China Mexico Trade

The China Daily recently interviewed Felipe Garcia, Commercial Counselor of the Mexican Embassy in Beijing regarding Mexico-China relations. The gist of the interview was that Mexico-China relations would improve under Mexico’s new federal administration because both countries want closer relations and because China knows just what is needed for such closer relations. In the China Daily’s view (and presumably that of the Chinese government as well), closer relations are a near-certainty because the first ambassador met by Mexico’s President López Obrador was from China and because China then reciprocated by inviting Mexico to the China International Import Expo (CIIE) to be held in November 2019.

The China Daily piece, titled With a New Leader, Mexico Eyes Stronger Ties with China is actually emblematic of how the Mexican government still does not understand how to generate more trade with China.

  1. The Chinese Ambassador inviting Mexico to the CIIE says nothing regarding relations between China and Mexico’s new federal administration both because Mexico had been invited to this event long before it had even become clear that López Obrador would be Mexico’s new President — it had been promoted among Mexican business circles for almost a year before this so-called invitation.
  2. The invitation is not that big a deal anyway. Many countries get invited to the CIEE (which is an annual event) and it is not clear Mexico has sufficient resources to promote its goods, services, tourism and investment opportunities at the CIEE. Mexico attended last year’s CIEE not so much because it was invited to do so, but because Mexico’s previous administration had a strong policy of promoting economic diversification abroad and it devoted substantial resources to do so. It is not at all clear President López Obrador shares this same economic view or the same willingness to devote resources to expanding Mexico’s global trade.
  3. The trade numbers given by Mr. Garcia in his interview hide the true shape of Sino-Mexican economic relations (something quite convenient after fiascos in recent years, such as the Mexico City-Queretaro high speed railway fiasco or the Dragon Mart fiasco. The China Daily interview mentions that “[e]ven before the expo there had been good news in the air. Bilateral trade had climbed 11 percent to nearly $48 billion in 2017, and Mexico’s avocado exports to China in the first half of this year, a whooping 9,368 tonnes, had already overshot 2017’s total.” These numbers conveniently ignore that China exported more to Mexico than the previous year and that China’s trade deficit with China is approximately that Mexico exported less than USD$7 billion to China in 2017, while importing more than $74 billion from China in that same year for a whopping $68 billion yearly trade deficit.
  4. The China Daily also uses a “before we had nothing” argument to highlight whatever little has been achieved in terms of Chinese investment into Mexico. The article notes that in 2017, “China’s JAC Motors, a state-owned automobile manufacturer, teamed up with Mexico’s Giant Motors to invest $200 million in an SUV auto plant in the central state of Hidalgo. And after China and Mexico decided to set up a joint investment fund of $2.4 billion, one of the fund’s first deals in 2016 was to invest $140 million in Citla Energy, a new Mexican oil company. According to a widely-cited Atlantic Council report last year, from 2014 to 2016 Mexico saw more than 40 deals valued at over $4 billion from China, a significant jump since no previous year had seen more than five.” But if you put these numbers in perspective, $4 billion is nothing compared to the value of projects currently underway between China and Chile, a Latin American country with a much more developed relationship with China. For instance, China has already invested US $3 billion in Chile according to the World Economic Forum and, as of last November, Investchile was working on “74 Chinese companies and 18 specific projects worth over US$1,800 million in areas such as energy, mining and infrastructure.” Though Chile’s economy is much smaller than Mexico’s it (along with Brazil) are China’s biggest trading partners in Latin America and Chile, at least in part because Chile has a wealth of qualified people that Chile have furthered Chile’s trade relations with China. Chile has even expressed its intention of joining the Belt and Road Initiative (BRI).
  5. Mr. Garcia nicely mouths the same old discourse to “win China over,” by highlighting Mexican exports of agroindustrial products that if not exported to China would almost certainly be exported to various other countries and “Mexico’s strategic location, bordering the US and a beachhead into Latin America [that] could help China’s global reach.” Or as the China Daily puts it: Mr. Garcia that “stressed the importance of bilateral trade…before ticking off in quick succession some of Mexico’s proud exports, like avocados and tequila.”

