki from Ryan over at Lost Laowai, who in his post, "Chinese Grammar Wiki: Learning Chinese grammar just got easier," had this to say about it:

AllSet Learning, the Shanghai-based language learning consultancy founded by long-time China blogger John Pasden, has just released what is surely a boon for mandarin learners who aspire to achieve better Chinese grammar — the Chinese Grammar Wiki....

As an on-again, off-again Chinese learner, I’m pretty excited for the resource. Few people I’ve met have spent as much time as John thinking about language learning, particularly as to how it relates to Chinese. His blog and various resources at Sinosplice have been extremely helpful over the years, and I have to imagine that with his ambition and love for the language behind the wiki, it’s sure to be fantastic.

I second that emotion.  What do you think?

UPDATE:  A reader sent me an email regarding a "wiki-ish" site he likes called Wordbuddy:

It is wiki-ish because it is a dictionary that anybody can add to (slang, etc). Other sites can do this, but this one is interesting because people can also add 'memory tricks' for learning words which everybody can share. For example:

书 (shū): The librarian will 'shoot' you if the <book> is not returned on time.

东西 (dōng xi): In old times, a "donkey" was one of a person's most basic <things>.

讨 (tao3): The purpose of a <discussion>(讠) is to slowly inch(寸) toward an agreement.

独 (du2): A dog(犭) with flees(虫) will be shunned by humans and other dogs. He'll become a <lonely> "dude".

These are just off the cuff examples that users have entered. The site also integrates flashcards, radicals, translation, study lists, forums, etc, and makes a very good training tool for learning vocabulary.

Having spent part of last night helping my youngest daughter memorize Latin American capitals, I can vouch for the value of using memory tricks. Does anyone have a good way to remember that the capital of Uraguay is Montevideo, the capital of Paraguay is Asuncion, and the capital of Ecuador is Quito?

Back when China Law Blog was a young pup, the Wall Street Journal Blog referenced one of our posts and we went all Sally Fields about that. We ran a post, entitled, "The Wall Street Journal -- They Like Us. They Really Like Us," the sole purpose of which (near as I can tell nearly six years later) was to let everyone know that the Wall Street Journal had noticed us. We are, of course, far too cool/wise/jaded/experienced/old to act that way now.

Or so I thought until I read a post on theContractsGuy Blog, entitled, "The Reading List: China Law Blog."

The author of that post, St. Louis business lawyer, Brian Rogers, so totally understands this blog that his post felt like confirmation of what we are seeking to achieve here. In addition to that (or better yet, because of that), Rogers' post does a phenomenal job listing out what are probably our best (or at least most practical/helpful) posts for 2011.

I am not going to list all the posts Rogers lists because i want to make sure you read his entire post, but I am going to state how delighted I was to learn that his favorite post "by far" was China Manufacturing Agreements. Watching The Sausage Get Made, which he describes as follows:

The post consists simply of a pair of sanitized client emails. One explains the typical contents of a Chinese manufacturing agreement, along with a discussion of important issues to consider. The other email accompanied the initial draft of a manufacturing contract. They’re pieces of commercial transaction art, clearly explaining the significant issues the client should consider and providing salient commercial and legal advice.

I too loved that post because it consisted pretty much entirely of emails co-blogger Steve Dickinson had sent to a client and all I had to do was remove any client identifiers and then post it. In other words, the post was the essence of what we as China lawyers do pretty much every day. Then to have a fellow lawyer appreciate that is -- to me -- one of the highest compliments we could ever get.

Whenever someone thanks me for highlighting on our blog something they have written elsewhere, I demur by saying that I should be thanking them instead. I say this because we mention and link to other writings not as a favor to their authors, but because we think the writings are interesting and worth reading and we want to bring them to the attention of our readers. So for this reason, I am not going to thank theContractsGuy for highlighting our blog on his blog.

Instead I am going to thank him for making my day. Thank you, thank you, thank you.

Interesting (and blisffully short and to the point) PowerPoint on luxury goods over at the The China Observer Blog, entitled, "Eight Trends to Watch in China's Luxury Sector."  What I found most interesting about the eight trends is that none of them came as much of a surprise to me, and it is not as though I now much at all about luxury goods in China. The eight trends did not come as a surprise because they seem to show that China's luxury goods consumers are not all that different from luxury goods consumers in most of the rest of the world.

A year or so ago I read an article (wish I could find and link to it) that posited that the elites in most countries around the world have a lot in common with each other and more than they do with the non-elites in their home countries. I buy that and this eight trends PowerPoint seems to be further proof of that. UPDATE: In Feng's comment below, the "missing" article was provided to us and it can be found here. It is entitled, "The Rise of the New Global Elite."

Do you agree?

My firm is in the throes of defending a strike suit brought against Sea Shepherd by Japanese whaling interests. The Japanese whalers are seeking an injunction to stop Sea Shepherd. Under U.S. law, to get equity, one must do equity and one of the things we have learned about the Japanese whaler plaintiffs that we consider to be less than equitable, is that they have used nearly $30 million in tsunami relief money (I kid you not) to fund their whaling operations. 

A young lawyer in my office was shocked that this would go on. Her shock stemmed not even so much from the fact that the funds would be used so deceptively, but more so from the fact that it seems never to have occured to the whalers that using tsunami relief funds to kill whales would be viewed with such horror by just about everyone outside Japan. I told her of how a friend of mine who is completely fluent in Japanese and lived there a long time is always telling me of how the average Japanese businessperson knows nothing of how Japan treated China during World War II, and so just assumes that China's anger towards Japan is based on "jealousy." 

I then ordered her the book, Dogs and Demons: Tales From the Dark Side of Modern Japan.

Whenever I want someone to have a sense for Japan, I buy them Dogs and Demons. And whenever I want someone to get a quick sense for Korea, I buy them The Koreans: Who They Are, What They Want, Where Their Future Lies. Both of these books have been recommended to me by countless people who really know Japan and Korea, respectively.

Well that got me to thinking. What is the one book to recommend to someone who wants to learn about the Chinese people? Now I know that no one book is going to do that so please nobody write about how no one book is enough, but is there any one book that shines above the rest for this? If I had to pick one right now, I would actually choose John Pomfret's book, Chinese Lessons: Five Classmates and the Story of the New China. Though not really intended to provide an overview of a people, by writing about the Chinese students with whom he attended Nanjing University in 1982, Pomfret's book at least makes clear (as if it were ever necessary) the great diversity that is China. But I am more thinking about a book that seeks to explain the Chinese people and why they are what they are.

What is that one book?

Very interesting Wall Street Journal article on how Huawei Technologies Company, China's hugely successful telecommunications- equipment maker, will be scaling back its dealing with Iran.

I see this as a potentially very important milestone in that it seems to indicate that in some circumstances, even Chinese companies widely believed to be "tight" with Beijing will place their profits over politics. One case does not a trend make, but most trends do start with one.

What do you think?

Surprised and honored by a post over at the Associate's Mind Blog (a terrific blog, BTW, written by a neophyte lawyer out of Birmingham Alabama). The Post is entitled Law Library of Congress Archiving Blawgs and it told me something I did not know: The Library of Congress maintains an archive of what it has apparently deemed to be the top legal blogs and that list includes CLB:

I went in expecting to find only things like the Harvard International Law Journal (which I did), but I was also pleasantly surprised to find regular blogs, such as China Law Blog, Simple Justice, The Trademark Blog, and others included. There are even a couple Canadian blogs included as well. It’s a nice resource when/if some legal bloggers decided to hang up their hats.

The full archive is here. In addition to our blog, Stan Abrams' China Hearsay also made the cut and so too will live forever. Near as I can tell from my quick review, the list of the 100 or blawgs that are being saved for archiving are all worth a read so if you are searching for a new law blog or two to follow, do check out the archive.

Must-read article by The Christian Science Monitor's Beijing correspondent, Peter Ford. The article is entitled, "Rise of an economic superpower: What does China want?" I liked the article because it does a very good job explaining where China fits in the world right now, where it sees itself fitting, and where it is going. I particularly liked how it concludes that China's future role is uncertain and how it does not jump on the "China will rule the world" bandwagon. The article rightly concludes that China, right now at least, has very little influence in the world beyond economics and even that mostly stems from its internal growth, not from Chinese multinationals, of which there are hardly any.

It also contained a quote that is very relevant for business:

Nor, frankly, do foreign affairs seem to figure very high on Chinese leaders' agendas. "International questions are an afterthought," says Francois Godement, founder of the Asia Centre, a Paris-based think tank. Instead, for a Communist Party whose overriding priority is to stay in power, domestic problems threatening social stability at home are infinitely more important.

This is absolutely true.

Far too often when my firm's clients have problems in China or hit roadblocks, they start talking in terms of how we should be pressuring the Chinese government because what they are doing is "not going to make it look good in the world." My response is usually something pretty blunt, along the lines of, "China does not really care very much about how it looks in the world; It's most important constituency is its own citizens and by keeping you out of X, Y and Z, it is looking pretty good to them right now."

What do you think?

Nearly every week, I get an email from someone (usually a law student or an in-China company manager) asking what books they should be reading to better understand China's laws and legal systems. About six months ago, I did a post, entitled, Chinese Commercial Law Books in English, setting out four excellent such books. I do these posts so that when I get an email asking for good readings, I can quickly respond with just a link.

When I wrote that post six months ago, I commented on how where there used to be very few English language books worth recommending, but now (then) there are four. Since writing that post, no fewer than three more excellent (though somewhat specialized) law books have come out and need to be added to my list.

if you want help understanding China's legal system or aspects of it, I recommend the following books for the folllowing reasons:

1.  The Legal System of the People's Republic of China in a Nutshell. Yes, this is part of West's Nutshell series, but before you law students and lawyers start keeling over in laughter, let me explain. I am always telling law students that they should read "the nutshell" of their course before they go to their first class in any given subject. I suggest they read the nutshell book from cover to cover as though they are reading a novel. In other words, they should not stress too much over the points they do not understand and they should not worry about retaining anything.

I advocate reading nutshell books because they are a superb and fast and relatively painless way to get a big picture view of a topic. Getting the big picture view first then allows you to put the pieces you learn later into their proper place. 

The China nutshell (I read a previous edition a long long time ago) does a great job of giving its readers a feel for Chinese law and a quick read of it will help you immeasurably in thinking like a Chinese lawyer. Will it tell you what you need to do to get from point A to point E in forming a China WFOE? No, but that should not be why you read it. You should read it because it is a very good first introduction to Chinese law.

The China law nutshell is written by Daniel C.K. Chow, a law professor at Ohio State University who is eminently capable of publishing more weighty works on Chinese law as well. 

2.   Chinese Commercial Law: A Practical Guide. This book was written by Maarten Roos, a Holland trained lawyer who practices in Shanghai. I find this book very useful as a good first source on Chinese legal issues. It does a good job touching on the major legal issues foreign investors typically face in China. Its Amazon page accurately describes it as follows: 

He clearly describes the opportunities and pitfalls exposed as a foreign investor engages with such elements of business in China as the following:

• negotiating a detailed written contract;
• performing a legal and commercial due diligence on a prospective partner;
• resolving disputes through negotiation, arbitration or litigation;
• establishing and enforcing trademarks, patents and other intellectual property rights;
• investing in China;
• considering the joint venture structure;
• expanding through a merger or acquisition;
• restructuring or liquidating an operation;
• designing and implementing effective corporate governance;
• retaining, managing and terminating employees;
• arranging funds into and out of China;
• ensuring both tax efficiency and tax compliance; and
• avoiding criminal liabilities in the course of doing business.

I agree and I think this book makes for a great nuts and bolts introduction to the various topics it covers and it also serves as a great initial legal reference as well.

3. China Law Deskbook, A Legal Guide for Foreign-invested Enterprises. This book is by James Zimmerman, a very respected China lawyer. When I wrote my last post, I had not read this book, but that has since changed. James was kind enough to send me a copy of it and though I have not read it from cover to cover, I have read enough of it to state confidently that it is THE book on the practical aspects of China law.

Its website describes much of what it covers:

[T]he new Tort Law, Property Rights Law, Anti-Monopoly Law, Labor Contract Law, Enterprise Income Tax Law, Enterprise Bankruptcy Law, revised Foreign Investment Catalogue, and various other new and amended laws, regulations, and governmental policies that impact foreign investment and trade with China. [It] is over 1100 pages long and over 3000 footnotes of references and citations. Overall, the Deskbook is organized in 24 chapters covering key topic areas such as court system and litigation, contract law, financial regulation, taxation, tender and government procurement, consumer protection, customs and trade, labor and employment, M&A, liquidation and bankruptcy, securities, property rights and land use, environmental, and dispute resolution.

If you buy this book, do not buy Maarten Roos's book, and vice-versa. They are both excellent books and they are both geared towards the person who needs real-life help in figuring out China business law issues. The difference between the two of them is that Zimmerman's book is much longer, much more comprehensive, and much more expensive. In my view, Zimmerman's book is geared more towards lawyers (though it would be fine for non-lawyers as well), as opposed to businesspeople, and Roos's book is the opposite. 

4.  Understanding Labor and Employment Law in China. I gave a very favorable review of this book when it first came out and my appreciation for it has only grown. This is what i said then:

I am three-quarters of the way through the book, Understanding Labor and Employment Law in China, by Ronald C. Brown. Brown is a Professor of Law and the Chair of the Pacific-Asian Legal Studies Committee at University of Hawaii Law School and can confidently state that it is a great book.

But it is not for those seeking merely a light dusting on Chinese labor and employment law. Not at all.

It is 332 page exposition on the current state of China's labor laws. It was just published so it is quite current. Its appendix consists of translations of the key Chinese laws relating to labor and employment.

Who should read this book?

-- Academics interested in China labor laws? Check.

-- Private practice lawyers seeking a deeper understanding of China's labor laws? Check.

-- In-house lawyers wanting to better understand China's labor laws? Check.

-- HR personnel with businesses operating in China? Probably check.

-- Lawyers who actually practice labor law in China? Maybe check.

-- The general businessperson doing business in China? Maybe check.

Let me explain my maybes.

Any lawyer actually doing employment law in China must be able to speak and read Mandarin fluently and so that lawyer probably does not have much need for a book like this, written in English. If you are going to be writing employee manuals and employment contracts in China or giving advice regarding China's labor laws, you absolutely must know how to read and write Mandarin. You have to know how to read it because so many of the employment laws are local, rather than national, and because there is no substitute for reading a law in its original language. You have to know how to write in Mandarin because your employee manuals and your employment contracts pretty much have to be in Chinese if you have any Chinese employees.

This book is probably too intense, too thorough, too long, too deep, and too complicated for the typical businessperson seeking a general background on Chinese employment law and I do not think it was ever intended for that purpose.

If you are looking for an English language book that really details China's labor and employment laws, this is the book.

I am now of the view that HR personnel should buy this book, so long as they realize that it is just a first step towards deciding what to do in each individual instance. I have come to this view after having recommended it to a number of HR people with whom my firm works and seeing how they use the book. I have come to believe this book is a great resource for HR people because they are using it to help determine whether they might have a legal issue in doing such things as firing someone who is pregnant, reducing vacation time, asking someone to work a weekend out of town, etc., rather than using it for the definitive answer to their very specific situation.

5. Patent Litigation in China, by Douglas Clark. This is a really good book if you want to know what is going on in the China patent world and it is great book if you want to know what to do in that world if you believe someone is infringing on your patent or if someone believes you are infringing on theirs. It is also an excellent book to read just for getting a sense of how China's courts operate (which as I am always saying, is likely to be quite a bit better than most believe it is, particularly in the context of business litigation involving foreign companies).

This book is very much aimed at the legal practicioner, not the businessperson, but if you are a businessperson imbroiled in a China patent dispute, I recommend this book for you as well. 

The book's own blurb accurately describes it as follows:

Patent Litigation in China, by Douglas Clark, provides U.S. and other non-Chinese practitioners with an overview of the patent litigation system in China. Strategic commentary is provided to enable those contemplating or involved in patent litigation in China to better comprehend the risks and challenges they face, as well as to ensure better decision-making by those responsible for bringing or defending patent actions. The book covers the tests for patentability grounds for invalidating patents before focusing on evidence gathering, litigation strategy and procedure, as well as considering defenses and remedies. The key differences between the Chinese, U.S. and other more mature patent systems are highlighted throughout the book.

6. Environmental Law in China: Mitigating Risk And Ensuring Compliance, by Charles McElwee. The book's publisher, Oxford University Press, accurately describes this book as having achieved the following:

Lays out a detailed explanation and analysis of Chinese environmental law

Provides the most complete [English language] guide to date for businesses, particularly foreign-operated, to comply with both national and local Chinese environmental regulations

Discusses the possible legal ramifications, both civil and criminal, of companies' failure to comply with Chinese law

Describes generally the relation between international environmental treaties and Chinese national law

Includes an overview of Chinese culture and its unique influence on the nature of the Chinese legal system

As I read this book, I kept thinking how China's environmental laws are not all that dissimilar from those in the United States. China greatly differs from the United States, however, in that there is little history to discuss by way of enforcement, either in the real world or in the courts. This means that too much of the book is on laws as opposed to practice. Charles essentially had no choice because in many instances there is no practice about which to write. Nonetheless, if you represent or work for a company facing environymental law issues in China, this is the book for you.

7. Anti-Monopoly Law and Practice in China, by H. Stephen Harris, Jr., Peter J. Wang, Yizhe Zhang, Mark A. Cohen, and Sebastian J. Evrard. This is truly a great book. It is clearly written, comprehensive and highly relevant and that is a rare beast among law books. 

It does an exceptional job covering China's anti-monopoly laws and it does an exceptional job putting them in their context. To quote some of those who received an advance copy:

This is an extraordinary treatise on the Chinese Anti-Monopoly Law, and should be on the desk or nearby shelf of every antitrust practitioner, academic and policymaker whose work or interest involves modern-day China, the relationship of the state to the market, and its transition to a socialist market economy. The book is an invaluable resource. It is clear, straightforward, and comprehensive in its presentation of the fundamental details, its identification of the ambiguities, and its overview and perspective."
--Eleanor Fox

Anti-Monopoly Law and Practice in China is an insightful and comprehensive account of an increasingly important area of Chinese law. The authors provide detailed coverage of a number of important issues that are central not only to the development of China's Anti-Monopoly Law, but also are at the heart of China's rise as an economic power. It will be helpful reading for practitioners, scholars, and policy-makers."
--Benjamin L. Liebman 

"Chinese Anti-Monopoly Law (AML) is now one of the most important antitrust regimes in the world, and this book provides the first comprehensive analysis of the AML. It describes not only the substantive and procedural provisions of the law, but also compares the AML with other antitrust regimes, and describes relevant cases since its implementation. This book will be useful to any corporation doing business in China as well as anyone interested in China's economic and legal systems."
--Xiaoye Wang

I wholeheartedly agree with all three and encourage those with an interest in China antitrust law to pick up this book.

What do you think? 

We just updated our blogroll (over there on the right) for the first time in a while. This update consists of the following changes:

OUT:

• AsiaBizBlog
• China Economics Blog
• China Solved

These are (were) excellent blogs, but two had not posted since May and one had not posted since mid-July.

IN:

• China Accounting Blog
• China Finance
• DigiCha
• Seeing Red in China

I am adding these four to the blogroll because...well...they are (not were) excellent blogs and they deserve to be here/there. If you want to learn more about our reasons for adding these four blogs, check out the following posts where we touted them:

• China Accounting Blogs. Because Accounting Matters -- China Accounting Blog and China Finance
• China's Internet Is Not Your Father's Internet and China's Digital Consumers -- DigiCha
• Noodle Blogs: Your Absence Swells My Eyes With Tears, So I Am Seeing "Red In China." -- Seeing Red in China.

In the "old days" -- back when people actually read blogs on-site and not just through RSS readers -- blogrolls really meant something. Though they mean less these days, we still take great pride in ours and we strive to keep it current, relevant, and, most importantly, as a useful resource for our readers.

As I nearly always do whenever I discuss our blogroll, I implore you to check it out and let us know in the comments below if there are any blogs we are missing or even if there are any blogs on our roll that you deem unworthy.

Whenever I speak at law schools, I always emphasize the growing need for international lawyers. There is a particular need for this in the individual (as opposed to corporate) arena. As people more and more live and marry and buy houses and die outside their home countries, the need grows for lawyers who understand the international legal issues that can arise from these life events.

Divorces with international ramifications are now becoming common. When an expat married to a Chinese citizen contacts us for help on their China divorce, I suggest they first get a divorce lawyer in China and, if necessary, also get an additional divorce lawyer in their home country. Then, if those lawyers need assistance on any cross-border issues, they can call my firm. We virtually never get these calls, simply because not many people can afford three sets of lawyers on one divorce.

