In going through my hard copy of Asia Legal Business today, I came across an article I wrote a few months back. The article is called “A China That Can Say No,” and though it was written at the very beginning of the Google imbroglio, I think it holds up well. Its thesis is that Google is not terribly central to what most businesses involved in China should be focusing. China is changing separate and apart from Google and though Google may certainly be seen as a sign of that, it is not what happened to Google that should matter to most businesses. It is the change that is going on everywhere else that matters:

The recent Google China brouhaha is both less and more important than depicted by the media. It is less important because when all is said and done, little to nothing will have changed in China as a result of it. Yet it is more important than painted in that when all is said and done, little to nothing will have changed in China.
Let me explain.
The Google China fight is a perfect symbol not so much of where China is heading than as where it sees itself right now. That conflict crystallizes how China now considers itself as being able to thrive without foreign investment. That conflict also highlights how China no longer fears using its own laws to reign in foreign businesses and give competitive succor to its own domestic companies. I do not purport to know why China did what it did with Google nor do I purport to know why Google did what it did with China, but I do know that China has been tightening its legal enforcement against foreign companies, Google included, and I am certain that will only continue.
The direct corollary of China having become less beholden to foreign enterprises is that those enterprises have lost their previously favored status. The best example of this is how foreign enterprises no longer receive special tax benefits not provided to domestic entities. For the last decade, China has had a framework for regulating foreign businesses but has not placed great emphasis on applying it. Now, however, those days of benign neglect are over and the Chinese government is increasingly cracking down on foreign violators of existing regulations, and issuing new guidelines and circulars to enhance what is already on its books.
With China being hailed as the world economy’s savior, its government has concluded it should put more effort into enforcing its laws against foreign businesses. This new world view is already impacting foreign business in China and it will continue. In particular, my law firm has seen the following changes for foreign business in China:
— China’s local governments are more often delaying or denying applications for wholly foreign owned enterprises (WFOEs) and joint ventures. Chinese officials have come right out and said they no longer care whether foreign businesses come to China.
— Registration of technology licenses is more often being prohibited or restricted. The idea seems to be that Chinese businesses should not be required to pay for access to foreign technology.
— Visas for foreign workers are increasingly being delayed, denied or restricted. The view on this is that Chinese workers are available to do any job.
— China is greatly stepping up enforcement of its tax laws against foreign companies.
The Chinese government’s unwillingness to bend in its fight with Google is very public proof of how China’s ascendancy has changed things for foreign businesses in China. For those of us who handle China business law matters, it is a prominent example of the sorts of things we see every day.

What do you think?

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Photo of Dan Harris Dan Harris

Dan is a founder of Harris Bricken, an international law firm with lawyers in Los Angeles, Portland, San Francisco, Seattle, China and Spain.

He primarily represents companies doing business in emerging market countries, having spent years building and maintaining a global, professional network.  His work has been as varied as securing the release of two improperly held helicopters in Papua New Guinea, setting up a legal framework to move slag from Canada to Poland’s interior, overseeing hundreds of litigation and arbitration matters in Korea, helping someone avoid terrorism charges in Japan, and seizing fish product in China to collect on a debt.

He was named as one of only three Washington State Amazing Lawyers in International Law, is AV rated by Martindale-Hubbell Law Directory (its highest rating), is rated 10.0 by AVVO.com (also its highest rating), and is a recognized SuperLawyer.

Dan is a frequent writer and public speaker on doing business in Asia and constantly travels between the United States and Asia. He most commonly speaks on China law issues and is the lead writer of the award winning China Law Blog. Forbes Magazine, Fortune Magazine, the Wall Street Journal, Investors Business Daily, Business Week, The National Law Journal, The Washington Post, The ABA Journal, The Economist, Newsweek, NPR, The New York Times and Inside Counsel have all interviewed Dan regarding various aspects of his international law practice.

Dan is licensed in Washington, Illinois, and Alaska.

In tandem with the international law team at his firm, Dan focuses on setting up/registering companies overseas (via WFOEs, Rep Offices or Joint Ventures), drafting international contracts (NDAs, OEM Agreements, licensing, distribution, etc.), protecting IP (trademarks, trade secrets, copyrights and patents), and overseeing M&A transactions.