The China Daily interview irritated me for other reasons, too. Cabinet members in Mexico seem also persist with an outdated and ineffectual view on how to “approach” China. On December 20, during her first press conference as Economy Minister, Graciela Márquez Colín, issued assurances that the new Mexican government would work to make China a “very important market for this country,” as though that same plan had not been official Mexican foreign policy during past administrations. She also stated the obvious, saying that Mexico must look for a way to insert itself into the Asian region, which is a growth locomotive for the coming years,” and that “although [evolution of Sino-Mexican] cultural and educational relations had begun since the 70s, that of trade had been slower.” But the punchline came when she pointed out that Sino-Mexican trade exchanges would teach Mexicans “how to understand this potential market” and given that “there are Mexican entrepreneurs in China…there was a “great opportunity to understand China’s technological and innovation advancements.” Sadly, I view her talking about opportunities to understand China as only confirming how little has been learned about dealing with China from either past administrations or from those Mexicans who actually have been dealing with China for the last two decades.

Mexico’s Undersecretary for Foreign Trade, Luz María de la Mora, stated (as we have heard so many times before) that “Mexico was seeking with China an agenda that responds to the interests of both countries” and that this agenda should be strengthened for Mexico’s export offerings, adding that we are “also very interested in attracting quality Chinese foreign direct investment (FDI) that allowed fostering an initiative of innovative industries development [using] top-notch technology” and pointing out that the CIIE was “a very interesting fair . . . where Mexico . . . could present its products to that Asian country which displays export opportunities.”

Mexico must start thinking of Chinese FDI as more central to our economy, and not just as one of many possible ways to boost Mexican exports. Even if the new administration is putting closer economic relations with China high in its priority list, its ignorance and lack of plans regarding how to accomplish that have so far been its defining traits.

There have been many changes already under Mexico’s new federal administration, including one that will significantly impact Mexico’s economic relations with China and the rest of the world: This is the plan to shut down ProMexico a Federal Government agency tasked with promoting international trade with Mexico and foreign direct investment into Mexico. In my next post, I will discuss the legal and business implications of ProMexico’s closure and various other budget reductions of key Mexican ministries, all with a focus on China.

For more on China-Mexico relations, check out the following:

For more on business relations between Mexico and China, check out the following:

 

*  The above post is by Adrián Cisneros Aguilar. Adrian is the founder/CEO of Chevaya (驰亚), an Asia-Pacific internationalization services company. Adrián has a Doctor of Laws from Shanghai Jiao Tong University and an LL.M. in International and Chinese Law from Wuhan University. He also is our law firm’s go-to lawyer for anything Mexico.

 

Myanmar

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

We have written a number of Myanmar-focused blog posts for China Law Blog over the years and if you want the full flavor of what has been going  on there, I urge you to go back and read those as well. In 2013, it was Myanmar Foreign Investment. Difficult And Expensive, But Opportunities Are There. In 2014, it was Myanmar: Open For Business? In those posts, we talked about how Myanmar is a difficult place in which to do business and many of companies going there are bigger companies looking to get in now and make money later. In 2017, in A Report from Myanmar from an old China Hand we talked about how much had changed, due in large measure to the relaxation of sanctions. Last year, in Doing Business in Burma/Myanmar: An On the Ground Report, Robert wrote how optimism in and about Myanmar is waning as things just keep getting worse there.

Yesterday, Robert emailed us an article from the Irrawaddy (for more on this newspaper and its interesting history go here) about “China’s ambassador to Burma going up to Kachin State to throw his weight around.” In response to that, we asked him to provide us an on the ground report of China’s activities in Myanmar. The below is Robert’s report:

Over the past five years I’ve had front row seats to watch how Chinese companies in Burma operate, as SOEs, as SMEs and as outright outlaws.  The latter predominate.

The Chinese SOEs were initially focused on getting a beachhead at Kyaukhpyu on the Rakhine coast NW of Rangoon. Between 2012-2014 a pipeline running from the coast across Burma to Yunnan was built. There were on again/off again plans for a railroad paralleling the pipeline, but nobody could figure out what good it would be for anybody local.

I’ve previously described other Chinese mega-projects in Myanmar, but the only place where anything is happening is a bizarro 5000-acre resort-industrial zone-Las Vegas in the Jungle sort of thing on the Thai border across the river from Mae Seot being done by Jilin Yatai Group. For background on this project go here. I am baffled how the Chinese are doing a very large project by working directly with an ethnic armed organization, on Burmese soil, and without much in the way of compliance with Burmese foreign investment laws and procedures. I am even more baffled with how Yatai’s operation is being done in an area where the local armed groups haven’t exactly hammered everything out with the government yet.