The response I usually get to this is a request for me to reccomend a Chiense divorce lawyer in whatever city it is in which they are located.  I then usually have to tell them that I have no referrals in their particular city. Lately though, I have been mentioning that they check out the Divorce in China blog, which is written in English by Ann Lee, a Shanghai based Chinese licensed lawyer. Ms. Lee does a nice job talking about China's divorce laws, particularly as they apply to expat divorces. I know of no other comparable English language resource and these people going through divorce in China seem pleased to have a place where they can read more about it. 

If you want/need information on China's divorce laws, I suggest you too check it out.  

I have been sitting on this Atlantic Magazine article for too long. When I first read it, I found it mostly true and I knew it to be important. I was planning to write a long post on it, but I kept finding myself tongue-tied for words and eventually concluded that I am not qualified to write on it as I am neither an economist or sociologist.

The article is entitled "The Rise of the New Global Elite" and it is written by Chrystia Freeland. It has the following subtitle:

Scott Fitzgerald was right when he declared the rich different from you and me. But today’s super-rich are also different from yesterday’s: more hardworking and meritocratic, but less connected to the nations that granted them opportunity—and the countrymen they are leaving ever further behind.

Though I have nothing of any substance to say on this article, I want people to read it and, of course, comment below.  In other words, what do you think? And where does China fit into all this?

David Barboza, the New York Times' crackerjack Shanghai business correspondent, recently did a story on his interview with Dan Breznitz and Michael Murphree, authors of the book, Run of the Red Queen: Government, Innovation, Globalization, and Economic Growth in China. The book (which I have not yet read) is, according to Barboza, about "China’s innovation drive" and it posits that "China should worry less about coming up with breakthrough technologies and focus more on what it already does best: making incremental innovations in everything from manufacturing to logistics."

I agree.

The Economist has a very interesting article on "privatization in China." The article is entitled, "Capitalism Confined" and its subtitle is that "Chinese companies, like companies everywhere, do best when they are privately run. In China, however, the state is never far away."

The article does an excellent job explaining the role the Government(s) play in various sorts of Chinese companies and I recommend this article for anyone who has ever been confused about the relationship between China's government and its companies. This article is not going to clear up everything for you, but it will help.

If you are looking for information regarding China's civil society or its nongovernmental (NGO), nonprofit, charitable sectors, I have just the link for you. The link is to "China Development Brief’s Bibliography of Sources on Civil Society," an exhaustive bibliography on sources relating to pretty much all aspects of China's Civil Society. The bibliography is divided into the following sections:

• Agriculture and Civil Society
• Economy and Civil Society
• Environment and Civil Society
• History and Civil Society
• Intellectuals and Civil Society
• Law and Civil Society
• Media, the Internet and Civil Society
• Philanthropy and Civil Society
• Religion and Civil Society
• Social Welfare and Civil Society
• Civil Society - PRC
• Civil Society - Comparative and International
• Civil Society - Homeowners Associations
• Civil Society - NGOs
• Civil Society - Theory

I am always getting asked for sources on various things relating to China so if anyone else is aware of good China bibliographies, please list them in the comments below. 

Like many, I am generally not impressed with most of those who purport to know how to analyze China stocks listed on U.S. exchanges. I am NOT a stock analyst, but I know Chinese corporate structures and I know what is legal for foreign companies to do in China (and what isn't) and, maybe most importantly, I do not think I have ever examined a Chinese company's books that were not at least somewhat cooked. All these things give me great pause when investing in Chinese companies and they also cause me to doubt the bona fides of stock analysts who pretty much just ignore these things. For more on investing in U.S. listed Chinese stocks, check out "Thinking Clearly About Chinese Companies Listed On US Stock Exchanges. Or, If A Tree Falls In A Sino-Forest...."

So when I find a stock analyst who just "gets it" when it comes to Chinese stocks, I feel obligated to pass it on to you, our loyal readers. I knew I had found such an analyst after reading the following at the beginning of one of his articles:

When it comes to investing in China, I've seen a lot of "interesting" corporate structures. Nothing, however, has thrown me off more than recently listed online dating site Jiayuan.com (Nasdaq: DATE) . The reason? It's unclear whether this company even has the right to be in business in China.

There's shady, and then there's this
Like a lot of Chinese companies, Jiayuan is organized so that owners of the Nasdaq-listed stock don't actually "have any direct ownership interests or direct voting rights in any of our PRC [mainland China] operating companies."

Because the Chinese government restricts foreign ownership of things like Internet services and online payments businesses, and won't grant foreigners a license to provide online dating services, the listed company simply has contractual arrangements whereby the operating companies in China, which are owned by Jiayuan's Chinese management team, agree to allow the management team at the listed entity to direct the operations at the operating entities and obtain "substantially all" of their economic benefits. (Though "substantially all" -- their words, not mine -- seems to be something less than all.)

If you're thinking this is complicated, confusing, ripe for conflicts of interest, and probably unenforceable in a court of law, you're right.

The article is on Motley Fool and it is entitled, "The Biggest Risk" and it was written by Tim Hanson, the lead international advisor at The Motley Fool and head of its Global Gains research service. Tim tells me that he "has been been working in a research capacity at the Fool since 2005 and spending a lot of time on China since 2007." He analyzes Chinese companies both their their public filings and by traveling to China and talking to the right people.

Tim wrote another excellent article on Baidu, entitled, "Could Baidu Get Blown Up?" in which he raises the necessary question as to whether it makes sense to invest in Baidu at a time when the powers that be in China have made clear they do not exactly appreciate diversity on the Internet and then flip around and manifest that with an anti-Baidu campaign on CCTV. Does it really make sense to invest in a Chinese company when that is happening?

I have not conducted my own analysis on either company so I cannot vouch for the accuracy of what Hanson is saying, but I can say that the mere fact that he is one of the few people writing on China stocks who is  actually asking the right questions means he should be read. So if you are investing in Chinese stocks or planning to do so, I recommend you start reading Tim Hanson. 

I feel like one of the most important things I do on this blog is to steer people to other good writings on China. I recently learned of a very good blog on China manufacturing and so steer I will.

The blog is called JLMade. 

JL Made mostly focuses on the basics of buying product from China, oftentimes in small quantities. I have been reading the blog for a few weeks and i am convinced its writer, Jacob Yount, knows whereof he speaks. The blog consistently conveys helpful information, such as in the following posts:

• Finding a Factory
• Smaller Order Pitfalls
• Back to the Basics: Air Shipping
• Back to the Basics: Sea Shipping

In other words, JLMade writes on the exact things every buyer of product from China must know but so often does not. If you are are buying product from China or thinking of buying product from China, you should be reading JLMade.

We recommend it.

What do you think?

Just read a truly excellent two part series of posts on China's housing market. The posts are from China Beat and they are titled China's Empty Apartments.  Part I is called "How the real estate market got stir-fried" and part II is called "What happens when the party ends?"  They were written by freelance writer Michael Gsovski and I highly recommend them to anyone interested in China real estate.  

The posts do a great job of capturing the curiouser and curiouser surreality that is China real estate. I particularly liked this portion:

Mr. He has himself invested in an apartment in Chenggong, not in spite of this government interference, but because of it.

“The government wants to increase their revenue, so they have to make sure the price of land increases constantly,” He said. “Under these conditions everyone must choose to invest in real estate.”

This is the “stir-fried apartment,” a phrase that describes apartments bought by wealthy individuals as investments, yet left empty because nobody they know is willing to pay the high rents. Many buyers understand that the market for apartments does not conform to consumer demand, but invest anyway, for two reasons. First, they need a place to store savings outside either the sclerotic banking system, which delivers returns far below the rate of inflation, or the Chinese stock market, which is notoriously volatile.

Second, they are confident that local governments will continue to drive land prices upwards as a way to raise land lease revenues.

I just don't know....

Reuters just came out with an absolutely excellent investigative report on Chinese companies doing reverse mergers to go public in the United States. It is called "China's Shortcut to Wall Street," and if you are looking for a nice history and overview of these so-often sordid business, I urge you to check it out.

Whenever I read an article like this, I thank my lucky stars that my firm long ago made the concious decision never to get involved in these things. There was a time where we were getting contacted all the time by people soliciting our help to secure Chinese clients for these IPOs and even a few seeking our assistance on the legal side in the U.S. (which really does not make a lot of sense). When these first started coming in I consulted with a knowledgeable friend of mine his advice was, and I quote, "almost all of these guys are turds" and "you had better bring a lot of soap and water if you are going to be dealing wtih them."

Not saying all of these guys are "turds" but I am saying that I could not be happier that I had that conversation. 

What do you think?

I recently received the book, Anti-Monopoly Law and Practice in China, written by H. Stephen Harris, Jr. (no relation), Peter J. Wang, Yizhe Zhang, Mark A. Cohen, and Sebastian J. Evrard. All of the authors are practicing lawyers, one with Microsoft, one with Baker & McKenzie, and the others with Jones Day.

I know this is going to make me sound like a complete geek, but I was hugely excited to receive this book.  I know or know of most of the authors and they are among the leading China antitrust experts. China's antitrust laws are relatively new and to a large extent untested so I was excited (yes, I know I already used that word) to see how this book would handle that. It handled that and everything else with aplomb. 

This is an absolutely amazing book.

Amazing because it is clearly written, comprehensive and highly relevant and that is a rare beast among law books. 

I actually started my career as an antitrust lawyer and so I am not unfamiliar with the topic. The book not only does an exceptional job covering China's anti-monopoly laws, it does an exceptional job putting them in their context. As a small firm that represents mostly SMEs, my firm is not going to be doing much big-time antitrust work in China. But, we constantly handle intellectual property rights issues and the book contains an excellent chapter on "Intellectual Property Rights Under the AML."  We also surprisingly often deal with Chinese unfair competition matters and the book covers that with its superb chapter on "Competition-Related Laws Other than the AML [Anti-Monopoly Law]" which is highly relevant for just about any business in or involved with China. 

To quote some of those who received an advance copy:

This is an extraordinary treatise on the Chinese Anti-Monopoly Law, and should be on the desk or nearby shelf of every antitrust practitioner, academic and policymaker whose work or interest involves modern-day China, the relationship of the state to the market, and its transition to a socialist market economy. The book is an invaluable resource. It is clear, straightforward, and comprehensive in its presentation of the fundamental details, its identification of the ambiguities, and its overview and perspective."
--Eleanor Fox

Anti-Monopoly Law and Practice in China is an insightful and comprehensive account of an increasingly important area of Chinese law. The authors provide detailed coverage of a number of important issues that are central not only to the development of China's Anti-Monopoly Law, but also are at the heart of China's rise as an economic power. It will be helpful reading for practitioners, scholars, and policy-makers."
--Benjamin L. Liebman 

"Chinese Anti-Monopoly Law (AML) is now one of the most important antitrust regimes in the world, and this book provides the first comprehensive analysis of the AML. It describes not only the substantive and procedural provisions of the law, but also compares the AML with other antitrust regimes, and describes relevant cases since its implementation. This book will be useful to any corporation doing business in China as well as anyone interested in China's economic and legal systems."
--Xiaoye Wang

I wholeheartedly agree with all three.

If you are an English speaking lawyer involved with China, you need to read this book and keep it on your shelf.  Now.

A couple of weeks ago, co-blogger Steve Dickinson did a post on Chinese companies that trade publicly on U.S. exchanges. That post was entitled, "Thinking Clearly About Chinese Companies Listed On US Stock Exchanges. Or, If A Tree Falls In A Sino-Forest....," and in it, Steve distinguished between legitimate Chinese companies and fraudulent Chinese companies.

With all the media coverage of allegedly fraudulent Chinese companies, Chinese share prices overall have suffered, including that of many companies that clearly do really exist and make money every day. In other words, babies are being thrown out with bath water and that usually spells opportunity. We here at CLB do not purport to be China investment gurus (and it never ceases to amaze me some of the people out there who do), but if you are interested in investing in Chinese stocks, I recommend you read, "Why China Looks Like a Buy," by Ben Levisohn, a personal finance writer with the Wall Street Journal. I like its analysis and I particularly like its graphics. 

What do you think? I should not have to mention this, but I will. Any comments left by anyone on this or on any other posts are simply the opinions of those who are leaving the comments and they may or may not reflect the opinions of this blog. This is my legalistic way of telling you that we do not monitor the comments for quality (short of deleting those that are racist, hate-filled, straight out promotions, or simply so beyond the pale that we would be doing a disservice to our readers were we to publish them) and so read and follow (or not) wholly at your own risk.

I am always getting emails from people asking me what they should be reading on China politics, China travel, China food, China this and China that. My quick answer is to refer them to our blogroll. But that only goes so far because our blogroll is intentionally and decidedly quite narrow, confined almost exclusively blogs relating to doing business in or with China.

There are countless other excellent blogs out there, of course, and many of those are on China. I try to have all of those in my RSS feeder and I also try to at least skim them from time to time. 

Just today I realized how much I enjoy and for how long I have enjoyed the Beijing Daze blog, and yet I have not once mentioned it on this blog.  Until now.

Beijing Daze describes itself as "ramblings and comments about Beijing Live Music Scene, Chinese Restaurants in Beijing as well as any weird and quirky cultural ditties that I might come across!" It is heavily skewed toward Beijing's music scene. 

It is written by a "dude" who describes himself as follows:

I’m just another expat in Beijing with a fingers, a keyboard and enough IT knowledge to setup a blog and -as you might have noticed- I’m not afraid to use it!

I have been in China since Feb 2004 and in Beijing since Feb 2006 so it’s has been a few years. I love Beijing and can’t picture myself living anywhere else in this massive country! Why? The sheer diversity and complexity and simplicity of the experiences I’ve had in this mecca of smog!

This blog reflects more or less my interests in life which are food, music and IT! I spend quite a bit of time out and about in the city and can be found generally hiding behind a wine glass or a white russian in the greater chaoyang area with occasional escapades into dongcheng!

I started this blog to keep track of places I was looking for and present information/share experiences in Beijing in a way that I would have liked to find them thus the whole “biased perspective” thing.

I mean, where else can you read about a Uighur psychedlic rock band?

Beijing Daze is not likely to impact the profits of your China business nor will it help you better understand China's laws, but it will increase your knowledge of Beijing and its music scene and if you have an interest in that, then I heartily recommend it to you.

UPDATE: Apparently, Beijing Daze is not the only place where one can read about China's ethnic music scene. The New York Times just came out with a story entitled, "Ethnic Music Tests Limits in China."

If you are an American company doing business in or with China, it behooves you to have at least some familiarity with the Foreign Corrupt Practices Act (FCPA). But where to turn for that?

I'm going to tell you: Michael Kohler's FCPA Professor blog, in a post appropriately entitled, FCPA 101.

The post is logically organized around questions one should have about the FCPA and it does a superb job of setting out the FCPA basics. If you want to know the answers to any (or better yet, all) of the following questions, go to FCPA 101:

• When and why was the FCPA enacted?
• Has the FCPA been amended since 1977?
• What are the FCPA’s main provisions?
• Who is subject to the anti-bribery provisions?
• What do the anti-bribery provisions prohibit?
• What does “anything of value” mean? 
• What does “foreign official” mean?
• What does “obtain or retain business” mean?
• Does the FCPA have any exceptions or affirmative defenses?
• Can a third-party subject a company to anti-bribery violations?
• What do the books and records and internal control provisions prohibit?
• Which agencies enforce the FCPA?
• How do the enforcement agencies typically find out about FCPA issues?
• Why has FCPA enforcement increased?
• How are FCPA enforcement actions typically resolved?
• How are FCPA fines, penalties, and sentences calculated?
• Are companies that resolve FCPA enforcement actions “bad” or “unethical”?
• What about the bribe-takers?
• What is the FCPA Opinion Release Procedure?
• Do other countries have "FCPA-like" laws?

I recommend it.

I just finished reading Troy Parfitt's book, Why China Will Never Rule the World, and as I always do when I finish a China book, I read other reviews before writing my own  And as Peking Duck has done previously, he has convinced me not to really bother.

Here's the problem. I realize that no matter what I do, Peking Duck's review will be better than mine. More importantly, his review will better express my own feelings on the book than my own. So instead of a full-on review, I will just summarize my impressions and implore you to go to Peking Duck for more depth.

I wanted to like Why China Will Never Rule the World because I am sick of reading things that just assume China's world domination, but my biggest issue with this book is its supreme confidence that China will not succeed and its view that there is nothing in China worthy of admiration: 

The problem is that Parfitt can find practically nothing in China that he admires. In most cities he sees squalor, drudgery, poverty and backwardness. Now, those things certainly exist in many Chinese cities, but there is much more to China than that. Parfitt seems to seek out and dwell on the negative. He has some nice things to say about Nanjing (it’s “pleasant” and “attractive”) as well as Xiamen, where he enjoys visiting the island, but the praise is lukewarm at best and is totally drowned out by his hostility toward the PRC. He finds nothing to admire in Qingdao (quite the contrary), and says of Hangzhou that “it wasn’t beautiful at all when I went there.”

I too take issue with this perception of China. Just by way of a very small example, I go to Qingdao at least twice a year and I really like the place. Good people. Great food (at great prices). Great views. Clean air. Cool old German buildings. Beaches. Great hotels. Easy to get around.  Surprisingly good cultural scene. And, contrary to Parfitt's assertions throughout the book, taxi drivers who know where they are going. I go to expecting to like it and I do. If i went there with a view towards deconstructing it, I am quite sure my views on it would be different.

I also take issue with Parfitt's thesis that not only does today's China have nothing to offer the world,  yesterday's China never accomplished anything much either. Again, Peking Duck covers this extremely well

Along with Lu Xun, one of the author’s heroes is Bo Yang, the Nationalist Party member who believed China’s only path to greatness was to embrace Western civilization and who wrote The Ugly Chinaman and the Crisis of Chinese Culture to stake his claim. In one of the most outspoken parts of the book, Parfitt delves into Bo’s worldview.

Chinese history is not glorious at all, he argues, but rather thousands of years of uninterrupted warfare, carnage, violence, oppression, mayhem and misery…. Crucially, he points out that the Chinese notion of a harmonious society revolves around the quote-unquote harmonious relationship between inferiors and superiors. Beyond that, harmony does not exist… Bo Yang goes on to argue that China has contributed virtually nothing to civilization. He characterizes the Cultural Revolution as entirely normal; the Tiananmen Square Incident as “back to normal.”

It’s hardly surprising that Bo Yang is Parfitt’s hero — this is coming from the mouth of a Chinese intellectual, not an obnoxious foreigner, and it’s much harder to dismiss it as “anti-China” propaganda.

All of this makes for compelling and thought-provoking reading, mainly because Parfitt makes his argument so well. For all my irritation with his negative tone and broad generalizations, there were definitely many times when I found myself agreeing with him, especially about education and propaganda and the lack of eagerness to embrace meaningful change.

As I was reading this book, I found myself doing something I pretty much never do; I kept wondering about the motivations of the author and what what in his own life had caused him to see things the way he did. I kept wondering what it was that had caused the Parfitt to see China so unremittingly negatively and what motivated his need to besmirch it so. How much of Parfitt's views are based on his mind-set going in and how much are based on an objective analysis? I go places expecting and wanting to like them and so I usually do. Parfitt seemed to go to China to prove how horrible it is and his own preconceptions gave him exactly what he sought. 

Though I read this book looking forward to China getting criticized and though I found myself constantly nodding along with the incidents Parfitt describes so well, it ended up frustrating me with its lack of balance and objectivity. I both expected and wanted it to take strong positions, but I also wanted it to at least acknowledge "opposing" facts.

But should you read it? I will again quote Peking Duck:

I suspect you’re wondering why I’d bother to write such a long review of a book like this, and why you should ever bother to read it. The answer is, as I said at the beginning, that Parfitt has done an amazing job in collecting and tying together hundreds of great anecdotes, combined with a good deal of history and political analysis, to create a highly readable and even enjoyable book, despite the parts that caused my blood pressure to rise. I actually think you would find it worth the time (I finished all 400+ pages in two days), and you’d definitely find yourself laughing at his trials and tribulations in China. A most interesting experience. I’m glad I read it.

I agree.

Why China Will Never Rule The World is one of the best and most enthralling books I did not like. It is not coming out until September, but I would really love to hear what you think.

UPDATE: Mark's China Blog just came out with a superb, though 99.99999% crticial review of the book. To put it bluntly, Mark HATED it:

Saying all of that, Why China Will Never Rule the World is one of the most ridiculous books I've ever read.

Whatever positives can be found in the book are more than offset by the hostility and one-sidedness Paritt shows towards China. Parfitt doesn't get close to a nuanced view of China even once in his book. Parfitt hates traveling and living in China, shows a sociopathic disdain for Chinese people, and loathes everything about the country's culture and history. Written without the slightest hint of balance, Parfitt's book reads like Ayn Rand's Atlas Shrugged and Jung Chang's Mao: The Unknown Story, two of the most unenjoyable books I've encountered.

