On December 13, I will, along with Fraser Mendel, be co-chairing a seminar on “The China Market: Selling Products and Services in the New China.”  I promise you it will be an excellent seminar.  I can make this promise because I have known nearly all of the speakers for many years and I can vouch for them.

Fraser Mendel and Robert Carrol will start the day speaking on forming an entity in China. They will be discussing when to form a WFOE, when to form a Rep Office, when to form a Joint Venture, and yes, even when not to form an entity in China at all.  Fraser is a lawyer at Davis Wright (Gary Locke’s old firm) and he knows his stuff.  Robert Carrol’s practice focuses on representing food and beverage companies and I understand his focus will be on the  the best ways for food and wine companies to do business in China.

Michael T. McCune (who I also have known for years) will speak next on “Marketing in China; Internet Sales; Creating Distribution Chains; Reviewing Consumer Values That Drive Consumption in China; Understanding Why Enabling Internet Sales is Your First Step Into the Chinese Market; Understanding Merchant Dynamics to Appropriately Prepare for Retail Distribution.” To give you an idea of Michael’s retail expertise, leading Chinese retailers hire him so that they can better compete in China against foreign companies doing business in China.  Yes, you read that right. Michael is Director of Global Retail and China Trends at Iconoculture.

Tony Liebo of will speak next on Money/Banking/Letters of Credit and getting paid in China.  And that is the bottom line, right?  Tony is a senior Vice President at Wells Fargo.

Yours truly will then speak on Protecting Your Intellectual Property in (and from China):  Trademarks; Copyrights; Patents; Non-Competes; Trade Secrets.

Fraser Mendel will then speak, this time on “Anti Corruption Compliance: Chinese legal issues and the Foreign Corrupt Practices Act (FCPA)”.  He will be focusing on “Red Flags When Operating in China; Considerations when Dealing with Government Officials; Risks of Bribery; Compliance Requirements

We will then break out into panel discussions.  The first will be on Food and beverages and will consist of the following:

  • Xiaohui “Lou” Luo heads up operations for Chang International, Inc., a Seattle based seafood company with sales and operations in China as well.
  • Julie Felss Masino, Vice President of Starbucks’ Global Beverage Group and former Vice President of Marketing and Category for Starbucks in China.  I saw Ms. Masino give a great speech at this year’s Wharton China Forum and then I was on a panel with her at an Economist Magazine “Business without Borders.” Julie knows China retail.
  • Michael McCune (see above) will round out this panel.

The next panel will be on consumer products and will consist of the following:

  • Michael A. Zakkour heads up China strategy and implementation for Tompkins International.  Michael has been involved with China for decades and he truly knows its consumer side. I have had the pleasure of working with Michael on a number of China matters and serving with him as a speaker at various China events and I can verify his expertise.
  • Sage Brennan co-founded China Luxury Advisors and he too has been working with China for decades.  China Luxury Advisors assists luxury goods companies in selling to Chinese consumers both inside and outside China.
  • Renee Hartman also co-founded China Luxury Advisors and she too has a wealth of China consumer experience.  Renee wrote The Basics On China Retail — Creating Your Own Customers Is The Key, one of the most popular posts ever on this blog.  I have worked extensively with both Sage and Renee and shared a podium with them at many a China event and I know that they will bring a wealth of expertise and ideas to this one.

The last panel will be on services and will consist of the following:

  • Benjamin A. Shobert heads up the Rubicon Consulting Group, which focuses on assisting healthcare and senior care companies with Asia.  Ben has been involved with China’s health care and senior care industry for many years and he is a frequent writer on the topic as well, oftentimes for the Asia Health Care Blog.  Ben is amazingly knowledgeable on China big picture issues.
  • Darryl Custer.  Darryl Custer is a Vice President of Operations at Callison Inc., an architecture firm which has had tremendous success in China. Callison has been doing business in China for as long as I can remember. Daryl’s focus is on China.

China Law Blog readers will be given a “substantial” discount to this seminar and if you contact us by leaving your email in the comments or by emailing us at firm@harrismoure.com, we will give you the code to make that discount possible.

I look forward to seeing you at the seminar.

China has more than 185 million people over the age of 60 and 16 retirees for every 100 workers.  By 2025, it is expected China will have around 64 retirees for every 100 workers. Currently, China is paying for the care of only 1.6% of its senior citizens, well below the 8% standard for developed countries set by the World Bank. Many American companies are seeking to fill this void.

In the most recent issue of the China Business Review, in an article entitled, “Senior Care in China: Challenges and Opportunities,”[link no longer exists] Benjamin Shobert delves into the issue of China’s ever increasing demands for senior care, and the obstacles foreign providers face in establishing themselves as a viable market presence in that arena. The whole article is well worth a read, but I would like to highlight one aspect. Recent conversations I have had with Chinese-Americans support one of the major points of Ben’s article—that the senior care market most likely to be receptive to Western companies is that of high-end care.  In the same way China’s ultra wealthy patronize high-end foreign hotels because of their reputation for exemplary service and powerful brand recognition, they will seek out foreign senior care providers for their elderly parents and for themselves if promised the same quality of service.

I guess I still have to wonder though how much room there is for foreign influence/investment/expertise in China’s soon to be booming private senior care market and I would love to get reader feedback on this. Is China elder care a great opportunity for Western companies? What do you think?

I love it when I read something that tells me what I already knew, but simply had not realized. That happened to me today when I read  a post on the Asia Healthcare Blog by my friend and fellow-Seattleite, Benjamin Shobert, entitled, “Life Sciences Companies Go to China to Raise Capital” [link no longer exists].