Other Chinese SOE projects like the Myitsone dam and other hydropower projects are stalled, largely due to pushback from locals in the intended project areas. The Myitsone dam project has gotten nationwide pushback because it would affect the entire watershed of the country and China does not have a great track record on either domestic or overseas hydropower projects, especially when it comes to having environmental impact studies done that are deliberately superficial. As of this writing we know of six such projects that are going nowhere. For a really great story on a really botched Chinese dam, check out It Doesn’t Matter if Ecuador Can Afford This Dam. China Still Gets Paid.

The major feature of all these Chinese projects in Myanmar is that Chinese SOEs think engagement with locals is not needed and so long as the right people in the Union government are paid enough under the table any and all objections should cease. The Chinese are not alone in this approach, as many international NGOs also take the same approach, pouring out largesse in Naypyidaw, while leaving crumbs to filter down to project areas. Up in Putao, people are fighting against various conservation NGOs because they have paid off people in the forestry department in Naypyidaw to expand the national parks in a way that drives people off the land. For an example of this, see Over 200 villagers march to demand the abolishment of Hkakhaburazi National Park.

For Chinese SMEs and outlaws looking to do something here, compliance with local law is the last thing on their minds.  Their collective mode of operations are as follows:

  • Acquire the land via local straw buyers.
  • Acquire the land with payoffs to the military, especially where a hapless local is occupying land that the military or affiliated cronies can easily seize. In many cases in Kachin and Shan State this occurs even more quickly if local farmers have been forced out due to conflict. A family can return home from months in a refugee camp to find their land under bananas or rubber plantings.
  • Import of seeds, cuttings, and/or seedlings without following agriculture rules on phytosanitary safety. This is a big deal because it is being done on such a massive scale.
  • Use illegal agrochemicals, some of which have been banned in China for decades. This has led to massive contamination of ground water.
  • Divert local water sources to Chinese plantations, basically robbing locals with longstanding arrangements. Bananas are awfully thirsty.
  • Develop industrial/agricultural/mining operations in areas outside direct government control, such as those controlled by various ethnic armed organizations. This allows the Chinese outfit to do whatever it wants, especially with gold, silver, and antimony mining. Entire riverbeds get messed up this way.
  • Operate in areas that have REALLY been out of government control for decades, such as the United Wa State Army (UWSA) areas in NE Shan State. These areas run by a notorious drug-trafficking army have been pretty much annexed by China. RMB is the preferred currency, Chinese banks and mobile systems are used, and there are few if any border controls. It’s my understanding that the Chinese Communist Party’s International Liaison Department is responsible for maintaining the relationship with UWSA, which could be a vestige of past relations when the UWSA was still the Burmese Communist Party. Christians and missionaries are repressed in these annexed areas.

In general, the Chinese approach is basically “how much will it cost me in bribes until I’ve squeezed all the juice out of this lemon?”

As local opposition to Chinese activity in Burma heats up, several features of Burmese political and commercial culture will act as countervailing factors:

The Burmese do not intend for any foreign entity from any country to make any money here via foreign investment (FDI) — nothing personal against Chinese. This is just how things have been set up under the foreign investment laws and this is local practice. Burmese generally view FDI as an extension of some sort of foreign government donor program and they bitch mightily when the flow of FDI slows, as it has for the past couple of years.

To the best of my knowledge the Burmese government still has no procedure for issuing debt guarantees for foreign debt. This makes it impossible for China to ensnare Myanmar with a debt load that facilitates de facto annexation of property, as has been done elsewhere (See the New York Times article on Ecuador above). What grates on the Chinese about the Myitsone dam project is that cancelled or not, China will not recover any of the costs already put into that project, as the Burmese government never made any commitments to pay if things went South. And China has almost  zero leverage. Burma will be one place where the give and take over the Belt & Road initiative is likely to be all give — by China.

As far as infrastructure development, the Chinese have done virtually nothing here that the Burmese people need, want, or sought. Everything  currently under discussion would directly benefit China, be it a highway, railroad, or hydropower dam and pretty much all the Burmese know this. So China is in no position to be able to accuse the Burmese for being “ungrateful,” as they like to do with Tibetans, Vietnamese, North Koreans, Ecuadorians, or whoever is their ingrate of the week.

Taiwanese companies are also here and they have a decidedly better reputation for compliance and how they handle local matters. In many cases, these are Sino-Burmese repats. There still might be a Taiwanese government  high school running up in Lashio and I used to know people who graduated from it. The Taiwanese businesspeople I know and work with here are studiously make certain to distinguish themselves from the Mainlanders.