After struggling through Parfitt's 400-page diatribe, I give Why China Will Never Rule the World a resounding two thumbs down and cannot recommend avoiding it highly enough.

Update: Charles Custer over at China Geeks recently did a very good (but pretty negative) review of the book, in a post entitled,

• Why do I always feel so at home in Japan? Reincarnation?
• Why did the U.S. get involved in Libya?
• What's the deal with Stonehenge anyway?
• Did Darren Richmond really kill Rosie Larsen?
• How does KFC do it in China?

These are probably my top five unresolved questions, at least for this week. I will be discussing only the last of these in this post.

I truly am fascinated by KFC's success in China. Though I myself have eaten there only once (with my daughter at an airport), I am in awe of its ability to keep prices down, sell food, open outlets all over China and, perhaps most impressively, consistently maintain a high level of food quality/safety and customer service. How does KFC achieve this? A Harvard Business School article, "HBS Cases: KFC's Explosive Growth in China, (h/t China Bystander) goes a long way towards answering this. If you are doing business in China or planning to do business in China, I recommend you read this article.

How has KFC managed to do so well in China? Can others duplicate it? Is it too late for another KFC in China? What do you think?

I cannot tell you how many times we have had to explain to people why we do not have a Chinese language version of our China Law Blog, but each time the explanation is the same. Our blog posts are written for Western businesses already in or doing business with China, or looking to do the same; most of it would not be of interest to Chinese readers.

Much of a blog's effectiveness as a communication medium has to do with tone and layout, both of which tend to get lost in translation. Chinese netizens do not experience the Internet in the same way English-language netizens do. On the other hand, a Chinese-language blog built specifically for a Chinese audience makes sense because information is contextualized within a familiar context. For more on this, check out this article by David Wolf, entitled, "The Internet Does Not Rise Above Nations and Cultures" this AmCham podcast by Jeremy Goldkorn, this post by Bill Bishop, this article on a talk by Kaiser Kuo or this CNN article, with ample quotes by Sam Flemming. Or just about anything else written by any of these five people, all of whom have their hands on the pulse of China's Internet (how's that for using a very physical cliché to describe a very digital world?).

The big topic used to be on how and when differences between China's Internet and that in places like the United States would eventually fade, but now people seem much more interested in dealing with China's existing internet reality.  A couple of readers (both of whom have copious knowledge on China's internet) passed along a post on Kai Lukoff's always enlightening TechRice blog, with the suggestion we do something with it here. 

The post is entitled, "China's Early Stage Ecosystem," and it, in turn, contains an excellent and in-depth slide-show is by Chris Evdemon, General Manager of Incubation Programs at InnovationWork. If you are interested in China's Internet (and who isn't?), this slide-show is a must see. 

The first half of Chris's presentation is chock full of great statistics on China's Internet and mobile technology usage. Slide 29, for example, includes a great breakdown of Internet users by age, showing that 83% of Chinese netizens are below the age of thirty. Slide 28 does a great job of illustrating how different segments of China's population utilize mobile phones, showing that a majority of mobile phone users are still blue collar workers who depend solely on basic text and voice messaging services for their livelihoods and their entertainment. Chris also shows that the other largest group, young white collar Chinese, are much more interested in cheap games and music than in sophisticated e-mail applications.

In the second half of his slideshow, Chris uses a similar array of charts and figures to survey China's angel and venture capital landscape, focusing in on the need for more investment during early stage company development (slide 52 provides a good wrap up of this discussion). On slide 36 Chris highlights three business types available to foreign start-ups wishing to have a go of it in China - Joint Ventures, WFOEs, and representative offices (ROs). If you want more information on these three  structures, go here for WFOEs, here for JVs and here for ROs.

Check out Chris's presentation and let us know what you think. Where is China's internet going and what role, if any, will foreigners play in its direction? 

I am a sucker for checklists. Doubly so when they are incredibly helpful, comprehensive and well done. Quality Control (QC) Inspector extraordinaire Renaud Anjoran recently did a "Checklist for importers in China and low-cost Asia" that sets out the steps one should be taking when sourcing product from China.  

I am loathe even to highlight portions of Renaud's checklist because its strength really is the sum of its parts. So I will merely state that if you are sourcing product from China or from anywhere else, or even just thinking of doing so, you must read this post in its entirety. 

What do you think?

interesting new China blog called China Debate. It is headed up by Malcolm Riddell and supported by an enviable roster of contributors and I recommend you check it out. 

China Debate describes itself and its mission as follows:

At China Debate, we believe in ‘groupthink’—as long as the group is made up of fiercely independent individuals; holding vastly different positions on China issues; who want to persuade others, but are willing to be persuaded (at least a little).

We provide a neutral platform. We don’t side with or promote any point of view, and we include and welcome all serious points of view. 

The blog is snazzy (kudos to the blog gurus at LexBlog), thoughtful and informative. The posts so far have been interesting and far-ranging. Even though I gave up Twitter long ago (and do not miss it a bit), I am actually finding myself enjoying China Debate's Twitter Feed.

If you are looking for top level discussions regarding China society, business and politics, I urge you to check out China Debate.

Then let us know what you think.  

Someone today asked me for good articles on China's Internet and I told him to start with "China's Internet: The Invisible Birdcage." This article was written by Bill Bishop and it does an excellent job explaining the theories and policies regarding China's Internet.  

If you have an interest in China's Internet, I recommend you read it.  

We assiduously try to stick to legal and/or business issues on here, with only occasional straying into political and cultural issues, justified by my belief that knowing those issues can only help on the business side.

I am not sure the post I am about to recommend qualifies in any of these categories (other than perhaps cultural), but it is so astute, so fascinating, and so beautifully written, that I cannot resist recommending it anway.

The post is by Xujun Eberlein, a Chinese writer (and I am not using that term at all loosely) who grew up in Chongqing and now lives in the United States. It is on China Beat and it is entitled "Chongqing Dispatch." 

What do you think?

Very interesting Reuters article, entitled, "Special report: Can China's billions spur the next big idea?" The thesis of the article is that China is doing well with incremental innovation but is still nowhere near competing with a country like the United States on "bold" innovations. In other words, China does just fine in slightly improving or reducing the cost of existing items, but it is not yet become creative in developing the new.  

The article posits the following as the cause:

China's innovation shortcomings are not merely the product of a preference for central planning over entrepreneurship, of course. Barriers include poor enforcement of intellectual property rules, an educational system that stresses rote learning, and a relative lack of independent organizations that can evaluate scientific projects and help police instances of plagiarism.

 "There's a political constraint, too," said Arthur Kroeber, managing director of GaveKal-Dragonomics in Beijing. "In the long run, innovation arises in societies that are really open, where you can discuss anything. And China doesn't have that kind of political culture yet."

What do you think?

About a year ago we started a China Law Blog Group on Linkedin with the goal of creating a spam-free source for China networking, information and discussion. We now have well over 3,000 members and, more importanly, a number of lively discussions. 

We have had approximately 200 discussions, generated by more than 150 members. We have had some absolutely terrific discussions, both based on the numbers (a number of the discussions have received around 100 comments and some have gone over 200) and on their substance. Our discussions have ranged from practical (such as, how do I open a China bank account or what are the best practices for a China Joint Venture) to deep think (such as, what is the future of rule of law in China?).

I am most proud of how (at least as far as I know) no spam item has yet lasted on the site for anything approaching 24 hours.

If you want to learn more about China law or business, if you want to discuss China law or business, or if you want to network with others doing China law or business, I suggest you check out our China Law Blog Group on Linkedin and join up. The more people in our group, the better the discussions. 

Click here and join us.

This post was written by Miriam Roth, a Harris & Moure paralegal. Miriam graduated last year with a slew of honors and a degree in English Literature from the University of Maryland. When not working with us, she is an assistant editor at PIF Magazine.

By Miriam Roth

China Law Blog co-editor Steve Dickinson joined Katie Fischer of Blue Ocean Network’s Chinalogue on Monday to discuss the issue of rare earths. Click here to watch the entire video.  

Along with John Gong, Professor of Economics at the University of International Business and Economics, Steve spoke about the implications of China’s long-standing monopoly over the rare earth industry.  The world relies on China for about 97% percent of its overall supply of rare earths, seventeen materials used in a wide variety of products.  That figure, compounded with talk of China initiating tighter export quotas, is making the international trade community pretty nervous.  And with good reason: rare earths are critical for the production of all kinds of high-tech equipment, from iPads to missiles.  It seems strange that countries like the U.S., whose defense industry alone consumes five percent of the rare earths in the world, have been willing to place their supply of such crucial materials in the hands of a single trade partner.  Especially because, as Steve points out, rare earths are not actually that rare.

In fact, 64% of the world’s supply of rare earths lies outside of China.  What’s more, as they are found relatively close to the earth’s surface, rare earths are relatively easy to mine and extract.  The precious commodity, then, Steve explains, isn’t the material itself.  Rather, it’s China’s willingness to bypass environmental and labor restrictions. The initial stages of processing these materials pose serious threats to both the environment and to human health, so it’s no surprise that many countries have taken a “not in my backyard” approach to rare earths despite their dependence on them.  

Though China sits on a large portion of the world’s rare earths, it is ultimately the “China price” of those resources that both attracts and frustrates its hungry trade partners.  Steve points out that China’s rare earths industry is controlled not by a single state-run agency, but by a “race to the bottom” between a cluster of companies who compete with one another by lowering and lowering prices, even below the profit margin.  At this point, no other country is willing to take the kinds of environmental, legal, and economic risks that China is in order to export large amounts of rare earths.

Due to rumors of stricter export quotas, and following a recent (and ambiguous) twenty-day embargo on rare earth shipments to Japan during a period of maritime tensions, these issues are coming to a head on the international stage.  With global demand increasing, even the U.S. is scrambling to re-open its own rare earths facilities. Though Steve and Professor Gong didn’t quite see eye to eye on China’s intentions regarding rare earth quotas, both agreed that China’s current monopoly likely will give way to some much-needed diversification. 

I urge everyone with an interest in rare earths to watch the entire video.

The European Chamber of Commerce just came out with a massive and massively helpful report, entitled, "Public Procurement in China: European Business Experiences Competing for Public Contracts in China." The thrust of the report is that European companies have not fared very well at all in terms of securing Chinese government contracts. Near as I can tell, you can substitute "American" for "European" without needing to change anything substantive in the report.

My law firm has been worked with foreign companies seeking to secure Chinese government in the IT, environmental, and medical arenas and it has been tough going in every instance. The problem is not China's laws on foreign company bidding on government contracts. The problem is that the governmental entities simply prefer going with Chinese companies first, joint venture companies second, and WFOEs third.  

The report lists the following as the "common challenges encountered by EU businesses when competing for public contracts" in China: 

• Difficulty in obtaining timely, accurate information about upcoming projects
• Lack of communication of detailed evaluation criteria for projects
• Trend towards decentralization of tenders leading to more costs, less transparency
• Unfair implementation of public procurement awards
• Unsatisfactory appeals procedures

In my experience, you can reduce all of these down to one: foreign companies are just not going to be chosen by most Chinese governmental entities unless there is an overwhelming reason to do so.  

The report provides the best overview I have seen on the topic of foreign company bidding for Chinese government contracts. Among other things, the report contains the following:

• The Legal Framework of Public Procurement in China 
• The Government Procurement Law 
• The Bidding Law 
• The Government Procurement Agreement of the World Trade Organisation
• Size of the Public Procurement Market in China
• The Typical Bidding Process in China
• Government Approval
• Publication of the Bid Announcement
• Bid Announcement and the Eligibility of Bidders
• Bid Documents
• Bid Evaluation Process 
• Bid Award 
• Appeals 
• Experiences from Three Sectors: Medical Equipment, Information and Communications Technology (ICT), and Windpower Equipment

If you are bidding for Chinese government contracts or contemplating doing so, I uge you to check out this report.

For years now, I have recomended the U.S. Commercial Service book, A Basic Guide to Exporting, to clients who are starting out in exporting their products overseas from the United States. Like so much of what the U.S. Commercial Service puts out, it is low cost (or free), helpful, accurate, and clearly written. I just learned from reading Laurel Delaney's Global Small Business Blog (of which the same adjectives used in the previous sentence apply) that an audio version of this book can be found for free on Michigan State's website, globalEDGE. 

The audio version is divided into the following modules:

• The World is Open for Business
•  Developing An Export Strategy
•  Developing a Marketing Plan
•  Export Advice
•  Methods and Channels
•  Finding Qualified Buyers
•  Using Technology Licensing and Joint Ventures
•  Preparing Your Product for Export
•  Exporting Services
•  International Legal Considerations
•  Going Online: E-Exporting Tools for Small Businesses
•  Shipping Your Product
•  Pricing, Quotations, and Terms
•  Methods of Payment
•  Financing Export Transactions
•  Business Travel Abroad
•  Selling Overseas and After-Sales Service
•  Analyzing a Company's Ability to Export

For anyone at all new to exporting, I highly recommend you go here and give this book a listen.

Every so often I get emails from readers asking what I read on China beyond the blogs in our blogroll. This post on China regional blogs is going to be the first in what is likely to be an erratic series to answer that question. 

I define a China regional blog as a blog that focuses on one particular China region or city written by someone who lives in that particular region or city.  

Right now I have the following regional China blogs on my blog reader:

• Shanghaiist 
• Notes From Xi'an  
• Qingdao(nese)
• Xinjiang Far West China
• Chengdu Living 

Shanghaiist is on our blogroll because though it does somewhat focus on Shanghai, it writes at least as many posts that go way beyond that. 

I strongly suspect I am missing some good ones. What other good China regional blogs are out there?

Got my always worthwhile issue of China Sourcer Magazine today and it contained an article on a new iPhone App called International Trade Dictionary. I paid my $1.99 and downloaded it and I am glad I did.

If you are involved with international trade or logistics and cannot instantly and easily explain the difference between FOB and FCA or if you just want easy access to the newest version of INCOTERMS, this app is for you. 

If you take it for a spin, please let us know what you think.

For years, Jottings from the Granite Studio has been one of my favorite blogs. Its written by Jeremiah Jenne, "a Phd candidate at a large public university in Northern California" who is "currently in Beijing teaching history, doing archival research, and working on his dissertation." If you have an interest in Chinese history (and you should), you have to be reading Granite Studio. 

I have always bemoaned the fact that the voices of Chinese bloggers are almost exclusively non-Chinese. There are and were a few blogs written by Chinese-Americans, but it seems like the best of those (i.e. China Esquire and CN Review have pretty much gone dormant) and those that remain do little more than act as cheerleaders for whatever China does.

I have seen a few English language blogs written by Chinese nationals in China, but most of those are badly written to the point of distraction; if the writing is so bad that I notice, I have trouble enjoying the blog.

There has been one exception out there, Inside-out China. That blog is beautifully written by Xujun Eberlein, who grew up in Chongqing, but then moved to the United States, got a Ph.d from MIT, worked in high tech for a while, and then became a writer. Yes, a real live novel writing writer and trust me, she can write. Her posts on China are must reads not only because they are excellent, but because they are those of a Chinese voice writing in English.

Anyway, about a month ago, Jeremieh took a brief blog hiatus (I love using words like that) and gave his "lovely wife and co-conspirator Yajun" a guest posting slot (can you say Wally Pipp?). Her first post, entitled, "Diversity When? A Guest Post by Yajun," was so well written and insightful, I immediately wrote Jeremieh requesting he pass on my compliments. Yajun is a Chinese national living in China.

Yajun just wrote yet another excellent post, this one entitled, "The Sino-Japanese Relationship: (apologies to Facebook) It's Complicated." It's a must read.

I think it important that those who do business with China (and those who don't) understand where China is "coming from" and that includes where China is "coming from" on such issues as Japan. I have received criticisms for even writing about this topic (see my earlier post, "China's Reaction to Japan's Earthquake")as though my not writing about it will somehow make it all go away.

I do not purport to know how the "average" Chinese person feels about Japan or how the "average" Japanese person feels about China, but I have many times been struck by the almost blind hatred the two countries have for each other. Totally rational, urbane, sophisticated, and worldly Chinese lawyers have said horrible things about Japan and vice-versa, that I see as being completely out of character for them.

It doesn't take me to note that there are obviously very deep-seated hatreds between those two countries that cannot simply be swept under the rug. This will be the second (and last) time I raise this issue, but I do want to highlight the really good writing on this issue from a Chinese perspective (note how I say "a" and not "the"). Go read Yajun's post and while you are at it, you should also check out Jeremiah's more historical post on the same issue, entitled, "Envy and Antipathy: Chinese historical attitudes toward Japan."

What do you think?

UPDATE: Colin Spears, over at the World Affairs Blog Network, just did a really good post on "Chinese Responses to the 2011 Japanese Sendai (Tohoku) Earthquake."

In response to what has been transpiring in the Middle East, a whole slew of articles have come out on whether China is ripe for the same thing. I have started reading maybe one hundred of these articles, but completed probably less than a dozen. I stopped reading as soon as it became apparent to me that their authors had no particular expertise and were writing the piece to advance their own agenda of painting China as evil or as a place where you should go to invest (presumably, using the author as your consultant).  

Francis Fukuyama's Wall Street Journal piece on China does not come within either category and it is flat out great. The conclusion (that China is not yet ripe for change) is not what matters. What matters is that Fukuyama engages in real and sustained and substantial analysis. If you read no other article on what we can expect in China, read this one. 

NOW.

Bill Bishop, a China Internet guru, recently did a post on his DigiCha blog, entitled, "China's Internet: The Invisible Birdcage." Not sure I like the title, but I am sure that I like the post itself as it does a great job explaining China's Internet and how different it is from most Western countries.

Because my firm is in a tech center and because so many of our existing clients are in tech or tech related businesses, we get a fairly steady stream of people/companies who come to us ready to make their fortune on China's Internet, without having even the slightest clue how different it is. This article is for them and I highly recommend it for anyone else interested in marketing or selling or whatever on China's Internet. 

What do you think?

UPDATE: David Wolf at Silicon Hutong also very recently did an excellent post on China's Internet. David's post is entitled, "A China Internet Bubble? Maybe…How Much Do You Know?" and I highly recommend that also.  

My friend Josh Gartner recently came out with a new podcast site, China Policy Pod. Josh describes his site as "a podcast covering current business and policy topics affecting China." Though we virtually never add a blog to our blogroll unless it has been around for at least 3-4 months, I just added it because I know China Policy Pod will be consistently excellent.

I have no doubts about China Policy Pod not just because I have been friends with Josh for some time (though that is a factor), but because many years ago he had an excellent blog and, more importantly, he churned out really first rate podcast interviews for AmCham's China Brief Insight over the last couple of years (including an interview with me regarding Joint Ventures in China). The fact that Josh is already three for three with excellent podcasts on his new site also certainly does not dissuade me. 

Josh has a Masters Degree from Columbia University's School of International and Public Affairs and he is a true policy wonk. If you are interested in the China big picture, I highly recommend you check out China Policy Pod. 

For years I used to simply discount Minxin Pei. As China kept rising, Minxin Pei kept talking of its imminent collapse. Though I always appreciated his analysis, I stopped reading him as he became more and more the boy who cried wolf. It has been at least two years (I am guessing) since I bothered reading any of his stuff.

But as my optimism regarding China has been tempering and as I see more and more of my firm's clients starting to view China as increasingly risky, I did something unusual this morning and went ahead and read a Minxin Pei article. It's gloomy, sure, but I found myself agreeing with much of what he was saying and I did not discount a single thing out of hand.  The article is "China's Bumpy Ride Ahead" and I would love to know what you think. Has China changed or is it just me? Who moved my cheese?

I am also going to ask this same question over at our China Law Blog Linkedin Group, which if you have not joined yet, you should.  

CNN China correspondent Lara Farrar, just wrote an excellent story on China's efforts to boost its intellectual property protection so as to better enable it to become an innovation-based economy. The article is entitled, "Keeping things safe: China aims to boost its intellectual property rights," and it nicely highlights Beijing's increasing emphasis on IP and it extensively quotes CLB's own Steve Dickinson. 

It begins by noting how Beijing is seeking to move China from a manufacturing economy to an innovation economy and how this plan includes increasing annual patent filings to two million by 2015. Last year China's intellectual property office granted 815,000 patents, itself a 40% increase from the year before. 

The article then gives Steve THE call out quote: "If you don't think you are going to get sued in China, you are crazy." Steve was referring to how Chinese companies are getting increasingly aggressive at protecting their own IP and they will not hesitate to sue foreign companies they see as infringing on their intellectual property (IP). The article notes how 30,626 intellectual property rights cases were filed in China in 2009, a 25% increase from the previous year. Amazingly, all but 117 of these cases have already been resolved.