Ben sets out the three main reasons pharmaceutical companies are going to China:

[F]irst, and most obviously, build market share in China’s high-growth market. Second, access China’s inexpensive R&D capabilities to complete drug discovery faster and less costly than what is possible in North America or the European Union. But, American pharmaceutical start-ups are beginning to take note of another opportunity in China: as a source of potential investors for their start-ups.

Though my firm has worked on/is working on a deals/potential deals involving Chinese investors in American tech (no pharma) companies, until I read Ben’s post, it had just not occurred to me that this is a trend. But it clearly is. Chinese companies are looking to put their money into United States based companies both in the United States and in China.

Of course, Chinese investing in foreign companies in China is nothing new as they have been doing that via joint ventures (JVs) for more than twenty years. What’s different about today, however, is that in the past foreign companies typically merely allowed Chinese investment when they had no choice. Today, foreign companies are actively seeking Chinese investment because they need the money.

Ben sets out the three key issues foreign companies face when taking in Chinese investment:

  • Losing intellectual property to the Chinese investor
  • Having to turn over the Chinese market to the Chinese investor
  • Eventually having to turn control of the company over to the Chinese investor

Absolutely true. It has been over one (or more) of these three sticking points on which most of the deals on which we have worked have foundered.

The tension is obvious. The American (in our cases) company wants to maintain full control over its IP and is concerned about the Chinese investor taking that IP to one of its other companies. Some of the Chinese companies are quite up front in saying that one of their reasons for investing in the U.S. company is to have full access to the American company’s IP. Most American companies cannot abide by that. The turning over the Chinese market to the Chinese investor is usually the easiest of the three issues because compromise is usually possible by agreeing on a timeline and/or a market sharing arrangement. Surprisingly enough, the same is usually true with respect to turning over the company to the Chinese investor because that too can usually be resolved by agreeing on the preconditions for any turnover and the terms for if and when such a turnover situation is triggered.

Chinese investment in your company. Are you ready for that?

Had lunch yesterday with Benjamin Shobert. Benjamin is very intellectual and very knowledgeable about China. At some point during our lunch, he talked of recently having attended a China cleantech conference at which the participants talked of how China is THE place for developing cleantech because, among other reasons, it is so heavily supported by the government.

Benjamin told me he then asked about the risk to cleantech investments were China to pull its massive government subsidies and a private equity person responded by saying that he cannot even consider that risk in his investments. Benjamin and I then talked of how that probably makes sense, and not only because this person is investing other people’s money, but because their is no good way to quantify it and his job is to try to make money now while the making is good.

Benjamin then said that a lawyer at the conference mentioned that there is always the risk of some crisis arising that forces the Chinese government to divert its cleantech funds for something else. Benjamin and I then talked of what such a crisis might look like and we thought it might involve the government needing to pay off on bad bank loans or having to prime another pump or two.

Benjamin then posed the following three part question:  How we will know when China has reached the point where its bad debt load has gotten too high? Will investors in things like cleantech know in sufficient time to get out? How do we know it has not already started?

I answered as follows:

  • I don’t know.
  • Almost certainly not.
  • We don’t know.

How do you answer?

UPDATE: Countless readers (by emai and by comments) have pointed out that Michael Pettis just recently wrote a post entitled, “Looking for debt” in which he does a seriously (he’s a real economist) analyzes information in an effort to determine China’s debt load. Whether you agree with Pettis or not (and I tend to), he is one of the very few real economists who closely studies China and for that alone, his blog is always worth a read.

China policy guru Benjamin Shobert has written an excellent article for the Asia Times on IP in China. The article is entitled, “China’s IPR thorn still needles West,” and it says what we have been saying: IP protection in China is getting better, but it is not there yet.

Shobert quotes from a recently released US-China Business Council report [link no longer exists] to back up this position:

Perhaps with this question in mind, the US-China Business Council (USCBC) released a report in mid-February on the question of IPR enforcement in China. The report acknowledged that China deserves to be recognized for the advancements it has made in this area: “The IPR legal framework … has become less of an issue over time … because of China’s efforts to build an increasingly comprehensive regulatory framework for IPR … many – but not all – companies report that the overall IPR picture has shown steady improvement, though at a slow pace.”

He also quotes me:

Not only does the USCBC see positive adjustments in this realm, but so do American lawyers who specialize in these matters. Dan Harris, a partner at Harris Moure and blogger at the award winning China Law Blog, agrees: “IP protection in China is very slowly improving and that has been true over the last 18-24 months as well.”

What I really like about the article though is how Shobert distinguishes between the effectiveness of IP enforcement by region and by industry. He notes that IP enforcement remains “highly uneven across cities and provinces” and how IP protection for software, movies, and music, is particularly problematic.

Shobert concludes the article with advice from Mike Bellamy and from me that foreign companies doing business in China must consider non-legal methods of protecting their IP:

For Mike Bellamy, China operations director at PassageMaker, the answer is to compartmentalize key technologies from one another, and utilize a third party for final assembly.

According to Bellamy, “We call this our ‘black box’. Put simply, the black box concept is designed to protect the intellectual property of our clients by having semi-finished or finished products delivered to our facility and then, behind closed doors … do the final branding, final assembly, packaging and inspection.” But even this model has its limitations, which Bellamy is quick to point out: “Once the product is in the market place then it is much harder to control who sees the product. But forcing your competition to reverse engineer and wait for your product launch is much better than having your ideas floating around among suppliers and competitors from day one.”

Harris, no stranger to IP issues in China, echoes this advice: “As a lawyer, we always do what we can to protect our clients on the legal front, but there is always more that can be done to add IP protection to the operations side.”

What are you seeing out there? Is IP protection really getting better in China?

UPDATE: Michael Lin of Marks & Clerk in Hong Kong has written a very good piece on China IP protection, entitled, “Intellectual Property Protection in China is NOT an Oxymoron,” with the theme that IP protection in China is improving.