Sooner rather than later I expect to see a nationwide backlash against China — such as occurred in the 1960’s — and it . will likely be ugly indeed. See The backlash against China is growing: warnings against ‘a new version of colonialism’ stood out for their boldness, they reflect a broader pushback against China’s mercantilist trade, investment, and lending practices. Heads on pikes and businesses reduced to smoking rubble are not outside contemplation. All it will take to light the match is for the Chinese ambassador to say something stupid like he did the other day in Kachin State.

China Lawyers

 

From all of us, to all of you,

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

ENJOY the season/holidays!

Doing business in Thailand

 

By: John DiDominic*

With all that has been happening with China lately on trade, Thailand is emerging as a highly attractive investment destination. Thailand has consistent and well-defined investment policies, increasing regional connections, and a government committed to improving its transportation infrastructure. It also (for the most part) has had long-term political and economic stability.

Thailand is Southeast Asia’s second largest economy with a well-established market system. In addition to being an attractive production base, its 70 million people make for a dynamic consumer market.

Thailand is well located between India and China and it shares maritime boundaries with Vietnam, Indonesia, and India. Thailand is the anchor economy for the neighboring developing countries of Laos, Myanmar and Cambodia and it is strategically located to serve markets in and beyond Southeast Asia.

The business climate in Thailand is welcoming to foreign investment and further deregulation and trade liberalization are taking place on many fronts, largely driven by Thailand’s participation in the Association of Southeast Nations (ASEAN) Economic Community (AEC). According to a recent World Bank study Thailand’s business climate has improved considerably since 2013 and it now ranks as the second most promising economy in East Asia. The World Bank rightly describes Thailand as “one of the great development success stories. Due to smart economic policies it has become an upper middle income economy and is making progress towards meeting the Sustainable Development Goals.” The World Bank Group’s 2017 Doing Business report “ranks Thailand in 26th place among 190 economies in the ease of doing business for small and medium enterprises around the world, up from 48th place when applying the same methodology to last year’s and this year’s data. The report also recognizes Thailand as one of top 10 economies that have improved most in the ease of doing business in the last year worldwide.” China came in at number 78.

Thailand is already a major destination for foreign direct investment and China’s trade problems have put that into hyperdrive. I moved to Thailand to live and work in 2007 and this is the best I’ve ever seen it.

Thailand 4.0

Thailand’s industrial sector is looking to move up the value chain and expand its capabilities to produce greater value-added products in a variety of modern industries.  These include the fields of Robotics, Medicine, Aviation, Advanced Manufacturing, Biotechnology, Nanotechnology, Advanced Material Technology, and Digital Technology. These efforts are known as Thailand 4.0, a master plan to move the country from one of an abundance of cheap unskilled labor to an innovation-based value economy. This strategy seeks to spur industries to progress up the technology ladder.  Thailand 4.0 mandates broad reforms that address economic stability, ease of doing business, human capital, equal economic opportunities, environmental sustainability, competitiveness, and effective government bureaucracies.

Incentives

In the current competitive global marketplace, simply possessing a favorable geographic location, efficient infrastructure, stable government and stable access to natural resources is often not enough to attract interest from multinational businesses searching for the optimal placement of their next factory. To stay ahead of regional rivals in competing for finite investment dollars, Thailand offers several financial and other incentives for companies keen to set up shop there. These incentives can vary by product and location but include the following:

·         Tax Incentives:

o   Exemption of up to 15 years on corporate income tax for certain industries

o   ASEAN’s second-lowest corporate tax rate (20%)

o   Double deductions for transportation, electricity and water supply costs

o   An additional 25% deduction for the cost of installing or constructing facilities

o   Exemptions on import duties for some essential materials and machinery

o   Tax deductions of up to 300% for qualified R&D expenditures

o   Tax deductions of 200% for qualified expenditures made in intellectual property acquisition and licensing fees for commercializing technology, technology training; donations to specific research and training institutions, and sourcing support

·         Non-Tax Incentives:

o   Special four-year visas for skilled workers and high-level executives

o   The right to lease state land for up to 99 years.

o   Permission to bring in foreign workers, own land, and take or remit foreign currency abroad.

o   Subsidies for energy conservation programs

·         Industrial and Special Economic Zones:

o   infrastructure and logistical advantages, such as electrical power, water supply, transportation, communications and waste treatment

o   Some of these infrastructure expenses are tax-deductible.

o   Easing restrictions on cross-border traffic of goods and labor to establish cross-border supply chains.

Trade Agreements.

·         Country Agreements.  Thailand is a WTO member and has free trade agreements with China, Japan, South Korea, India, Australia and New Zealand.