The article rightly stresses the importance of registering your IP in China because if you do not register your IP there, you have no protection there:

"If you do not register your IP (intellectual property) in China, that is the equivalent of giving your competitor a royalty free license. If you don't get a Chinese patent that means you have no right to sue.

"[The Chinese] say that if you don't come to China to file, you cannot accuse us of not respecting your own intellectual property because you don't even care to go to the Chinese patent office.

"If China is your largest market, it makes sense for you to budget the most to protect your intellectual property in that market. There is no magic to that."

In 2010, international patent filings from China totaled 13,000 applications, a 61% increase from 2009, the China Daily reported. Dickinson believes that it is only a matter of time before China's domestic courtroom battles are replicated on the international stage.

"Intellectual property is one of the main areas of litigation [in China]. They are really after each other on these issues. They for sure will start to take it overseas. There is no question. The only question is the where and how," he said.

Stan Abrams of China Hearsay concurs: "They are going to be acting like foreign companies in other markets and what do foreign companies do in those markets? They do things like enforce their patents or participate in litigation. The Chinese are going to start doing these in greater numbers."

I recommend you read the full article here.

Anyone who has spent any real time in China has had to deal with a situation similar to that thoughtfully described in this post, entitled, "Breaking the ‘rules’ in China — getting involved when you know you’re not supposed to." The post is about a public fight between a man and a woman and the issue is whether the laowai (foreigner) should get involved and I recommend you read it and give us your thoughts.

Received an interesting email the other day from a loyal reader complimenting us for having maintained our "Alexa ranking" through the "downturn" in blog readership. I then checked our Alexa ranking, which ranking is allegedly based on the number of readers and it looked pretty good, at least as compared with other leading China blogs. I then had one of our legal assistants review the blog rankings of all the China blogs of which we are aware to compare blog rankings for this post.  

I did this because I was mildly curious who is being read and who is not being read and, mostly, to see if there is any correlation between quality and readership. Not surprisingly, there is, in that the most read blogs are all good (I am excluding our blog from this description) though, as you would have guessed, there are some truly excellent blogs that are still wallowing in obscurity.

I also asked her to review whether readership of the leading blogs had, for the most part risen, fallen, or stayed the same. Based on her very quick review, she felt that readership had risen in the last two years for "nearly all of them." The Alexa number given is the overall rank (supposedly based on readership) of each site, with Google at #1, etc. ChinaSmack has the leading readership at 16,850, Shanghaiist is number 2, at 33,438, M.I.C. Gadget is number 3 at 74,426, ChinaHush is ranked number 4 at 88,637, Danwei is number 5 at 123,281, and this humble little niche law blog is number 6 at 173,628 and China Digital Times is number 7 at 190,051 and China Car Times is number 8 at 209,173. Near as we can tell, these are the only China blogs with a ranking of less than 300,000.

All of these blogs have something to say about China that people obviously want to read and so I urge you to check them all out to see which suit you.

I am not exactly sure what all of this signifies, if anything, but it does make me feel good to know we have so many readers and I will say we love 99.9999% of you.

What do you think?

Nothing really new here, but the International Herald Tribune's Business Navigator section just came out with a concise explanation of the etiquette involved in Chinese business dinners. The article is entitled, "In China, Social Evenings Are Considered Part of the Business Routine," and, among other things, it notes the following: 

• Business dinners are "a very important event."  The article does not say this, but I will. If you want to do business with a Chinese company, it really pays to accept their dinner invitation and you should learn the basics of what is, essentially, a ritual.
• Business dinners on the mainland usually start at 6 or 6:30.
• The Chinese host sits at the head of the table facing the door. As the company's guest, you should sit "directly across from him if the table is rectangular. If it’s a round table you’ll be seated to his right.”
• "Paying attention to details...can improve your standing in business negotiations." “Giving face comes through what you say; it can come from body language; it can come through a seemingly gratuitous demonstration that you understand some aspect of the culture; it can come from something like a proper seating chart at a circular dinner table.”
• Never pour your own beverage. Make sure the glasses of those next to you are always full.
• Do not stick your chopsticks into your rice "like sticks into the ground;” Use your chopstick rest.
• Taste everything but do not clean your plate.

Anything missed?

A cllient sent me a link to an MP3 interview a while back, saying he had listened to it and it contained really good information on doing business in China. The MP3 can be found here and it is an interview with James Rice, a businessperson who has been living in China since 1990.

Jim has a long and illustrious China business history. Until recently, he was a Vice President and the Country Manager of Tyson Foods, Inc. Before that, he was a Sales Director at Danone Biscuits in China and the General Manager at Shanghai Danone Yogurt Company and CFO of Kimberly-Clark China. Jim recently took on a new job as CEO of CSM China, a subsidiary of CSM, a Netherlands-based company that is the largest bakery supply company in the world (with over 800,000 employees).

The interview is about an hour long and in it Jim talks extensively about the changes he is seen in China. He sees China as presenting huge opportunities for U.S. businesses and he insists China is actually quite open to Western businesses and products. Rice predicts China’s middle class will in about ten years be about equal to the entire United States population. China is not "bikes and straw hats"; the Shanghai Louis Vuitton store is the company's highest grossing store in the world.

If you want to learn about China business from someone who has walked the walk and knows whereof he speaks, I highly recommend you check out the full interview here.  

What do you think?

This review was written by Miriam Roth, who recently joined our international law firm as a legal assistant/paralegal. Miriam graduated this year with a degree in English Literature from the University of Maryland.  When not working with us, she is an assistant editor at PIF Magazine.

By Miriam Roth

In her newly published book, The Chinese Dream, Helen Wang explores the rise of China’s new middle class: an up-and-coming force that is growing and changing at an unprecedented rate, and also opening a Pandora’s Box of social, political, and environmental issues. As this powerful demographic continues to grow, Chinese ideas and values are becoming increasingly important on a global scale. But to many Westerners, especially those who fear Chinese competition, those ideas can seem strange or threatening.

Taking this reality into account, Wang argues that “oneness” -- understanding and collaboration between East and West -- can and should happen. And the key to this “oneness,” she suggests, might well lie in the very differences that have alienated us in the past.

Having grown up in China and lived most of her adult life in the U.S., Wang speaks from a uniquely informed perspective. Not only is she fluent in both English and Mandarin, but she also clearly understands the subtleties of each nation’s attitudes and values. The Chinese Dream shows the depth of her knowledge in these areas.

But besides her professional expertise, Wang is a talented storyteller with a knack for turning the abstract into the tangible. A truly enjoyable read, the book brings foreign concepts to life through a blend of facts, reflections, and personal experiences.

Wang manages to make sense out of modern-day China’s most baffling paradoxes. Especially interesting is her discussion of the ways in which communist and capitalist values coexist within a single nation -- even within individual minds. Interviewees like Wu Haitao, a Party member who plays the American stock market, show a culture that, Wang explains, is full of ambiguity. One cannot read this book without putting at least a dent in the idea of a stereotypical Chinese.

The Chinese Dream looks at the tensions that trouble China and its relationship with the world: the tensions between old and new, collectivism and individualism, growth and preservation, East and West. Wang understands that though these issues are not going to disappear and may be handled badly, she nonetheless presents a hopeful picture of the future.

Wang’s call for unity never suggests that total agreement can or should be possible. Instead, she argues that ideological struggle is necessary for positive change. She explains how, like Yin and Yang, conflicting countries and ideologies can interact to form a more balanced whole. The U.S. and China, for instance, can capitalize on their different economic policies to counteract their respective trends of overconsumption and over-saving. In this and other ways, the two countries can benefit from one another, not despite, but because of their differences.

The Chinese Dream describes countless possibilities for shared growth, on both national and international levels. For those looking to gain a deeper understanding of modern Chinese society, and those looking to prepare for a new age of globalized collaboration, Helen Wang’s The Chinese Dream is an exciting and timely resource.

Bill Dodson of This is China! Blog fame, is coming out with a book, entitled, China Inside Out: 10 Irreversible Trends Re-shaping China and its Relationship with the World and pre-ordering is now available on Amazon for delivery next month. I am certain the book will be good.

It is going to focus on the following ten "major social, economic, environmental and technological trends that are molding a China":

CHAPTER 1: China's Generation W(eb) – The Great Firewall of China seems monthly to become more sophisticated with growing armies of internet censors and cutting- edge technologies that filter and block web sites, emails, and text messages that promote the free flow of ideas and expression. But how far will government censors be able to go before a cyber- subculture of hundreds of millions of Chinese rebel en masse?

CHAPTER 2: Keeping Up with the Zhangs – Chinese are on average becoming richer, less healthy and more anxious as they eat more, drive more, smoke more, work more with few government assurances their assets and their futures are secure;

CHAPTER 3: Country Mouse, City Mouse – China needs its migrant workers from the countryside to build its cities, and, increasingly, to live in them, with ever increasing stresses between the have's and the wanna have's;

CHAPTER 4: "Not in My Backyard!" – As more Chinese embrace the ideal if not the practice of an American style middle class lifestyle, it is beating records as the world's largest polluter of land, water and air resources;

CHAPTER 5: With the Appetite of a Dragon – China has been on a buying spree abroad as modernization leaves it with less arable land, food, crude oil and other mineral resources. Ultimately, though, it will find water more precious than oil, with dire implications for its neighbors.

CHAPTER 6: China 24/7 – As the East Coast becomes a more expensive and congested place in which to do business domestic and foreign production and infrastructure development is moving to China's hinterlands, where 800 million Chinese literally work day and night to get rich and show it off;

CHAPTER 7: China, At Your Services – The hallmarks of China’s nascent services sector are a lack of civility, little sense of customer care and arcane bureaucracies. If only Chinese hospitals, for instance, were more like the country's wedding industry, where the customer is queen, service level quality reigns and beating out the hundreds of local competitors is a matter of pride.

CHAPTER 8: The Global Sugar Daddy – As China becomes richer its trade practices, currency positions, stock markets, and foreign investments will matter more in the international marketplace, which will increasingly resist opaque Chinese business practices and inadequate quality and governance controls;

CHAPTER 9: Hot Pot Nation - China's allure as the most populace country in the world has for millennia snared foreign and Chinese interests into cultivating and exploiting a source of tremendous wealth and energy. Now, population pressures lanced by the One Child Policy and a rapidly aging population with a below- par replacement rate are becoming national and global liabilities.

CHAPTER 10: In the Shadow of the Emperors – Chinese nationalism and militarization are increasingly filling the vacuum left by the lack of a civil society and the dearth of reflection on the country's modern history, making its neighbors near and far anxious about how aggressively it will fulfill its role as a rising superpower.

I can hardly wait.  

2-6-2011 UPDATE: This book just started shipping today in both physical form and via the Kindle.

China Sourcer Magazine is out with its second issue and it is good. The issue is dedicated to China trade shows and it is chock full of helpful information on what to do before, during, and after a China trade show.  

My favorite part of this issue was actually the Q&A section with the editor (with assistance from PassageMaker). I particularly liked the answer to a question regarding the most common mistakes made by first time China trade show visitors, summarized below:

1.  "In hopes of capturing the attention of the supplier and getting a good price, some buyers overestimate their expected order size. If production gets started and the promised orders don’t start coming in, one will find themselves dealing with a very unhappy supplier. The vendors have to make an investment as well to get an order going and if they feel they have been misled you can expect significant problems ranging from a decrease in service attitude all the way over to a blatant refusal to accept new orders or even to deliver the current lot. A good rule of thumb is to be open about your order size. This will help ensure you find a supplier that is a good match for your situation."

This is so true. Every so often, we get calls from companies that have led their Chinese suppliers to believe they will be ordering 100,000 units and then they cannot understand why the Chinese supplier is seeking to double prices on a 10,000 unit order. I am not aware of any such situation ending well for anyone.

2. "Some buyers come to the trade show without any ideas of what they want to buy, hoping the right product will magically present itself. What happens is that there are so many cool products available at the show that the buyer gets pulled in many directions." 

3. "Production can’t start until the materials have been selected and engineering completed. For those that are buying customized products, another common mistake is to give the supplier only a rough idea of your concept and assume they can do the engineering for you.  

a) Even if you pay them for engineering, suppliers often have the mentality that if they did the engineering, then they have ownership of the design. This is very dangerous if you are creating a custom product and worried about IP leaks.

b) China excels at taking blue prints or well laid out designs and turning them into reality. But the medium and small factories may not have a good pulse on your particular marketplace in terms of government regulations for product safety and materials, let alone consumer preferences."

Again, so true. Chinese factories tend not to be at all good at figuring out how to design what you need or at customizing a product for your market. We find successful outsourcers nearly always give their Chinese suppliers explicit instructions, including listing out the materials. We have also dealt with all sorts of problems relating to who owns what Intellectual Property and most of the time the problem arose because the foreign company "just assumed" the IP would belong to it. If you care about your IP, make sure you have it in writing (preferably in Chinese) who owns what.   

4. "Believe none of what you hear and half of what you see. So true for the trade show. It is key to remember that it’s a SHOW which means the suppliers put their best foot forward. If you want to know the real deal at the factory about quality and lead times for example, don’t rely 100% on the words from the sales people at the booth, make the effort to visit the factory after the show." 

Lots more good stuff in the mag and I suggest you check it out.  

I went to a dinner the other day, attended by a neighbor who is one of the world's foremost experts in some niche area related to cleaning up land sites contaminated by oil. We got to talking about China and he talked of how "about half" the published scientific material he is seeing these days comes from China. I made some comment about quantity not quality, and he immediately shot me down, saying that what he was reading from Chinese scientists was as good as what he was reading from non-Chinese scientists.  He then told me of a professor friend of his in some other niche scientific area who had just been saying how in his area Chinese scientists were doing about 50% of the leading research.

I was somewhat stunned because this goes against the old bromide that we cannot expect innovation in China.  

China is doing whatever it can to improve its scientific research and it seems to be working. A recent article, "The Spark Rises in the East," by Michael Brooks, (h/t China Challenges) talks of how China "could soon lead the world in scientific research," due in large part to Chinese government funding/encouragement:

Science is rising in the east. China's strategies for economic development, which are centred on creating a world-beating science base, don't sound like much. They go by odd names: the 863 Programme and Project 211, for instance, and the Torch and Spark programmes. But they are proving to be more powerful than even the Chinese government could have hoped.

Last year, following a decade of phenomenal growth, China became the second-biggest producer of scientific knowledge in the world. In 1998, Chinese scientists published about 20,000 articles. In 2009, they produced more than 120,000. Only the US turns out more.

According to figures released this year by the US National Science Foundation, there are now as many researchers working in China as there are working in the US or the EU. The state is encouraging Chinese scientists trained in the west to return home, offering them enormous salaries and access to world-class laboratories. In 2008, for example, the molecular biologist Yigong Shi, one of Princeton University's rising stars, walked away from a $10m research grant to set up a lab at Tsinghua University in Beijing. In January, the Chinese equivalent of the US National Institutes of Health was unveiled with £150m in its pockets, which will be distributed to new medical research projects.

China's rise in science is already impacting the West.  

Canny European and North American scientists are already reaching out to China. The number of east-west collaborations has doubled in the past five years and organisations such as the UK Research Councils, the British Council and the US National Science Foundation have made brokering such partnerships a priority.

According to Rainer Spurzem, an astronomer at the University of Heidelberg in Germany and the National Astronomical Observatories of China, collaboration with Chinese research­ers is important because science in China is growing so fast. Not to pull these scientists into the international research effort "would be a loss for all sides", says Spurzem.

Those who don't collaborate with their Chinese peers risk becoming second-rate. Given the sheer volume of Chinese researchers, they will come to dominate various fields; only through collaboration will western scientists know what is going on behind the scenes. "If you've missed out on the background thinking behind published papers, you don't know what was tried and dropped," Adams says.

Though China is doing the right things on funding, it still has room for improvement when it comes to "attitude, atmosphere, synergy, culture." According to various scientists, "the western tradition embraces adversarial debate, while the eastern approach is characterised by Confucianism's search for harmony:" 

If China is serious about conquering the world of science, its culture will have to change, Wang says, because the less hierarchical western tradition produces better results. "At the moment, when a well-respected senior scientist gives a seminar in China, you don't often see junior scientists stand up and criticise the ideas," he says. But this is how scientists make progress. "In science, by its very nature, young people come up with new ideas; one generation passes another. This is something that the Chinese need to achieve."

The article goes on to note how Western and Chinese scientists can benefit from the other:

[T]here are upsides to the differences between east and west. Chinese scientists will bring a fresh approach to western research. "The analysis of a problem, what they think of as the most interesting element and the tools they use will be an important part of development of some fields," Adams says. In the short term, however, great innovation is unlikely. For the next few years, China's dominance will be most visible in areas related to its economic well-being.

Is what is true of pure science also becoming true of product innovation?  What do you think?

Since 2007, the Experience Not Logic blog was a vital China law blog. Then, in late 2009, it went silent as its founder and driving force, Will Lewis, embarked on his LLM in Tax from NYU School of Law, where he focused on international transactional tax. Now that Will has graduated he is back to blogging. 

I was delighted to hear this and after securing written assurance from Will that he is back to stay, I immediately put his blog back on our blogroll. Will is extremely bright and thoughtful and his blog has always reflected that. 

The more serious China law bloggers (and China bloggers), the better the discussion. I urge you to read Experience Not Logic. 

I have had the blog iLook China on my blogroll for the last few months and I have to say that I only read its frequent postings maybe half the time.

It is often too intellectual, too historical, too tangential, and, most importantly, too pro-China for me. But it just occurred to me that I was not being fair in not listing it on our blogroll. It is a thoughtful blog with an oftentimes original take on China issues and my sometimes disagreeing with it is not a good reason not to have it on our blogroll.

Just to be clear, I am not listing it just because it has a different viewpoint; I am listing it because it is well-written and thoughtful. Just by way of an example, check out the post, "The Sky is Falling in China but only in China," which discusses the unfairness of a Los Angeles Times story using one recent crash as evidence of how China's airline safety is slipping. 

iLook China is written by Lloyd Lofthouse and its tag-line is "looking at China from an outsider's point of view."  Lofthouse describes his blog as follows:

For outsiders, there are many misconceptions about China, and the Western media often does not get it right (at least in the way they interpret why something happens the way it does in China). My goal is to create a place where people outside China may discover China’s history, country, culture and government and to understand better.

I’m sure that I will be making some Americans angry. Some may even feel I’m a traitor when I compare American culture to China and find America lacking. Since I was born in America and worked here for forty-five years before I retired from teaching in the public schools, American culture is the only one I can use in my comparisons.

Who is Lloyd Lofthouse? Well, he lives in the belly of a Chinese family, and he earned a BA in journalism after fighting in Vietnam as a U.S. Marine. While working days as an English teacher at a high school in California, he enjoyed a second job as a maitre d’ in a multimillion-dollar nightclub.

He now lives near San Francisco with his wife, with a second home in Shanghai, China. Lloyd has traveled to China often since his first trip in 1999. He has also spent a decade researching China, and his first two novels are about China.

Lloyd’s first novel, My Splendid Concubine earned honorable mentions in fiction from the 2008 London Book Festival, 2009 San Francisco Book festival and the 2009 Hollywood Book Festival. His second novel, Our Hart, won honorable mentions in fiction at the 2009 Nashville Book Festival, the 2009 London Book Festival the 2009 DIY Book Festival, and the 2009 Los Angeles Book Festival

His short story, A Night at the Well of Purity, was named as a finalist for the 2007 Chicago Literary Awards. He also writes The Soulful Veteran, a Blog about the Vietnam War, combat and Post Traumatic Stress Disorder.

I was emailing with a fellow China blogger earlier today about intemperate comments on our respective blogs. I told this blogger that I actively enjoy deleting comments from those who have nothing to do but to attack me or others personally, but that, somewhat paradoxically, I love getting comments from serious people who completely disagree with me. I love getting those comments for many reasons. First off, it shows I am reaching those who disagree with me, which means I am doing more than just preaching to the choir. Second, I am more likely to learn something from those who disagree with me than from those who agree. Third, I believe our readers should see both sides of issues and appreciate seeing both sides of issues. I see my role as presenting my side of an issue and therefore it is up to others to present the other side. If I fail to publish comments from those presenting the other side, I am doing our readers a disservice, particularly if the opposing opinions are well-reasoned.  

Since you-all are big boys and girls capable of thinking for yourselves, I have added iLook China to our blogroll. I should have done it sooner. 

What do you think? 

For years now, Beijing has been doing its darndest to encourage foreign investment in Xinjiang and for years now, it seems very little of that has been happening. My firm did some work for a German food company that was buying product from there and for an oil services equipment company that was supplying product to there and I came "this close" to going to Urumqi for a couple of depositions in a case that settled only weeks before the depositions were to occur, but that is it. i can tell you though that if you ever need to conduct a deposition in Urumqi and have it filmed and broadcast over the internet, the Sheraton there seems to be the place for that.

Though near as I can tell not much is happening in Xinjiang for Western business, it is (or at least it was) a fairly prime tourist destination. If you are planning to go there for any reason, you should check out the FarWestChina Xinjiang blog which just came out with a really good post, entitled, "FarWestChina Xinjiang Travel Resources," setting out a host of excellent links for those travelling to Xinjiang.  

Urumqi is actually the answer to one of my favorite trivia questions; what is the most remote city from any sea in the world (per the Guinness Book of Records)?  

Any of you done any business in Xinjiang.  

Excellent and thought-provoking article at Knowledge@Wharton, entitled, "Turning Shanghai into a Global Financial Hub: So Much to Do, So Little Time."  The article focuses on Shanghai's very public plans to become an International Financial Center by 2020 and debates whether that is going to happen: 

While Shanghai might be big, can it be international? A new Goldman Sachs report titled, “Shanghai in 2020: Asia’s Financial Centre,” argues that although the city will gain in importance, it is more likely to “become a large domestic market rather than a broader regional market.”

But that's not what city officials have in mind. They don't want Shanghai to be like Tokyo or Seoul, both of which are impressive and vibrant cities at the hearts of their respective nations but aren't -- as Shanghai wants to be -- at the absolute center of the global economy, whether in capital markets, trade or commerce.

For that to happen, Shanghai needs two things from the central government: The full convertibility of the RMB and the relaxation of controls allowing the free flow of currencies in and out of the country. 

Go here for more. What do you think?

The Wall Street Journal has up a fascinating and illuminating graphic on the Chinese diaspora. This graphic depicts where Chinese have settled around the world. I knew Peru had a lot of Chinese, but would never have guessed 1.3 million. I also knew Thailand and Indonesia had a ton of Chinese, but surprised they each have more than 7 million.

Check it out. 

Taikongren's Advice Blog has a nice post setting forth and commenting on many of the various issues swirling about these days on labor in China. The post is entitled,"Taikongren’s definitive 'What’s happening with Chinese Labor' post," and it does a very good job setting out China's labor situation and raising some interesting issues attached to that. If you want to know more about China's current labor situation, I recommend you read it.

Taikongren asserts the following: 

1. Wages in primary manufacturing areas are rising.  

2. Wages are rising due to a shortage of workers.

3. Wages rising in China's interior are causing coastal wages to rise. 

4. Foreign investment should be headed to second-tier cities and to the interior, but this is not really happening much. 

5. Some capital-heavy manufacturing companies have decided to move back to the US. NOTE: I am NOT aware of this happening.  

6. China should start making higher end products to fit its more-expensive industrial base.  

7. The strikes of the Honda Factory and Foxconn suicides are often linked in the news but they are not really related. 

8. The government is promoting higher wages. 

9. China's Labor Law is empowering China's workers. 

10. What is going on with strikes and other labor issues at the State Owned Entities?  NOTE: I have been wondering the same thing and I asked this question over at the China Law Blog Linkedin Group. 

11. Chinese workers are using the internet and cell phone text messages to organize their labor protests.

In an unfortunate bit of pique that mars an otherwise thoughtful post, Taikongren pokes fun at Rebecca MacKinnon, for having told the New York Times that "QQ is not secure" and for having been described by the New York Times as “a China specialist." I do not believe the average New York Times reader knows what QQ even is, much less that the Chinese government monitors it. I also feel I must note that Ms. MacKinnon is widely considered (by me too) as one of the most knowledgeable Westerners on China's Internet.

Though non-lawyers who deal with China love to talk of how "uncertain" everything legal is there, the boring reality is that we lawyers who constantly deal with Chinese legal issues tend to read things there the same way nearly every time. Sure we sometimes jabber back and forth about whether it is better to arbitrate in Hong Kong and then try to get the arbitration award enforced in Shanghai, or just arbitrate in Shanghai from the get go. But on the big issues, there is usually no dispute.  

We lawyers generally think alike when it comes to legal issues.

I thought of all this after just having read a really phenomenal post by Stan Abrams over at his China Hearsay blog. The post is about a United States cleantech company that is extolling how much more cooperative the Chinese government is than the United States government. Stan entitled the post, "U.S. Tech Startups: China Is Coming For You" and I am not sure whether he intentionally sought to reference the horror movie idea of a monster coming for you, but if he did not, he should have.  

To grossly summarize Stan's post and to add my own probably blunter spin to it, the post is says the following:

1.  The media story on which Stan's post is based is really vague. It is certainly vague if you are a lawyer trying to figure out what is really going on. This only increases the sense of dread. Who and what is really lurking out there?

2.  The article along with probably 98% of its readers are of the view that everything is and will be great for this US company in China. Stan sees a big giant IP sucking zombie with a bloody axe.

3.  Stan is trying to remain calm, but he is completely freaking out.

Me, I am so worried for this U.S. company that I could only scan the post once and now I cannot even return to it. I am not kidding. Reading that post was like getting punched in the stomach (actually even lower, but no need to get graphic here). It is like seeing a little kid on a train track and then realizing a train is rapidly approaching. It really is that bad and if you have been involved with China (or really any other emerging market economy), you know exactly what I am talking about here.  

I just hope the kid jumps off the track before it is too late.  

Read Stan's post and let us know how it makes you feel. 

Very good post over at the Foreign Entrepreneurs in China blog on how to handle your China outsourcing arrangements. The post is entitled, "12 Tips for Negotiating and Dealing with your Suppliers in China," and it imparts good, solid, common sense information. Here are my five favorite tips:

1. Know who it is at the company who makes the decisions and make sure you are dealing with that person.

2. "Make them recap the agreements, do not assume they understood just because you feel you were clear enough"

3. Assume there will be delays.

4. Once you build the business relationship, payment terms get easier.

5. "Do not get obsessed with the cheapest deal"

Go here for the other seven and for a bit more by way of explanation.

Absolutely excellent, must read piece in today's New York Times, entitled, "Foreign Companies Chafe at China's Restrictions." Better than anything else I have read, this article, written by Keith Bradsher, conveys what foreign companies have been facing in China recently.

The reality is that China is simply less excited and less desirous of foreign direct investment now than it was even as recently as one year ago and it is putting up hurdles against it. I intentionally used the word hurdles (and not roadblocks) because my clients have so far been able to jump over the new obstacles thrown their way.

If you are doing business in China or thinking of doing business in China, I urge you to read Bradsher's piece. For more on how China is tightening the noose around foreign investment, check out the following:

-- China's Changing Worldview Is Bad For Your Business.

-- With China's New Standing Come New Errors.

-- China Whets Its Enforcement Appetite. And It's YOU It Wants.

-- China Business And Regulation. The Times They Are A Changing.

-- Foreign Business In China. Can't Live With 'Em, Can't Live Without 'Em.

-- Foreign Investment (FDI) In China. The Glass Is Half Empty Not Half Full

What are you seeing out there?

A few years ago, I went all gaga over a new blog that had produced all of two posts. The two posts were incredibly well written, incredibly insightful, and incredibly original. I immediately determined that this great light (discovered by me, of course) should be introduced to the world so I did a post on his blog and put it on our blog-roll. I cannot even remember that blog any longer, but what I do remember is that it never came out with another post. Apparently my kudos either convinced him he had achieve the pinnacle and there was nothing left for which to strive.

in any event, after that I instituted my own "sand-box" rule, which held that blogs must have been in existence for at least a reasonable time before I put them on the blogroll. For years I stuck by the rule, but today, I'm gonna throw caution to the wind and put china/divide and The China Tracker blogs on to the blogroll before their time. I hereby create the just too damn good exception.

Other than its failure to capitalize its name (which drives me crazy and has caused me to violate another of my longstanding rules to capitalize every single word in every single blog post title), china/divide is perfect. Back in my more conservative days, in a post, entitled, "China/Divide. I Will Keep My Wits About Me" (I capitalized all words back then to), I wrote the following about this blog:

The blog that nearly caused me to lose my head is China/Divide and though it is brand spanking new, what got me all aflutter are the people behind it and its stated mission. The people behind it are Stan Abrams, whose China Hearsay blog has always been one of my favorites. Charles Custer, who has been banging out great stuff for quite some time over at the China Geeks blog he founded. And Kai Pan, the lead writer over at CnReviews, yet another truly top-flight China blog. I have to believe that any blog combining these three really thoughtful people will be superb. It would not be an exaggeration to say that these three people have produced some of the deepest, most thought-provoking blog posts out there on China.

I was right to have gotten so all aflutter as it has consistently turned out great stuff, controversial stuff (that's a good thing), thoughtful stuff, and, on top of all that, generated a ton of good comments. It has also had some interesting pictures as well. It is a terrific blog and I have concluded I am doing our readers a disservice by leaving it off the roll.

China Tracker is even newer, but after reading a trio of excellent posts all put up today, I realized I could no longer justify leaving that blog off the roll either. China Tracker has been put together by Forbes and it consists of an all star cast of China bloggers. Paul Denglinger posted today on "Why Hong Kong is China's New Tech Hub," Ray Kwong posted on "How Multinationals Can Compete In China," and Bill Bishop posted on Facebook's China plans in "Has Facebook Hired Several Google China Engineers?" All good stuff.

Am I forgiven?

I typically receive (unsolicited) maybe two to three China books a month from publishing houses hoping for positive reviews. My decision on which book to read is based on my own somewhat random logic. I choose the one I believe will best match the length of my flight. I just got back from speaking at the ABA International Law Section in New York and I picked the perfect book,China in the 21st Century: What Everyone Needs to Know. The book is by Jeffrey Wasserstrom and it takes maybe five hours to read. Wasserstrom teaches Chinese History at UC-Irvine and is also one of the founders of the China Beat blog.

The book is part of an Oxford University series, "What Everyone Needs to Know." Wasserstrom nicely explains the goals of the book on the Huffington Post:

It would be inaccurate, though, to claim that there was nothing I'd said or written that served as a building block for this new book. This is because the questions I chose to include were culled largely from the many that have been put to me during the last decade by students, colleagues, strangers sitting next to me on long flights to Asia, school teachers at outreach events, and people I have run into in unexpected places who after learning that I teach and write about China for a living told me what they had always wanted to know about that country. The book gives me a chance to refine the off-the-cuff answers I have given to these queries and try to weave a large collection of responses to disparate questions into a lively presentation of where China has been lately and might be headed. In the process, I am also offered the opportunity of working to unsettle common misunderstandings about China that I feel hinder the ability to see it for what it is--a place that is amazingly complex but by no means "inscrutable" (a word that still shows up far too often, generally without the scare quotes, in discussions of the place and its people).

In a sense, then, as those who have read my posts to this blog and commentaries for related venues will realize, the book can be seen in part as a long-long-form version of the often very short pieces of writing I've been publishing frequently in recent years. (Long-form, but not that long, as China in the 21st Century is still plenty short enough, as political scientist Susan Shirk pointed out in her very nice endorsement statement for the back cover, to be read in-flight between taking off from one side of the Pacific and touching down on the other.) And, in fact, when I've written blog posts or newspaper commentaries, I've often done so in part to try to answer or place into a radically new light a question put to me by someone who was curious to learn more or I felt had gotten a distorted idea about China.

Part I of the book is entitled "Historical Legacies" and it is broken down into the following subsections:
1. Schools of Thought
2. Imperial China
3. Revolutions and Revolutionaries

Part II is entitled, "The Present and The Future" and ot consists of the following subsections:
1. From Mao to Now
2. US-China Misunderstandings
3. The Future

The book also has a very thoughtful section on "Further Reading."

It is either not out yet or just came out this week and there is only one review on Amazon so far, but it is quite accurate:

"China in the 21st Century" provides a good background on China, though it is rather bland reading. In addition to providing background on China, Wasserstrom also addresses important issues (eg. "Is war likely over Taiwan?") in a even-handed manner. The author also brings appropriate focus - eg. reminding readers that even though intensively competitive, about 70% of its largest businesses are still state-owned. However, the book lacks any solid projections for the future - especially China's economics.

It is only about 150 pages and judged within that confine, it does an amazing job. My knowledge of Chinese history comes mostly from a few college courses and from current event readings that make brief mention of relevant historical events. I found reading the history section of the book very helpful and enjoyable because it pulled together in a coherent format much of what had been floating somewhat disjointedly in my head. If you are anything less than a true China history expert, I guarantee this book will serve either as a great starting point for you or as a great refresher. Wasserstrom does a great job explaining both what happened and its relevance/impact on present day China.

And though I already consider myself pretty familiar with China today, I enjoyed that section as well because Wasserstrom does a great job explaining China's current situation and the influences of its past. On the more controversial issues, like Tibet, for instance, he clearly tries to be evenhanded and he also tries to explain China's position in a way Americans can understand. He does this by analogizing Tibet to Hawaii and asking how Americans would feel if Hawaii were to seek independence.

This is not a book you are going to love, but it is a book that will serve you well and shore up the weak areas in your China knowledge and reinforce your strong suits. Unless you just got your degree in Chinese history or are teaching it, <China in the 21st Century: What Everyone Needs to Know is a book you should read.

UPDATE: Adam Daniel Mezei has done a masterful (and thorough) review of the book in his post, entitled, "Finally, a Guide for the Perplexed! China in the 21st Century: What Everyone (Yes, Everyone!) Needs to Know." I did disagree, however, with Mezei mentioning how China experts might skip the first half of the book, dealing with China's history. Though the first half of the book will seem familiar if you have taken Chinese history 101, it does serve as a great refresher and if you are no a Chinese historian, I guarantee there will be some things in there that you have forgotten or just never knew. I am not one of those people who believes history predicts everything, but I do believe that knowing a country's history borders on essential for knowing the country.

6-7-2010 UPDATE: The Asian Review of Books just did a nice short review of the book here.

8-26-2010 UPDATE: Xujun Eberlein at Inside-Out China just did an excellent and very positive review on the book.

10-10-2010 UPDATE Matt Schiavenza just gave it a very good review here.

The International Law and Policy Blog is just out with a post that very nicely summarizes various positions on China's currency. The post is entitled, "Summary of China Currency Views," and it seeks to do the following:

I thought it might be interesting to gather up the various views that have been expressed on the China currency issue. I have two key questions in mind:

1) Is the Chinese currency peg at an (allegedly) undervalued rate bad for the U.S. economy/global economy?

2) If it is bad, what is the appropriate response?

Here's a brief rundown of some views expressed by prominent bloggers/op-ed writers/others on each point, in no particular order.

It does a nice job setting forth the various views and providing good links to people who put forth various well-reasoned arguments for all sorts of positions. I could not read it without thinking of one of my favorite economics jokes:

An economist, a physicist and a chemist are stranded on an island with one unopened can of food. The physicist suggests they roll the can down a hill where it will strike a rock which will pierce the can and release the food. The chemist suggests they cool the can in the ocean then heat it in the sun so as to cause the can to burst. The economist suggests they assume they have a can opener.

What do you think?

China Real Time Report just put up an excellent post by Professor Stanley Lubman on the state of the environmental laws and enforcement in China. Entitled, "Strengthening Enforcement of China's Environmental Protection Laws," its first and last paragraphs nicely summarize the post itself:

In the face of ongoing serious damage to China's environment caused by 30 years of historic economic development and weak enforcement of China's environmental protection laws, environmental litigation is growing and a small number of experimental environmental courts have been established. The growth of rights consciousness and citizen concern about the dangers of uncontrolled pollution has also stimulated suits against polluters brought both by citizens and public interest environmental NGOs.

* * * *

As is the case with law reform in general, much depends on the political will of both central and local governments, in this case to encourage the development of environmental courts and the exercise of judicial discretion to meet the challenges of limiting China's environmental degradation.

If you want to know what is happening in China's courts with respect to the environment, Professor Lubman's post is a must-read.

UPDATE: For a grittier perspective (pun intended) on China's environment, check out Peter Foster's post, entitled, "Beijing sandstorm: we are experiencing environmental meltdown."

Plus8Star blog has an excellent post up on Beijing's technology "scene." The post is an interview consisting of the following questions (with answers):

1. What’s the funding scene like in China and where are some of the incubators and resources Chinese entrepreneurs can look to?

2. How did the technology scene in China emerge and who are the leaders?

3. In your opinion, who are the up and coming web-based startup companies in China to watch out for?

4. How have Chinese politics and culture scene shaped the types of startups emerging?

5. What government resources are available for entrepreneurs?

6. Other than Mobile Monday Beijing, where can Chinese entrepreneurs go for China-specific events and news?

7. Can you make a case for moving or keeping your startup in China?

Though labeled as an interview on Beijing's tech scene, it really covers China as a whole and I recommend the post to anyone interested in China's emerging tech scene.

Every month or so, I get an email from someone asking me for my views on their starting a business in China. These emails usually come from someone who has been in China for a year or so at a really low paying job or from someone who just recently graduated from college in the United States. I typically respond with one or two sentences of lawyer advice, something along the lines of the following:

I really do not know what to tell you, never having been an entrepreneur in China myself, but from the perspective of a lawyer who spends his life representing companies (including start-up companies there), I can tell you that it is going to be much more difficult and more expensive for you to start a company there (at least legally) than in the U.S. For an on the ground view of what it takes to be a foreign entrepreneur in China, you should read Sam Goodman's book, Where East Eats West.

I am now also going to tell them to read Rand Han's recent post, entitled, "Confessions of A China Entrepreneur." This paragraph both tells you what Rand's post will be about and why you absolutely should read it:

So in the interest of fully answering the “China Entrepreneur” question, I’m going to take those of you not already bored with this article down memory lane, and reflect on how many times I got my assed kicked, punched, and handed back to me in a beautifully arranged gift basket during my journey through China’s “wild wild east” business frontier… from the street level looking up.

The post is a no holds barred history of Rand's Shanghai-based advertising agency Bloody Amazing and his just-formed digital social media agency, ZeroDegrees. Though it does ramble a bit at times (which Rand admits and which really only adds to its charm), doing so it only makes us better "feel" what it is like to go through starting a business and becoming an entrepreneur in China. I am hoping this is only part 1 of a series.

About four months ago, in Part I of this series, I promised we would go through our blogroll and justify and expound upon each blog, five by five. A couple of months ago, I did part V of this series. This is the sixth of this slowly running series, where I explain, in alphabetical order, why it is that each blog managed to qualify for our blogroll under our admittedly "slippery, vague, and subjective criteria:"

Our blogroll basically consists of those blogs we like and which we think our readers will like or should be reading. We tend to like blogs that are unique in their content, well written, or consistently helpful. If we really like a blog, it makes it on no matter what. The less we like the blog, the more we have to believe it can be helpful to our readers. If a blog has not posted for a couple of months, we start seriously consider removing it from the rolls. Three months and it is usually removed. We obviously focus on China related blogs and, within that, we generally focus on those blogs related to law or business.

So without further ado, the sixth five in our alphabetical list:

China Hearsay. China Hearsay is written by my friend and fellow lawyer, Stan Abrams, who has been practicing law, mostly on the IP side, in China since 1999. It is subtitled, China law, business & economics commentary, and that's exactly what it is. Nearly daily, Stan provides us with insightful comments on China, with a much more political and social slant than this blog. I never miss a post and I urge you to do the same. Stan has recently branched out to form one third of the triumvirate writing for the new China/divide blog.

China Solved. China Solved drives me nuts. It is an excellent blog written by another friend of mine, Andrew Hupert. Andrew describes himself as "an experienced management consultant based in Shanghai. Previous to setting up house in Shanghai almost 6 years ago, Andrew lived in Taipei, Hong Kong and New York. In addition to consulting for MNCs in Shanghai and writing about China success strategies, Andrew lectures at New York University's Shanghai campus on international negotiation." All true but probably too modest. Andrew is an NYU MBA who really knows China business and does a great job writing on it. I swear that I end up writing on about half of Andrew's posts, which is probably a higher percentage than any other blog. So why does it drive me nuts? Because Andrew has a disconcerting tendency to get really busy and not write anything on his blog; his last post was about a month ago. But stay with it for the gems.

Chinalyst. Chinalyst is not really a blog. It is essentially a blog amalgamator that provides "a steady stream of updates from member blogs writing about China." It is a good place to go to keep up on the China blogosphere (particularly newer blogs) and every year it puts on its own best of China blog competition.

China Sourcing Blog. The China Sourcing Blog is put out by The Beijing Axis, which describes itself as "a cross-border business bridge to/from China in three principal areas: Strategy, Sourcing and Investment." This blog is a great source for studies and statistics on China manufacturing and business.