·         US Treaty of Amity.  U.S. owned businesses enjoy investment benefits through the U.S.-Thailand Treaty of Amity, originally signed in 1833 (This is the United States’ second oldest treaty!).  The Treaty allows U.S. citizens and businesses incorporated in the United States or in Thailand that are majority-owned by U.S. citizens to engage in business on the same basis as Thai companies (national treatment) and exempts them from most restrictions on foreign investment imposed by the Foreign Business Act.

·         ASEAN.  Thailand’s membership in the Association of Southeast Asian Nations (ASEAN) provides businesses in Thailand the advantages of the ASEAN Economic Community, a single market of more than 600 million people covering 10 countries in the region. This enables the free flow of goods, investments, labor and capital within the community.

·         China-ASEAN.  A China-ASEAN free trade deal also helps mitigate the trade-war risk for companies trading with both the United States and China.

Summary.

Is the time right for your business in Thailand? That depends on a variety of factors specific to your business, your industry and, most importantly, your goals. But is the time right for doing business in Thailand? Yes it is.

* John DiDominic spent seven years as a management consultant with the APM Group (Thailand’s leading domestic management consulting company) in Bangkok, Thailand and he has since focused on helping foreign companies navigate and do business in Thailand. For more than a decade, John has been our law firm’s go-to person for just about anything Thailand.

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

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

We discuss the practical aspects of Chinese law and how it impacts business there. We tell you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.

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

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

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

We tell you more than just that the law is this and this is what needs to be done to comply. We discuss how the Chinese laws as written may say one thing, but our experience on the ground in China dictates something else. We tell you when you need to do more than just follow the law to succeed, and we set out exactly what that something else is. We also will sometimes regale you with stories about the Chinese lawyers with whom we work, the foreign and Chinese businesspeople with whom we deal, and even the places we go. There will be times where our lawyer ethical rules prohibit us from naming names, but we will always work to tell the full story and when we cannot, we will usually make that clear and explain why that is the case.

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

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

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

2. We are thankful that no matter how bad relations between China and the West might get (and they are at their lowest ebb since we started this blog and we see them only getting worse; See yesterday’s post The China Tariffs: You Can Always Lose a Little More, we remain truly moved by the deep and meaningful relations we have with so many people all over the world, including China.

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

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

Again, thank you from all of us (from all of our offices in the United States, China and Spain) to all of you!

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

China lawyers

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

One of the questions both our China lawyers and our IP lawyers have been getting frequently of late — especially from the media — is whether it is possible too protect your IP from China.

To which I always start out with a lawyer answer: yes, maybe and no.

Yes, if you are making a product that the Chinese government does not care about, such as toys, furniture, clothing, most electronics, etc. But if you are making something the Chinese government really does care about, like high speed rail, or cutting edge semiconductors or cutting edge energy technology, the answer is maybe/no. Let’s just say that our China IP lawyers generally drafting contracts and doing China IP registrations for an IoT company than for a semiconductor company simply because we have a lot more confidence in the results we can achieve for the IoT company than for the semiconductor company and we tell our clients that. Nonetheless, even the semiconductor companies must do what they can (both legally and via their own protective systems) to protect against IP theft, otherwise, if that theft happens, they will have no legal arguments against it. See How to Protect Your IP from China.

 

China entertainment lawyer

On September 26, China media and entertainment lawyer Mathew Alderson will be discussing how movie and TV producers can “make the most of the opportunities China offers” as part of a FREE webinar. Go here to register.

PACT, “the trade association representing the commercial interests of UK independent television, film, digital, children’s and animation media companies,” is putting on this webinar and it describes it as follows:

To shine some light on how producers can make the most of the opportunities China offers, we have invited Mathew Alderson, Partner at Harris Bricken to take part in a webinar. Mathew is a transactional entertainment lawyer based in Beijing. He has a wealth of knowledge about the Chinese TV and Film industries and will share his experiences about working with China.

Topics to be discussed include:

–    An overview of China
–    Information about SART and how they work in the market
–    The biggest mistakes companies make when working in/with China
–    An explanation of how copyright works in China
–    The benefits of working within the co-production treaty
–    Contracts and Chinese law
–    How companies can protect their IP
–    Chinese quotas
–    Payment in China, tax, and additional costs
–    Legal representation

To register for this webinar, click here. I remind you that it’s free.