China Tax Insights. Matthew McKee, an Australian tax lawyer based in Beijing is the force behind China Tax Insights. Though I pride myself on hating tax law, I am a regular reader of Matthew's blog because, unfortunately, the importance of tax law to China business has been and will continue to increase exponentially.

More to come....

What do you think?

I long ago created an arbitrary rule saying that I would not put a blog onto our blogroll until it had been around for at least three months. I instituted this rule after raving about a brand new blog, putting it on the blogroll, and then having it never put out another post. So never again, though I have to admit I at least thought long and hard about it today.

The blog that nearly caused me to lose my head is China/Divide and though it is brand spanking new, what got me all aflutter are the people behind it and its stated mission. The people behind it are Stan Abrams, whose China Hearsay blog has always been one of my favorites. Charles Custer, who has been banging out great stuff for quite some time over at the China Geeks blog he founded. And Kai Pan, the lead writer over at CnReviews, yet another truly top-flight China blog. I have to believe that any blog combining these three really thoughtful people will be superb. It would not be an exaggeration to say that these three people have produced some of the deepest, most thought-provoking blog posts out there on China.

And I love their mission statement:

China/divide is a group blog three incredibly awesome guys started to write socio-political commentary on modern China issues, how China relates to the world, and how the world relates to China.

Still here? Wow, okay…well, china/divide is also a place to escape from the wingnuts, from the rabid Chinese hyper-nationalists that think the world is out to keep China down on one side, and from the annoying self-righteous foreigners that think China is the definition of pure evil on the other. We like to think of ourselves as moderates, as being in the middle of this divide.

We’re middlenuts.

Which is fine, because we want to be reasonable and fair, to think critically about complicated problems, to challenge misconceptions and prejudices, and to recognize the good points whenever and wherever they are made.

So yeah, china/divide is us sharing what we’re interested in, what we know, and what we think. But it’s also a place for anyone genuinely interested in having interesting, intelligent, and honest conversations about China and all the insanity that surrounds it. If that sounds like you, we welcome you to share your comments with us and get involved in our discussions and debates.

Power to the middlenuts!

There seem to be two schools of thoughts regarding China's economy. One school says everything is fine, China is different, and we should expect 10% GDP growth for the foreseeable future. Hakuna Matata.

Then there are those who say China's economy is a bubble and a meltdown is coming. Soon. Some of these people have been saying this for ten years, others for just the last year or so.

I do not have an opinion on where China's economy is heading because am not an economist and, even if I were, it would take me hundreds, maybe even thousands, of hours of intense study and analysis to be able to formulate my own opinion, as opposed to simply cribbing the opinion of someone I trust who has actually done all of that work.

But I always find well a reasoned analysis of China's economy interesting and this one, by Vitaliy Katsenelson is certainly interesting and thought provoking. Katsenelson, the Director of Research / Portfolio Manager at Investment Management Associates, sees China as bubble and he has a well-reasoned slide show to back up his contentions. The slide show is entitled, "China – The Mother of All Black Swans."

What do you think?

The China Sourcing Blog has an interesting post, entitled, "China and India: A Comparison in Sourcing Potential," on the similarities and differences between China and India when it comes to product sourcing:

There are many similarities between China and India in today's global-economic climate. Both have over one billion citizens, both have experienced resilient growth in output, and both have greatly expanded their roles in international trade. The relatively inexpensive yet well educated workforces of these two countries have made them key prospects for the sourcing of manufactured goods. Yet differences remain in their supplier and logistical capabilities which must be taken into account by the sourcing professional.

The post sees both India and China as "capable of world class manufacturing processes." The two countries are fairly close in terms of factory productivity, but (and no surprise here) China outperforms India on infrastructure and logistics which "may explain why India is a more common site for the outsourcing of services, particularly IT services, which do not require a physical good to be brought to market." The post concludes that both are viable countries for product sourcing:

However, India should not be entirely discredited as a sourcing destination for manufactured goods. Both it and China have allocated over 10% of their GDPs toward infrastructure development which will enhance their future logistical abilities in bringing their products to the world’s consumers. The greatest similarity between China and India: neither can be ignored by the sourcing professional.

What do you think? I would particularly love to hear from people with sourcing/manufacturing experience in both China and India.

A few weeks ago, a client who will be opening a factory in China within a couple of months told me how much he has been learning about China by following people on Twitter and following their news links. He then asked me who if I had a list of "China people" he should be following.

I said about all I could tell him is that he should go through the people I follow on Twitter and pull out those related to China. The problem there is that I follow about 900 people and many of them have absolutely nothing at all to do with China. This morning, while perusing Ad Age China, I came across an excellent article by Normandy Madden (yes, she was named after the region in France) entitled, "25 China Experts You Should Follow on Twitter" and, with one giant caveat, it is a really good list.

The caveat is that I do not believe any of the 25 people on the list are China experts (myself included) and I would guess all 25 would agree with me on this. Calling someone a "China expert" is like calling someone an expert on the United States. There are no U.S. experts. There are US historians expert on particular historical periods. There are US economists, expert on particular aspects of the US economy. There are US lawyers, expert on particular aspects of US law. Etc., etc., etc. Same is true of China. Having said that, here's the list:

William Bao Bean, venture capitalist at Softbank focused on early stage tech, media, telco and consumer investments in Asia
Follow: @williambaobean

Sage Brennan, independent media and internet analyst and TEDx organizer in Shanghai
Follow: @sagebrennan

Richard Burger, blogger and editor at the Chinese newspaper Global Times
Follow:@ThePekingDuck

Simon Cousins, CEO of the PR and strategic communications agency Illuminant Partners in Beijing
Follow: @illuminantceo

Thomas Crampton, director of digital influence, Asia-Pacific at Ogilvy & Mather in Hong Kong
Follow: @ThomasCrampton

Oli D., Shanghai-based blogger
Follow: @djodcouk

Paul Denlinger, ex-VP at Chinadotcom and founder of China Business Strategy, which advises internet startups
Follow: @pdenlinger

David Feng, founder of Civitology, a network of mass transit-based China city sites
Follow: @DavidFeng

Andrew Galbraith, deputy editor, China Economic Review in Shanghai
Follow: @apgalbraith

Jeremy Goldkorn, founder and editor In Chief of Danwei.org in Beijing
Follow: @goldkorn

Dan Harris, China law blogger
Follow: @DanHarris

Lonnie Hodge, CEO at CFM, Asia Director at Pitchengine, Educator and Social Median
Follow: @lonniehodge

Kaiser Kuo, Beijing-based China tech watcher, Youku.com consultant and guitarist in one of China's top heavy metal bands, Tang Dynasty
Follow: @kaiserkuo

Ray Kwong, Asia market entry adviser in Beijing
Follow: @raykwong

Andy Lee, digital media and finance consultant in China
Follow: @andylee

Kevin Lee, magazine brand manager and integrated media strategist in Beijing
Follow: @kevinkclee

Kristie Lu Stout, Hong Kong-based anchor/correspondent on CNN International
Follow: @klustout

Ryan McLaughlin, writer and web designer in China
Follow: @thehumanaught

Will Moss, American spin doctor in Beijing
Follow: @imagethief

Jay Oatway, Hong Kong-based journalist covering tech news, culture, digital media, trends and social media
Follow: @JayOatway

Philip Pan, Moscow bureau chief of the Washington Post, formerly based in Beijing, author of the book "Out of Mao's Shadow: The Struggle for the Soul of a New China"
Follow: @panphil

Adam Schokora, manager, digital, China at Edelman in Shanghai
Follow: @ajschokora

Dan Washburn, writer and founding editor of Shanghaiist
Follow: @danwashburn

Steven Weathers, TV host, video producer and founder of American English Circle in Shanghai
Follow: @sdweathers

David Wolf, communications strategist in Beijing
Follow: @wolfgroupasia

I sent this list to my client and told him this is a great place to start but that plenty of people are missing from this list. Who would you add? Do you know of any other good lists?

The China Online Marketing Blog recently did an interesting five part series of posts discussing the various methods of making online payments in China. Even three years ago, these payment were barely being used at all and though their usage is nowhere near the levels in places like Korea or the United States, they are increasing at an incredible pace. Part 1 on Alipay is here, part 2 on Tenpay is here, Part 3 on online bank transfers is here, Part 4 on credit card payments is here, and part 5 on China Mobile payments is here.

If you are running an online business that takes payment from/in China, I recommend you check out this series.

Really excellent post up at the just discovered (by me) Switchboard blog. This blog is put out by the NRDC (Natural Resources Defense Council) and the post is entitled, "China Renews Its Commitment to Renewable Energy." The post is written by Sara Schuman, a "visiting attorney" in the NRDC's Beijing Office. The post discusses what it sees as two "significant changes" to China's Renewable Energy Law brought about by the December 26, 2009, amendments to that law: "(1) the addition of measures intended to better implement the Mandatory Connection Policy and (2) the streamlining of the renewable energy fund that provides the financial incentives for the renewable energy industry."

I recommend Ms. Schumans' post for anyone with an interest in China's Renewable Energy Law.

Great discussion budding over at the Linkedin China Law Blog Group among some really knowledgeable China people on whether there really is such a thing as top Chinese brands in the worldwide market and if and when there will be such a thing.

David Dayton of Silk Road International blog started the discussion by laying down the gauntlet by proclaiming not now and not likely later either. He then he took the ball with him by posting on it over at his own blog in a post entitled, "Famous Chinese brands and other things you've never heard of."

I urge you all to go here to join the fun.

Now that everyone knows garnering all 1.33 billion Chinese as customers for your product or service is unrealistic, selling to China's youth is the new holy grail.

But who are China's youth and what do they want? Seeing as how I do not profess to having a clue on those questions in my own country, I am not even going to begin to try to answer those questions regarding China. But I do know enough to know that plenty of Chinese parents are not unwilling to shell out big bucks for their kids and that there is plenty of money to be made by catering to China's youth. I would estimate that around half of my firm's consumer-centric clients cater at least partially to China's youth. This is particularly true of our clients in the software, clothing, educational, gaming, entertainment, technology and food industries and I fully expect this skewering towards China's youth to continue.

I am a huge fan of the enoVate blog, which is put out by the company of the same name, which company describes itself as follows:

enoVate is an insights and design firm located in Shanghai. We combine youth insights and an experienced strategy team to develop solutions for China’s youth market. We work with multinational and Asia based brands, agencies, and investors looking to expand in the growing China youth market. Our core strengths are:

youth insights and trends, qualitative research, creative offline and online campaigns, and
youth focused strategies for market entry, product/service development, and branding.
enoVate’s’ experience includes helping companies like Coca-cola, New Balance, Ticketmaster, and Anta to identify and take advantage of youth insights and new brand concepts.

The blog itself very much focuses on China's youth and their parents. If you are selling to China's youth or thinking of selling to China's youth, you should be reading enoVate. I highly recommend it.

The Imagethief blog has a post up here that provides an excellent list of the best writings so far on the Google-China Kerfuffle.

This story is already big because it is Google and China and I see a very real possibility of this becoming huge if it spreads. I do not even know what "spreading" could look like, but I do think that now that so much of what so many of us have suspected/known for a long long time, there may be no backing down by some very big players and that could mean some big changes for all of us.

UPDATE: The China Beat has an excellent list also, broken out into what it calls "the five C's on China:" Comprehensive, Chronological, Cynical, Cheeky, and Clarifying.

UPDATE: I should have mentioned that there is a discussion regarding Google/China going on at the China Law Blog China Group. Join up and participate.

Just finished a very interesting and very nicely done three part series over at the brand spanking new View to China blog, written by London based lawyer, Geraldine Johns-Putra. The series is on the five big issues confronting China in its ascension to superpower status and it is entitled, "China as the next Superpower? Top 5 Make or Break Issues." Part 1 is here, part 2 is here and part 3 is here.

I recommend it.

If you like this blog and have not yet joined up as a member of the China Law Blog Group on Linkedin, you are really missing out.

About two weeks ago, I asked the Group to list out what they thought to be the best ten books on China business. Within about a week, Forbes Magazine asked me to write an article on the same thing. That article, entitled, "Best 10 Books On China: Planning your first business trip to China? Here's a guide," just came out today.

So without further ado, here's my list (in the order in which I am suggesting they be read, not in order of quality):

1. Lost on Planet China: The Strange and True Story of One Man's Attempt to Understand the World's Most Mystifying Nation or How He Became Comfortable Eating Live Squid, by J. Maarten Troost.

2. Chinese Lessons: Five Classmates and the Story of the New China, by John Pomfret.

3. River Town: Two Years on the Yangtze (P.S.) and Oracle Bones, both by Peter Hessler.

4. Out of Mao's Shadow: The Struggle for the Soul of a New China, by Phillip P. Pan.

5. Postcards from Tomorrow Square: Reports from China, by James Fallows.

6. China Shakes the World: A Titan's Rise and Troubled Future -- and the Challenge for America, by James Kynge.

7. The China Price, by Alexandra Harney.

8. Mr. China: A Memoir, by Tim Clissold.

9. One Billion Customers: Lessons from the Front Lines of Doing Business in China, by James McGregor.

10. China CEO: Voices of Experience from 20 International Business Leaders; and/or Where East Eats West: The Street-Smarts Guide to Business in China, by Sam Goodman.

If you want my explanation of the above, please go here for the Forbes article. And if you disagree (or agree) with me, please let me (and everyone else) know by commenting on this blog post or by adding to the ongoing discussion on our Linkedin Group.

About a week ago, we went public with a China Law Blog Group on Linkedin. The goal of the group is to gather together people interested in real discussions on Chinese law and business and, sometimes even China in general.

There are plenty of other China groups on Linkedin and I am a member of some of them. So why did we form the China Law Blog Group? Well the quick answer is to provide a forum for our readers who are, of course, the best people in the world. But the real answer is because I was dissatisfied with most of the other groups, usually on one of two grounds. First, many groups have been hijacked by a few people whose goals are not to learn or to engage, but to market and sell. Now I have absolutely nothing against marketing and selling....nothing at all. But I do not want to be in a group where that goes on. And what was driving me crazy was how much of this is going on and how badly it is disguised. The typical example I always give is the person who goes on to a China group and asks whether you are having trouble finding a good translator and then proceeds to explain how their company provides great translation services? Who needs that? Really.

But at the same time, if a businessperson or lawyer or whomever is going to Dalian, China, and will need a translator while there, there would be nothing wrong with that person posting something to the group asking if anyone knows of a good translator in Dalian, China. The difference being that this person is asking the question because he or she wants an answer, not as a set-up to pitch a product or a service.

You an tell from the above though that monitoring a group is important. Those who monitor must be willing to delete the first, while keeping the second.

The other fault I have seen with so many Linkedin Groups is a lack of activity. Someone will pose a great question, to which I would love to see a response, but a response is never forthcoming. So again, who needs that?

The goal of the China Law Blog Group is above all else to be useful to its members. Because if it is not, what's the point?

The way I see it, there are only two ingredients for succeeding with a Linkedin Group: its monitor and its members and I think the China Law Blog Group has made a good start on both fronts. I am committed to engaging in tough monitoring and if that job ever gets too big, I will bring in others to assist. As for the members, I am delighted with the number of people who have already joined (nearly 200 in one week), but way more importantly, I am absolutely thrilled with their caliber.

I thank each and every one of you for joining.

Our members are and will be the key to a successful group. It will be their contributions to the discussion forums and the various other areas of the group that will determine whether it becomes a must see way station for those interested in China. We are off to a good start, but my being the person that I am, I want to do better. Always better.

We have been having an excellent discussion on the best English language books on China and that discussion does a great job of highlighting why it should be taking place on something like Linkedin, rather than in the comments section here. The discussion started out with my asking for people to list what they thought to be the best China books on business and it has since evolved into the best books on China in general and its most recent turn has been to whether there are any good English language books on Chinese law. I like it.

At the same time, one of our members asked a question regarding TechGear's coverage of Foxconn and Shenzhen and there has yet to be a response. That's too bad and that should not happen, which is really the point of this post.

Linkedin Groups are only as good as their members but quantity matters. I strongly suspect there was no answer to the Foxconn question because those who saw it did not feel they were qualified to give a response. I put myself in that category. But if we had 500 members instead of 200 members, there would be a much greater chance of members having the knowledge and the interest to respond.

So I am urging all of you to go here and check out our brand new group on Linkedin and join if you are interested.

Let's make it work.

Bill Russo, China car expert extraordinaire, has been running an excellent series of posts on China's car market and he just hit the lucky number 8 and final one and this one really got my attention. It is entitled, "TREND #8: China's Rapidly Changing Demographics and Growing Demand in Lower Tier Cities," and its focus is on China's demographics relating to car sales in China. But it really is a terrific short briefing on China's demographics as they are relevant to business.

If you are dong business in China or thinking of doing business in China, particularly if you are selling product or services in or into China, I suggest you read it. And it certainly would not hurt you to read the seven posts that preceded it.

"Whoever wants to know the heart and mind of America had better learn baseball, the rules and realities of the game."
Jacques Barzun

I love watching and reading about sports. Always have. Always will. Growing up, I never missed school unless the Cubs were on the television. No way was I going to waste a sick day on I Love Lucy and the Beverly Hillbillies.

Many years ago, a London lawyer friend of mine (who happens to be a baseball fan) was asking me about racism in the United States. I told him of an incident in Ken Burns' amazing documentary, Baseball, that to me, pretty well summed up both the absurdity and shame of American racism. The story (as I remember it now) was Curt Flood (or was it Lou Brock?), an intelligent, thoughtful, and articulate black man, talking about a doubleheader his minor league team played in Arkansas (I think it was Arkansas) where he had to sit out the second game because the local laundry would not wash the clothes of a Black man. I then instructed my friend to read David Halberstam's book, October 1964, which does as good a job of any in explaining American racism. My read it and loved it.

Though I know it to be a total cliche, I cannot resist also pointing out that sports teach you about life. Because they do. Read this amazing article on Walter Payton and then try to dispute that.

All this is a preface to pointing out that there is some excellent China sports writing going on out there in English, of which you should be aware.

The China Sports Review Blog and China Sports Today are both excellent general sports blogs.

China Sports Today describes itself as follows:

From our base in Beijing, China Sports Today covers the Chinese sports world - from professional leagues and Olympic teams to sports marketing and recreational events. Our daily news updates, events calendar (coming soon), guides and listings of relevant locations (coming soon) around China will help you make sense of the rapidly evolving sports scene here.

Whether you are a journalist looking for the names of China's top badminton players, a rugby player looking for a team to play with in Shanghai or a sports fan coming to the 2008 Olympic Games in Beijing next August, China Sports Today is your online source.

China Sports Review describes itself as follows:

China Sports Review was established in Oct. 2008, one month after the Beijing Olympics Games, with the objective of providing up-to-date news about China’s sports industry, analysis and opinions on current happenings in the Chinese sports world, as well as information on Chinese sports media, education, culture and history.

And though I am of the Golf is a good walk spoiled view (mostly because I suck at it) I love Dan Washburn's Par for China blog, which he describes as follows:

I am Dan Washburn, an American writer based in Shanghai, China. I am currently researching a book about the development of golf in China. Golf, its emergence and growth in China, is a barometer for the country’s rapid economic rise. But golf is also symbolic of the less glamorous realities of a nation’s awkward and arduous evolution from developing to developed — historical prejudice, class struggle, political corruption, environmental neglect, and an ever-widening gap between rich and poor. This website is dedicated to some of my work on the topic.

It is often said that to fully understand a culture, you have to understand its humor. I think the same holds true of a country's sports and its relationship to those sports. If you want to know more about China through sports, I recommend you read China Sports Review, China Sports Today, and Par for China .

I am three-quarters of the way through the book, Understanding Labor and Employment Law in China, by Ronald C. Brown. Brown is a Professor of Law and the Chair of the Pacific-Asian Legal Studies Committee at University of Hawaii Law School and can confidently state that it is a great book.

But it is not for those seeking merely a light dusting on Chinese labor and employment law. Not at all.

It is 332 page exposition on the current state of China's labor laws. It was just published so it is quite current. Its appendix consists of translations of the key Chinese laws relating to labor and employment.

Who should read this book?
-- Academics interested in China labor laws? Check.
-- Private practice lawyers seeking a deeper understanding of China's labor laws? Check.
-- In-house lawyers wanting to better understand China's labor laws? Check.
-- HR personnel with businesses operating in China? Probably check.
-- Lawyers who actually practice labor law in China? Maybe check.
-- The general businessperson doing business in China? Maybe check.

Let me explain my maybes.

Any lawyer actually doing employment law in China must be able to speak and read Mandarin fluently and so that lawyer probably does not have much need for a book like this, written in English. If you are going to be writing employee manuals and employment contracts in China or giving advice regarding China's labor laws, you absolutely must know how to read and write Mandarin. You have to know how to read it because so many of the employment laws are local, rather than national, and because there is no substitute for reading a law in its original language. You have to know how to write in Mandarin because your employee manuals and your employment contracts pretty much have to be in Chinese if you have any Chinese employees.

This book is probably too intense, too thorough, too long, too deep, and too complicated for the typical businessperson seeking a general background on Chinese employment law and I do not think it was ever intended for that purpose.

If you are looking for an English language book that really details China's labor and employment laws, this is the book.

Atlantic Magazine has a short article up, entitled, "The Nine Nations of China." It is written by Patrick Chovanec, a professor at Tsinghua University, and it basically consists of an interactive map that seeks to make the well-worn (and pretty well-known) point that China is not monolithic (did I just hear someone call for stopping the presses?) (h/t James Fallows) This article is coming out now to coincide with President Obama's China visit:

This week, President Obama makes his first state visit to China. What kind of country will he find there? We tend to imagine China as a monolith: 1.3 billion people sharing the same language, history, and culture. The truth is far more interesting. China is a mosaic of several distinct regions, each with its own resources, dynamics, and historical character.

I am not sure how these nine regions were determined and when I pressed the link for what appears to be a fuller explanation, I got sent to an error page. But I know that knowing these nine regions is important because the article tells me so:

As China’s economy becomes more integrated, these regional differences are taking on greater importance than ever before. Each of the Nine Nations faces a unique set of challenges and opportunities in carving out its own competitive niche. Anyone who wants to do business in China, make policy towards China, or simply comprehend the dramatic changes happening there should understand the Nine Nations and the role each of them is playing in shaping China’s future.

My problem I see with this map is that it is exactly that. A map. And as a map, it distinguishes among regions geographically and that is not how I view many aspects of China. Just by way of an example, I see Beijing having commonalities with Shanghai just because they are two powerful and relatively sophisticated big cities. Different as these two cities are (and they are plenty different, in their cultures, in their attitudes and even in their languages), they still share many commonalities in terms of business.

Help me out here. What do you think?

UPDATE: Mr. Chovanec has done a nice post on his blog explaining his map a bit more. And Jottings from the Granite Studio has weighed in as well.

Paul French has written an interesting article for Ethical Corporation magazine, entitled, "Bye-bye backhanders." (h/t China Herald) The article is subtitled, "China’s initiative on removing corruption in tendering for public contracts are a victory for transparency" and it nicely details how China is in the process of enacting a state of the art process for choosing the winning bids for government procurement contracts. The article talks of how this new process (starting in the bigger cities first) is intended to (and likely will) greatly reduce corruption and patronage in Chinese government contracting.

It is well worth a read.

I recently became a regular reader of the Jason Patent blog. Patent is a PhD linguist with a ton of teaching and writing experience regarding Chinese culture. Patent now offers coaching and consulting services, mostly relating to Chinese business culture and that is what he usually writes about on his blog as well.

His welcome page describes his blog:

All organizations in China work in an unpredictable environment. What few realize is that much of what determines your success or failure is completely predictable. Decades of on-the-ground experience and validated research have shown that when Westerners go to China, certain things will come up as a result of the unfamiliar cultural environment they find themselves in.

A hitter in baseball knows the difference between a fastball and a curveball, and knows which one they’re better at hitting. Nobody should go to China without knowing the cultural basics, or without knowing their own strengths and weaknesses as leaders and as venturers into the unknown. Why lose out for failure to prepare for what you can prepare for?

There is one reason for my being here: to help you succeed in China. The formula is straightforward: by being ready for the mental traps awaiting you in China, you will save precious time, money and goodwill, giving yourself the best possible chance at success.

His posts often explore a particular way Westerners view Chinese and then details how the perception might have arisen, and analyzes its validity/invalidity. The posts also usually set forth how to deal with these perceptions to more smoothly allow business to go forward. I particularly liked his series on trust:

-- Truth and Trust: Prove it
-- Truth and Trust: Absent malice?
-- Truth and Trust: American lies
-- Truth and Trust: Chinese truths

If you are doing business in or with China, you should be reading the Jason Patent blog and I just added it to our blogroll.

Our blogroll is very intentionally limited to blogs on China or, at minimum, those with a decided China focus. If we were to open it beyond these confines, I have no idea what the new confines would be, our blogroll would get too big, and we would almost certainly leave out deserving blogs.

Keeping our blogroll limited does have its downsides, including that many great blogs we read regularly are left out. Over time, we will be highlighting some of these blogs because we believe many of our readers will have an interest in those blogs as well. I am starting this "series" by highlighting the International Business Law Advisor blog, written by Santiago Cueto, a Miami (technically, Coral Gables) based international lawyer who focuses on international litigation and arbitration. The blog's byline is "identifying trends in international business law," and that is exactly what it so deftly does. For example:

-- "Hey Brazil: It'sTime to Ratify Those Bilateral Investment Agreements," where he rightly points out how Brazil's rising economic and political status signals it is time for Brazil to start signing bilateral trade agreements:

However, it [Brazil] lags behind all other Latin American countries in one important respect: it has yet to ratify any bilateral investment agreements (BITs). These agreements protect international investors when disputes arise in host countries. In light of Brazil’s recent good fortune, the time has come for Brazil to rethink its approach to BITs and implement measures to protect foreign investors.

-- "Florida Court Refuses to Enforce $97M Foreign Judgment Against Dole," highlighting the refusal of a Florida Federal Court's refusal to enforce a Nicaraguan judgment against Dole Foods because the law on which it was based violated international standards.

-- "Alien Tort Claims Act: A Threat to U.S. Corporations Operating Overseas?" This post posits that corporations are being sued as surrogates for countries that violate human rights.

In addition to being thoughtful and crisply written, its design is first rate as well. I have it on my RSS feeder and if you have an interest in international law generally, so should you.

Just finished the book, Chocolate Fortunes: The Battle for the Hearts, Minds, and Wallets of China's Consumers, by Lawrence L. Allen. It's a very good book.

The book is about the competition between Hershey's, Mars, Ferraro Rocher, Nestle and Cadbury for the Chinese consumer. But it is really more about is what it takes to succeed in the consumer products business in China. And lest anyone ever thought China consumer sales would be easy, Chocolate Fortunes thoroughly dispels that notion while explaining exactly what it does take to succeed or fail in China. Lawrence Allen was himself an executive with both Hershey and Nestle and he clearly knows whereof he speaks in describing who among the Chocolate titans did well and why.

For anyone who is thinking of going into consumer products or food or retail in China (and who out there is willing to ignore 1.3 billion customers?) this book is a must read.

Based on my firm's experience in handling the legal aspects for all sorts of businesses going into China, I see the legal side of China consumer products/retail as relatively straightforward. But the "making money side of retail in China is no mean feat. For the most part, our manufacturing clients go into China, start making a product and then start making a profit relatively quickly. Our service sector clients go into China, get an office, and then start making money relatively quickly. Now I know it has to be more difficult than that, but from my perspective as a lawyer, it does seem that the call I get from these clients 3-6 months after we have set them all up usually involves them telling me how well things are going and how well they expect things to keep going.

Not so on the consumer products and retail side. Issues like where to sell in China, distribution, and marketing (all of which Chocolate Fortunes extensively discusses) are intensely complicated and can be fraught with peril. And then there is the issue of costs. Getting good retail space (either through renting one's own store or through distribution through existing stores can be shockingly high in China. We have had a number of very well funded clients decide to test out retail concept in a second tier city like Qingdao or Suzhou after finding out how much it would cost to do so in Shanghai or Beijing. Indeed, these days, places like Qingdao and Suzhou are not really bargains either. And my 3-6 month calls from our retail/consumer goods clients who are seeking to sell into china usually involve them muttering about how they had no idea "gaining traction" in China would be so difficult.

What are you seeing out there?

UPDATE: Just saw Experience Not Logic's excellent post-review on this book, "Everything You Wanted to Know About the Chocolate Business in China."

FURTHER UPDATE (2-28-2010): China Herald just came out with a favorable review on the book as well, in this post, entitled, "China disasters with a chocolate coating."

FURTHER UPDATE (4-26-2010): Heart of Beijing has an interesting interview with Allen and notes how "Time's Jeremy Wasserstrom lamented -- rightfully -- that "big picture" China books miss the point, more room should be made on bookshelves for works like Allen's."

All Roads Lead to China just came out with a fascinating, but way too short, post on a few interviews of Shanghai's underclass. It is called, "It's All About Hope and Opportunity in China" and I urge everyone to read it.

All Roads' post touches on the sorts of things China Law Blog used to discuss a lot more often when when we first started oh so long ago.

I can remember writing a number of posts and comments where I would talk about how the Chinese are more like Americans than many realize. And how I have always felt far more "at home" in China than in what I see as for more hierarchical and formal societies like Korea and Japan.

The All Roads post brought back some fond memories for me of one of my longest and best China friendships. Excuse me for a rare burst of maudlin here, but it all goes back to a case I was handling in Qingdao where a Qingdao lawyer and I ended up spending the better part of two days together waiting for a ship to come in to Qingdao's port and then hunting it down once we heard it had arrived. We had a lot of time to talk and one of the things I will never forget about our conversation was how we both saw our countries so similarly.

We talked about how what we most liked about our country was how it was still possible for people from poverty to rise up and achieve just about anything. And of how this belief is so essential to the fabric of both our countries. And this now very wealthy, exceedingly well educated Chinese lawyer knew of this from the heart as he is one of 13 children from a tiny village whose father had a 4th grade education.

We then talked about what most concerned us about our respective countries and we both again said that our biggest concern was how this was changing. We both talked of how the wealthy are starting to live in gated communities and send their kids to private schools and we both worried about the long term impact this might have on our countries' futures. Our two law firms eventually established a formal affiliation, but it has always been built more on our friendship than on any piece of paper.

All Roads' piece talks about the hopes of the financially downtrodden to do better by their next generation. CLB's Steve Dickinson is always telling me of conversations he has with waiters and waitresses and others in China's less respected jobs. And what he says reinforces what All Roads is saying: that these people believe their hard work will pay off in a better future, if not for them, than for their children.

When I was in college, I took a course on revolutions and the two things I best remember from that course (in fact, probably the only two substantive things I remember from that course) were that revolutions typically spring from the urban middle class (this is obviously less true of China than of most countries) and that they typically spring from those who believe the elites have blocked the paths upward.

Rich, put me down as someone else who would love to see more of your street interviews.

Just a few random thoughts....

What do you think?

About a month ago, in Part I of this series, I promised we would go through our blogroll and justify and expound upon each blog, five by five. This is the second in that series. As I mentioned in that last blog post, we pick our blogs based on the following slippery, vague, and subjective criteria:

Our blogroll basically consists of those blogs we like and which we think our readers will like or should be reading. We tend to like blogs that are unique in their content, well written, or consistently helpful. If we really like a blog, it makes it on no matter what. The less we like the blog, the more we have to believe it can be helpful to our readers. If a blog has not posted for a couple of months, we start seriously consider removing it from the rolls. Three months and it is usually removed. We obviously focus on China related blogs and, within that, we generally focus on those blogs related to law or business.

Here then is our second five, listed alphabetically:

Asia Health Care Blog. Alphabetically, this blog actually belonged on our first list, but since we added it since that post, I am writing on it now. I tend not to like listing industry specific blogs because.....well, they are too industry specific. There are many excellent China tech blogs and none of those are on our blogroll. But I have added this one for two reasons. One, health care impacts us all (yes, I know technology does also, but remember the subjective part mentioned above) and this blog is written with a general audience in mind. Second, the two bloggers are so damn earnest, I wanted to give them some kudos.

bezdomny ex patria. My Latin ain't so good, but I think this blog title means homeless and outside of one's native country. And at least the second part is true of the force behind this blog. It is written by a New Zealander who lives in Beijing, hence its subtitle: "ramblings of an expat Kiwi living in one small corner of Beijing." I like that it is not yet another American blog and I especially like how the guy behind it, Chris Waugh, is very smart, very independent, and not afraid to put it all out there in his posts. This is not your standard China blog and that is why you should be reading it. Waugh describes himself as follows:

My real name is Chris Waugh.... I’m from Wellington, I live in Beijing where I teach English to earn my keep and study Chinese in my spare time because…… well, why the hell not? I mean, apart from the fact I live in China and my wife is Chinese, it’s just interesting. Well, I majored in French language and literature (Otago University, finished my BA in 1998, graduated May 1999), I also studied German language and literature, Russian language and literature, German and Russian film, Russian history….. I guess you could say I’m the kind of guy who loves studying languages, literature, cultures, that kind of thing. So in that respect, living in China is great, never a dull moment, always something to keep me interested.

I’m one of the least threatening people I know, and I don’t blog about the kind of stuff that would have people kicking my door in and dragging me off for reeducation. This blog is simply about what I observe and experience in my banal little life. If people find it interesting, cool, if not, there are plenty of other things you can kill your time with. What you can expect to read here is rambling about life in Beijing, my experiences trying to learn Chinese, perhaps some ranting about stuff in the news- but that’s not likely to be of a nature to invite unwelcome attention, I’m more likely to rant about shitty journalism, and just whatever occurs to me to write. Don’t come here looking for profound insights into Chinese language, culture, society, history or anything like that. Explore my blogroll, several of the blogs there are much better at that kind of thing. Basically, I just write about my view from this little corner of the world. That’s all.

Chris underrates himself. I have learned a lot from his blog and it makes me think.

Black and White Cat. Black and White Cat is a very intelligent, irreverent, thoughtful and independent blog. It typically takes a topical and interesting China news story and goes deeper. The writer is anonymous, but whomever he or she is, he or she knows China and does an excellent job tying previous news to current news. B&W Cat describes itself as follows:

Black and White Cat tends to be about China, since that is where I live; and I live here because I like it. But although most things I write or translate are about China, I do also launch off into other things. That is probably quite irritating to many people who would prefer not know what I think about other things.

If you came here looking for information about cats, there isn’t any. Sorry.

I'm glad about the lack of cats.

Blogging For China. The full name of this blog is Fools Mountain: Blogging for China. And its subtitle is "A wise one knows moving mountains is beyond human power, but a fool has other thoughts…." This blog too is on our blogroll for its originality and also for its courage. Courage because this blog is not afraid to take a stand and to offend. I like that. No, actually, I love that, even though I definitely do not always agree.

Blogging for China has this to say about itself:

Fool’s Mountain (愚公移山) is a collaborative effort amongst writers focused on Chinese issues. Through our blog, we publish regular English-language articles and essays for both a Western and Chinese audience. All articles represent only the opinion of the individual writer, and may not reflect the opinions and views of other contributors. All contributors write on a voluntary basis with no compensation; those who write are driven to do so by their conscience, and nothing else.

Just by way of a good example, its most recent post is a video of a bunch of American school children chillingly reciting a piece deifying Barrack Obama. The post is entitled, "Mmm, mmm, mm … Barack Hussein Obama!" and the point of it is that maybe we Americans should look at ourselves and our willingness to ignore our own propagandizing when we so condescendingly criticize China for doing the same thing. In other words, is it propagandizing that we do not like or is it the message of the propaganda that offends us. As someone who does not believing in politicizing our schools and politically brainwashing children, I like the question posed.

Last, and maybe least, is the Cal Poly MBA Blog. Least not because of content, which has always been excellent, but because of a lack of posting regularity. It has had only two posts since June 18. But I have the following reasons for keeping it on the blogroll, at least for a while longer:

1. This blog is written by a friend of mine, Chris Carr. I have known Chris for years and I greatly like and respect him.

2. This blog is really good. Chris is a professor at the highly regarded Orfalea Business School at Cal Poly-San Luis Obispo and he brings that perspective to his posts on China. By that I mean that he views a lot of what he sees in and about China from a business prospective. More importantly, his posts are great teaching devises and great for spurring thought and conversation regarding China.

What do you think?

I just love this post, "Saying “I love you” with a toilet: of indirect displays of love in Chinese families," over at the Speaking of China blog. I love it because it perfectly illustrates how Chinese express an emotion (in this case love) differently than in the West.

Differently, not necessarily better or worse.

The post is about an American woman, married to a Chinese man, and how her in-laws show their affection for her by first installing a stand-up toilet, and then adding on rooms to their house. A Chinese client of mine (who has been living in the United States for probably 15 years now) told me of how her father never once told her mother that he loved her, but that her mother always knew from the way he acted.

There has to be a way to relate this post to doing business in China and I would love (see how easy we Westerners are with that word) for someone to expound on it.

Whirlwind China entrepreneur and friend Sam Goodman has a great and blissfully short book out on how to do business in China. I say blissfully short not because I did not like his book (because I did), but because its shortness is one of its strengths. Most people wanting to learn the ins and outs of doing business in China neither want to nor have the time to read an encyclopedia on the subject. They want something that gives them a full overview of the basics in a hard-hitting and relevant way. Sam's newly released tome, Where East Eats West, is that book.

Sam is a somewhat rare beast in China: an experienced and successful expat entrepreneur. Sam started a chain of cafes in 1997, called Beijing Sammies. Sam built these cafes into a real business and then sold them in 2003. His book does a great job distilling what he learned from those experiences.

The book consists of a series of many very short, very informative, chapters. Though I see this book's highest and best use as being for the person seeking to start a business in China, it also is a great read for anyone looking to learn more about how business is really done in China. I took comfort in reading how much of what has happened to my clients is not so unusual after all. It is appropriately subtitled, The Street-Smarts Guide to Business in China.

According to the book's website, reading the book will give you the following invaluable information:

Here are just a few things you’ll learn in Where East Eats West:

1. How to keep yourself in check in the first few infatuating weeks and avoid becoming delirious with China Fever (and then how to cope when the fascination ends and reality sets in).

2. Just enough background about business in China to help you understand where they’re coming from when you don’t see eye to eye (which will happen more times than you can count!).

3. What to expect and how to deal with China’s vast human resources, a.k.a. the enormous talent puddle.

4. How to break down the basics of ‘face’, ‘guanxi’ and so much more - so you get what you want for your business.

5. How to command respect (and avoid getting screwed over) by suppliers, vendors, and even your customers.

6. How to stick to your guns when the aforementioned suppliers, vendors and customers try to wear you down and bleed you dry (it’s not personal, it’s just business).

7. How to avoid offending your new friends and colleagues (a.k.a. a few touchy subjects to NEVER, EVER bring up).

8. How to avoid the most common scams to con you out of your money (if you do find yourself a victim, you won’t get much sympathy or help from the police or Chinese legal system, so you want to avoid these scams).

9. How to cover your butt before you face a business deal gone bad (and you probably will, at least once).

10. A roadmap to navigate the negotiating detours and potholes that come with Chinese business negotiations.

11. How to deal with bureaucrats and their constantly-changing rules.

12. The two most uncommon things in China – a friendly warning so you’re not caught off-guard.

13. The two most important rules to succeeding in the Chinese business market.

David Wolf over at the Silicon Hutong blog sums up the book perfectly:

Sam Goodman is the Harvey Mackay of China, a straight-shooting entrepreneur who has defied the odds and succeeded where some of the world’s largest and smartest companies have failed.

Get it for your Kindle by going here.

Thought provoking post over at TwoFish's Blog, entitled, "Best and the worst – The Sanlu Settlement." The thesis is that China's handling of payments to those injured by the Sanlu dairy food poisonings was handled better than would have been the case had Sanlu been in the United States and been subject to a class action suit.

TwoFish makes some valid points, which points are certainly more sophisticated than some commentators who fly over to China for a week and come back proclaiming that if only China allowed tort claims (it does) just like in the United States, all (or at least nearly all) food safety problems would be solved there.

TwoFish says China handled Sanlu "quite well" and he challenges those who are "critical" to "explain what the Chinese government could have done better:"

As I said above, as far as the actual settlements and consequences, I do think that the Chinese government handled things quite well, and I’d like for people that are critical of the legal aftermath to explain what the Chinese government could have done better. Yes, one could argue that the payouts where low, but as it was, it totally bankrupted the company responsible. If you mandate US-style damage awards, then the whole thing becomes a lottery, in which people that are the first to file or who have particularly good lawyers get the bulk of the money, and everyone else spends years fighting over the scraps that remain. (What happened with asbestos.)

Also if you have a long nasty class action lawsuit, then most of the money ends up with the lawyers (there is an entire industry devoted to asbestos lawsuits). In the mean time, honest dairy farmers and dairy workers who weren’t involved in the scandal are hurt because the company gets pounded into dust.

China did handle Sanlu pretty well, but in large part, that was because that case received so much publicity, China almost had to handle it well. As much as I agree with TwoFish that a class action where the plaintiffs' lawyers get rich and the plaintiffs themselves get a pittance is no solution at all, I do not believe top down remedies can work consistently.

The Eileen Eats blog did an excellent, though very disquieting, post on the state of Chinese food. The post is entitled, "Food Safety– Can’t let your guard down," and it has the following money quote:

Hung Huang, chief executive of the China Interactive Media Group in China, said recently in an article in the New York Times that China as a nation of food lovers is going on a diet. “Not because we don’t love to eat anymore,” she said, “but because we just don’t know what is safe to eat.”

CLB's own Steve Dickinson wrote a Wall Street Journal column earlier this year, entitled, "Food Fumble," discussing how China's new food safety laws will do little to solve China's food safety problems.

What will work? When will it work? What do you think?

I normally hate this sort of thing, but "Steve" over at Fool's Mountain does such a great job with it, I cannot resist posting on it. The post is entitled, "Cross Cultural Dating," but I think it goes way beyond that and that is my point. The post does a great job explaining the need to be sensitive to other cultures and the advice given definitely translates to the business world and even to dealing with another person within the same culture.

What do you think?

Fascinating collection of articles over at Forbes Magazine on American manufacturing and how it does and should compete with China. The introduction gives a good description of the themes the articles.

Made in America meant something very different 30 years ago. It will mean something very different 30 years from now. All we can do is make good guesses. The facts are that 12 million adults make something for a living in the U.S., and their output accounts for $1.6 trillion, one-fifth of world manufacturing, more than that of any other nation. Yet our unprecedented manufacturing muscle is, to many, and justifiably so, in a state of crisis. Those 12 million jobs were once 19.5 million jobs. Since its peak in 1979, factory employment has never stopped falling. The hard truth? It never will. Manufacturing is always in crisis. Productivity eliminates jobs here, in China, in Mexico and everywhere. Making goods will continue to play an important part in our economy, but it will employ a smaller workforce. The growth will be in the ideas that come with the hands: innovation, automation and customization. Hands have skill; people have passion.

I have read two so far and was impressed. What do you think?

Crossroads blog has a post up listing China Corporate Social Responsibility related twitterers, broken out between "China Social Entrepreneurs," "China Treehuggers," and "NGOs." If you twitter and have an interest in China CSR, I urge you to check it out.

Excellent article by Tina Wang up on Forbes.com. The article is entitled "KKR's Concrete Lessons In China" and it is subtitled, "A KKR-led group bought into a Chinese tycoon's cement business. Over a year later, who's in charge?" It is on a KKR cement industry joint venture in China and like so many stories on joint ventures (not just in China but just about everywhere), it reads like a bad spy/war novel.

It reminds me a bit of a chapter (or two) from Jack Perkowski's book, Managing the Dragon, where Jack very graphically writes about one of his China joint ventures gone bad. Jack's story is so incredible, that if my firm had not represented parties in similar situations (right down to the unbelievable parts), I would never have believed it. Let's just say one of my favorite joint venture stories involved a client who after being hung head first outside a high floor window in Russia he decided he would gladly relinquish his controlling interest after all.

For additional reading on the perils of joint ventures in China, check out the following:

"Chinese Joint Ventures -- The Information The Chinese Government Does Not Want You To Know "

"WFOE v. JV"

"China's Joint Venture Jeopardy" (this post is on an article I wrote for the Wall Street Journal on the same subject.

"China -- Damn The Joint Venture"

"Beware The China Joint Venture"

"Beware The China Joint Venture, But Do Not Ignore It Completely"

"China SMEs: Own If You Want To Own."

The Aimee Barnes Blog just did a post, entitled, "Sex, Drugs, Weapons and Cash: China vs United States," comparing the United States and China on all sorts of numbers/statistics relating mostly to sex, drugs, crime and health. It makes for fascinating reading, particularly, if (like me) you are the kind of person who remembers off the top of your head, exactly what Bob Gibson's ERA was in 1968 (1.12).

Check it out.

KPMG recently came out with an excellent report on outsourcing to China (h/t to Experience Not Logic), entitled, "A new dawn: China’s emerging role in global outsourcing." KPMG summarizes its report as follows:

Outsourcing is on the agenda of the Chinese government as they seek to boost foreign investment into China and support the development of the services sector. Companies are also looking at China as an alternative to India, especially in light of recent security and governance concerns.

This paper looks at how China is moving up the value chain in developing the necessary infrastructure and outsourcing centers, and how that will impact the Asia-Pacific region and the rest of the world.

Because my firm recently started doing legal work for a very large China outsourcing company, I do not think it appropriate or even fair for me to comment on this article, but I am citing to it because it most certainly is well worth the read.

The Beijing Axis business consultancy just came out with its quarterly "China Analyst" publication and it is chock full of nicely arranged economic statistics and predictions for China. If China economics is your thing, I recommend you check it out here.

A few months ago I was on a China panel at Northwestern's Kellogg Business School where, among other things, we were asked to list China's best opportunities. I stressed that because I am not a China business expert, I would have to answer the question based entirely on what I was seeing of my firm's clients and, based on that, I listed health care, technology, and food.

If I had to pick just one of the three, I would pick health care and technology (I know I said one, but hey, it's MY blog). I would pick these two now because even within just the last few months, China's government has made clear, both in its policy statements and in its spending, that it is going to be increasingly emphasizing these two during the next few years.

A couple years ago I did a post listing a whole slew of top China technology blogs and I plan to do another one soon. There is a surprising dearth of really good China food blogs and, as far as I know, no blog focuses on China's food business, which is too bad.

I am aware of only one blog with China's health care. It is called Asia Health Care Blog and I have been a regular reader for months. It is written by two Beijingers, Damjan DeNoble, who has a Public Policy B.A. with a certificate in Health Policy from Duke, and James Flanagan, who has a B.Com from McGill.

If you care about health care in China (and you should), I urge you to check out Asia Health Care Blog.

The title sums up my initial reaction to the news of Jackie Chan dissing the Chinese people by essentially saying they are too messed up to ever be able to handle democracy. I was going to write a blog post criticizing Chan for his comments and noting how the same thing has been said about other countries that are now democracies (the United States, Japan, West Germany, Italy, Spain and South Korea immediately come to mind). Then I decided I am not the right person to write such a post, so I didn't.

But today, over at The Useless Tree, I saw the post I would have written, if I were a thoughtful college professor of Chinese politics and decided to simply incorporate it as though I had written it myself. The post is entitled, "Jackie Chan does the Orientalist thing," and if you want to know why Jackie Chan should pretty much be ignored when it comes to world politics (just as anyone with any brains ignores Sean Penn, Woody Harrelson, and the various other Hollywood types when they talk about politics as though their simply being famous gives them a clue), you absolutely should read it.

For more on this, check out the following:
-- "Jackie Chan: A little bit of oppression may be good for the Chinese," in the Poli-Gazette;
-- "Chinese shouldn't get more freedom, says Jackie Chan,"in the Independent;
-- "No 'Rush Hour' for freedom," at TigerHawk

One of the best/worst things about this blog is that just about every book that comes out on China finds its way to my desk, gratis. Most sit on my credenza for a few weeks, and then get moved to my bookcase, where I look at them from afar. I'm planning to read all of them eventually, but, you know....life just always seems to get in the way.

It has taken me forever to read the book, Flowing Waters Never Stale, by Mark Anthony Jones. On the one hand, I really wanted to read the book because Mark is a long time China Law Blog reader and a very thoughtful commenter here. On the other hand, I worried his book would be too intellectual and since it is subtitled, "Journeys Through China," I thought it would be too much the travel book. So it sat.

But I spent most of this weekend at the office on a big project and I started reading it as a diversion and I ended up hardly putting it down until I finished it. I wish I had read it sooner because I actually really liked it.

It is not so much a travel book as it is Mark's very thoughtful observations on much of what he saw in China while living there from 2002 to 2007. Mark looks closely at various aspects of China and (just as he does in his comments on this blog), he looks at them from various perspectives. It has no particular agenda on how one should view China, beyond seeking that we look at it fairly and in context. It often looks at things from both a Western and a Chinese perspective, with Mark's Chinese girlfriend, helping immensely on the Chinese side.

It really does make you feel like you are in China and I heartily recommend it.

Domestic US lawyers frequently call my law firm asking us to help them enforce their just received US court judgment overseas. They are seeking to turn the US judgment into a judgment of the country where the defendant is located so they can, in turn, collect the money owed under the judgment. Way too often, however, these lawyers are operating under the assumption that all we need do is take the judgment to a foreign court and ask them to enter it as a new, local judgment.

My response on taking US judgments to China is that there is no reason to do so because they have no value there. This is less true for Europe, where if one plays the cards absolutely correctly from the very beginning of the US court action, it is sometimes possible to convert a US judgment into a local one.

My law partner, Nadja Vietz (who is a licensed attorney in Germany, Spain, and the United States -- think about that for just a minute!), just came out with a cover story for the Washington State Bar Journal, entitled, "Will Your US Judgment Be Enforced Abroad." It is a great article and I highly recommend you read it BEFORE starting a US action against a foreign company.

The US-Asia Law Institute website has a webcast entitled, “China’s Changing Courts: Populist Vehicle or Party Puppet?” It features a truly stellar panel of China law scholars, including Prof. Ben Liebman of Columbia Law School, Prof. Xin “Frank” He of the City University of Hong Kong School of Law, Prof. Nicholas C. Howson of the University of Michigan School of Law, Prof. Carl Minzner of Washington University School of Law, and Rachel E. Stern, a Ph.D. candidate at the University of California, Berkeley.

The panelists will be answering questions submitted by Wednesday, February 25, 2009 to usasialaw@nyu.edu, with the subject line "Court Panel Question." Answers will be posted by March 2, 2009.

I have yet to listen to it, but I would love to hear from those who do.

Loretta Chao and Andrew Batson of the Wall Street Journal have written an excellent piece on what is going on these days with China factories. The article is entitled, "China's Small Factories Struggle," and it is about factories closing, factories changing to meet changing demand, and about factories starting up. Not news breaking by any means, but a piece well worth reading to get a sense of what is going on with China's factories.

The most recent issue of Supply & Demand Chain Executive Magazine has a really informative article by Steven Ganster on China. The article is entitled, "The China-ready Supply Chain: Key attributes to ensure a high degree of readiness for doing business well with China," and it does an excellent job setting out what foreign companies must be on the lookout for "doing business well with China and getting excellent performance from your supply chain."

The article very nicely sets out the following four key challenges to address to make your supply chain China-ready and then sets out to explain how to meet these four challenges:

-- China's vast and complex market landscape. China crams its 1.3 billion citizens (estimates of China's population range from 1.2 to 1.5 billion, the margin of error being the size of the United States) into a space the size of the continental United States, and it boasts more than 170 cities with a population exceeding 1 million residents. Almost 70 percent of economic, trade and investment activity is focused in a small group of provinces along the east coast, yet China's domestic infrastructure is very inefficient. As a result, moving goods within China takes time and costs a lot of money. Transport costs can be 40-50 percent higher than comparable figures in the West. There is a shortage of railway and river transport capacity, internal toll rates can be obscenely high, and the technology of the freight movers and handlers is pathetically low.

-- Opaque financial and legal systems. Those active in China know that things are often "gray." Many Chinese firms will have two or more sets of books, with the real numbers in the head of the owner. While many new laws are being promulgated, their interpretation (not to mention enforcement) leaves much to be desired. China is still a country of "rule by man" versus "rule by law." This lack of transparency makes it difficult to know what your real costs are and certainly makes it hard to know with whom to do business and, of course, whom to trust. As a result, financial planning must be done with an uncomfortable level of uncertainty.

-- Huge cultural and business system differences with the West. In the scale of human development, China's economy would be barely out of adolescence. Business systems are immature, and Western-style management experience is hard to find. This is coupled with sharp cultural differences with the West in terms of values, communication style, organizational hierarchy and even life experience. Understanding and appreciating the differences in business culture in China is one of the most underestimated challenges faced by Western management. Intertwined with these business and cultural differences is a pervasive level of corruption, either outright graft or more subtle gray tactics in business practices that often depend heavily upon relationships (guanxi). Progress in this area is taking place, such as in intellectual property protection, but it will take generations to fully eradicate the old ways of doing business.

-- Rapid pace of change. The constant dynamism in all aspects of China's economy only aggravates the above challenges. For example, within the last two years alone, China's currency has appreciated by 20 percent, the VAT rebate on exports was reduced to almost nothing, oil reached $150 a barrel before falling back again, and a new labor law has gone into effect. The combination of these changes has cost many Chinese exporters about 30 percent of margin. (Interestingly, as this article is being written, China is again raising the VAT rebate for a number of products in response to the duress of many Chinese exporters.) The ripple effect to Western companies' sourcing strategies has been equally disruptive as costs have gone up, suppliers have abandoned ship and transport costs from China to the West make current sourcing patterns questionable. Planning for China is like shooting at a moving target.

I recommend you check it out.

"'You sit by yourself grasshopper. What do you think of?' -Master Po 'My mother, my father. Both gone. I am alone.' 'You hear the flock of birds flying overhead? You hear the fish? The beetle?' To all of this the young Caine nods. 'In this crowded place you feel alone. Which of us is the most blind?"

In his post, "Is China now more capitalist than the US?" Ed Morrissey over at HotAir has written what so many have been thinking [h/t to China Challenges]. As the US economy tanks, the US moves away from capitalism. As China's economy tanks, it moves towards capitalism. There is obvious irony here, but also a pretty good petri dish(es) to test which works better when things start going really wrong.

We will see.

In its post, "China Not Brave Enough to Save the World," the always excellent China Economics Blog, makes the valid point that China (and by China I think we mean the China sovereign funds) is a terrible investor. Its history indicates that and according to this article, so will its future. Like so many new to the investing game, China seems to think the maxim is buy high sell low, rather than the reverse.

David Dayton of Silk Road International has a fascinating, though disquieting post, entitled, "Another Trip to the Healthy Department." Dayton's father was a doctor and Dayton tells us (in vivid detail) why he thinks it better never ever ever to go to a hospital in China, which hospitals he describes (based on a far amount of international experience) as being the worst he has ever seen.

For what it is worth (quite little, I daresay)I have been to a hospital in Yantai, China, Dubrovnik, Yugoslavia, Yuzhno-Sakhalinsk, Russia, and just about EVERY emergency room in Seattle, Washington and I would rank them in the following order of best to worst, in terms of cleanliness:

1. Seattle
2. Yuzhno
3. Dubrovnik
4. Yantai

But what do I know? My father was an English professor.

Would love to hear your hospital stories.....

UPDATE: Found in China did an interesting post recently on a trip to a Chinese hospital, entitled, "Medical Examinations In China: A Laowai Exposed."

Google just came out with millions of photographs from the archives of Life Magazine and, as anyone who has seen Life Magazine would know, they are riveting (h/t Shanghaiist), I have been checking out photos of old Shanghai and Beijing (a/k/a Peking). I am, however, a bit disappointed at how my searches of Qingdao, Dalian, Chongqing, Chengdu, Xiamen and Tianjin all came up empty. I highly recommend you check it out.

There is a strange dearth of materials out there for foreign companies seeking the nuts and bolts of how to get into selling their products online in and into China. I was recently alerted to an paper written on this very subject by Lisa Conklin, for her MBA degree at Fudan University. I enjoyed the article and thought it would be helpful to our readers and so I requested Ms. Conklin get it up on the internet to facilitate my linking over to it. That has been done and if you click here, you will see the article, entitled, "Chinese E-Commerce 2008: An Introduction and How-To for US SMEs." [pdf]

The China Observer blog has been up for about two months now and I have already become a regular reader. The blog is written by Joel Backaler, who describes himself as follows:

Joel Backaler (周乐达) first traveled to Beijing in 2001 and has since returned to the capital city where he works as the only non-Chinese analyst for a leading multinational IT and management consulting firm. Joel has accumulated over six years of China market experience through positions in venture capital, new media entrepreneurship, independent consulting and research.

Joel holds a Bachelor of Arts degree in Economics and East Asian Studies from Connecticut College. He was awarded the prestigious U.S. State Department sponsored Fulbright Fellowship to work and study in Taiwan. Upon completion of his Fulbright grant Joel studied under the academic year program at the Stanford/IUP Center intensive language training program hosted by Beijing’s Tsinghua University.

Joel is a native English speaker. He speaks, reads and writes fluent Mandarin Chinese; and is conversationally fluent in Spanish.

Joel is using his blog to chronicle what he is seeing in China, which is "the next big thing":

China is the next big thing.”

Every visit home, friends and family all make the same observation: “You’re in the right place. China is the next big thing.”

When asked why, most offer anecdotal evidence about China’s rapid economic growth and the outsourcing of American jobs. They just don’t get it.

Back in Beijing, I am surrounded by many friends and colleagues, both expat and Chinese, who do get it. Like me, these dynamic and diverse professionals live in China and understand the language, culture, and business environment. Innovators write blogs about the latest happenings, emerging businesses and all aspects of China’s ongoing transformation. Silicon Hutong, China Digital Watch, and China Law Blog are just a few of my favorites.

What is missing, however, is a bridge connecting these two groups (what I define as Outside Observers and Inside Observers). Someone to take key local observations from within China and share them with the greater global community. The China Observer Blog presents readers with the essential information on companies you need to know, best business practices and cultural factors that drive the Chinese marketplace. Only through analysis of these factors can one begin to truly understand why and how the focus of the global economy has shifted away from the U.S. and other traditionally “strong” economies.

* * * *

The ultimate goal of The China Observer Blog is to educate and offer readers a source of current and comprehensive information about the business world in China. My aim is to be an educator across borders and cultures. In today’s business world, if you don’t know about what is happening on the ground in China, then you will inevitably be left behind.

Yes, I agree: China really is “the next big thing.” I don’t feel this way because of what I have heard from the mass media, or because of the stories I’ve been told by friends impressed by China’s dramatic growth. I base my opinion on first hand observations made while living here in China. The China Observer Blog presents these local observations to you and gives you the opportunity to see what today’s China is really all about.

Despite Joel's gargantuan ambitions for his blog (ah, youth), of which I do not believe any one blog can achieve, the blog does fill a very nice niche. Many of the posts start with Joel's observing a China business or industry, then explaining how that industry works in China and what we can expect of it in the future. He does this with China's online gaming industry, China's plastic surgery industry, and China's beauty products industry, among others. To complement his industry observations, Joel also throws in an occasional post on what I would call the cultural ramifications of technology in China.

I urge all readers to check out The China Observer.

The Joint US - China Cooperation on Clean Energy Forum (JUCCCE -- Is that pronounced Juicy?) recently ended and China Environmental Law was there and has posted on it, in its aptly named post, "The Morning After." This post nicely summarizes went transpired and links over to various other sites for those who just can't get enough clean with their tech.

The post includes the following money quote, which near as I can tell from the many clients of my firm that are in the China cleantech business, could not be more true:

China will continue to be a “pilot program” heaven: if you have a technology, product, or service, you would like to test in a low-cost environment, you will probably be able to find a partner in China (as long as it doesn’t cost them anything) to help you test it. But remember, China still doesn’t have that IP protection thing down pat yet.

Do check it out.

UPDATE: In its post, "JUCCCE Clean Energy Forum–Closing Summary," The Green Leap Forward,' provides a transcript of the excellent and inspiring (that is the first time I have used that word on this blog) closing speech by Julian Wong, who is the author of The Green Leap Forward.

As good a foreign policy article as you will find in a US newspaper is a piece is by Washington Post "World Columnist," Robert Kagan, entitled, "Still No. 1." I learned of this article from foreign policy expert Thomas P.M. Barnett, who stated he agreed "with it 100%." I do too.

What do you think?

China Business Blog and Podcast has a great post up on what it calls China's pre-consolidation stage. The post is entitled, "Signs: Observing the pre-consolidation stage in China," and its gist is as follows:

But I think there are some signs that are quite clear that are telling us what stage we are at in China’s growth — and one of the defining features of this stage is what I call “pre-consolidation,” meaning, generally, that many industrial sectors in China are still very diverse, fragmented and messy but are in the process of becoming more aligned and streamlined. Instead of trying to further describe this stage, I would like to look at four “signs” that define what I am calling “pre-consolidation” and signal that we might be coming to a crossroads.

First of all, the biggest sign — and the easiest to recognize — is simply the number of players in many market sectors in China. One of the features of a more mature economy is that there have emerged several large players in a particular sector and other players have either fallen away or have been gobbled up (and that’s how the big players got that way, growth by acquisition). The auto industry is a good example — in the early 1900s, there were dozens and dozens of car companies in the U.S.; today, there are only three (and if the talks GM is reportedly having with Chrysler come to fruition, there will only be two!). China is on the other end of this spectrum. There are over 54 different car companies operating in China and well over 100 brands. Given time, consolidation will happen, but for now, China is in the “pre-consolidation” stage.

This post does a superb job explaining China's economy from a business perspective and I strongly recommend anyone with any interest in China business read it (or listen to the podcast) -- it is that good . . . .though quoting Billy Joel really ought to be verboten.