PACT (quite accurately) describes Mathew as follows:

Mathew Alderson is a transactional entertainment lawyer in Beijing. He represents major Hollywood studios, major tech companies and gaming companies, as well as independent producers and distributors. Mathew frequently advises UK companies on the structuring of projects in order to minimize the impact of quotas and other restrictions on foreign content in China. Mathew focuses on protecting his clients’ IP and reducing their exposure to payment defaults in China. He handles China theatrical and episodic projects from development through production and distribution.  Mathew is the author of the UK-China Film & TV Toolkit and a frequent contributor to China Law Blog.

We would add that Variety Magazine described Mathew as a “game-changing” lawyer rocking the movie biz for Mathew’s leading- edge work as a China entertainment lawyer.

You do not want to miss this, so go here and register.

china employee due diligencePeople lie.

Especially on job applications.

A widely cited US study from 2017 found that 85% of applicants lied on their job application. Another study from 2015 found that only 56% of job applicants had lied, but either way, the number is huge.

Why do job candidates lie? For most, it’s a combination of two things: they think their lie will help their candidacy (especially if they think resumes are being screened by a computer), and they don’t think anyone will do a background check. The most common lies are about job skills, followed closely by lies about job responsibilities. An estimated 15% of candidates list jobs that they never held (George O’Leary or Marilee Jones, anyone?).

China is no different from the US in this regard, and in many ways it is worse because Western companies are unable or unwilling to perform due diligence on job applicants. Seeing a market opportunity, I started my own company in 2009 to help Western companies with their China hiring, with a particular emphasis on background checks and screenings. And boy, do they need the help.

Overall, we reject 72% of all candidates for dishonesty, usually for not having the ability they said they did. We have found that salespeople and general managers lie 80% of the time; engineers lie 65% of the time; and people working in finance lie 59% of the time. They lie because they think they can get away with it.

One candidate said he recently left his company when a headhunter called. We found out he was fired three years ago and his detailed stories regarding his accomplishments over the last three years were all fantasy.

Candidates often give us a cell phone number for a former boss that turns out to be the phone number of their friend pretending to be the boss. And even if we get the right number for the boss, Chinese bosses are usually unwilling to speak ill of a former employee even when it’s justified. Our strategy is to take detailed interview notes with the job candidate, and then ask their former boss to confirm the who, what and where of important projects. We often learn that the boss, or someone other than the candidate, actually managed the project in question.

Ronald Reagan is credited with popularizing the Russian proverb “trust, but verify” during his 1980s negotiations with Mikhail Gorbachev. The phrase is ambiguous, but is generally agreed to mean that people should earn your trust, rather than be assumed trustworthy until proven otherwise. I wish the latter was a good business strategy in China but it is not. China has many wonderful people and fantastic job candidates. But it also has a lot of people willing to lie and cheat to get ahead, and they are often the ones who get the interviews.

What are you doing to ensure you hire the “right” candidates?

*This post was written by Jim Nelson, President of SHI Group Recruitment, a China-based employee recruitment agency that focuses on helping Western companies find and hire good employees in China.

China employment lawyerOn April 18, Grace Yang, our lead China employment lawyer, will be putting on a webinar on “Employment Laws for Female Workers in China.” To call this webinar timely would be an understatement, as the issues involving female employees in China could not be more relevant/topical/important.

The live webcast will be this Wednesday, April 18, 1:00-3:15pm PST / 2:00-4:15pm MST / 3:00-5:15pm CST / 4:00-6:15pm EST.

LawProCLE, who is putting on this webinar, describes it as follows:

Foreign companies doing business in China face complex China labor and employment issues every day and issues related to female workers require additional attention. The Chinese government has high expectations regarding how employers must treat female employees, especially those who are pregnant, nursing or on maternity leave. Employers need to know and follow the national, provincial and municipal laws and regulations regarding protection of female employees. Female employee disputes are increasingly common in China and both the government and the courts are getting increasingly tougher against employers that fail to treat their female employees appropriately.

This webinar will give you the information you need to spot employment law issues relating to your female employees and arm you with ways to avoid and mitigate problems.

Grace’s talk will focus on the following:

  1. The key China employment laws on protection of female workers
  2. The employer rules, regulations and policies you need for your China employees
  3. What you need in your employment toolkit to reduce your risk of sexual harassment claims
  4. Female employee special leaves
  5. Female employee terminations
  6. China employer audits

LawProCLE describes Grace as follows:

Grace focuses on international business and China law. She is Harris Bricken’s lead attorney on China labor and employment law and recently authored a book entitled the China Employment Law Guide. Grace is admitted to practice law in the States of New York and Washington. Grace received her bachelor’s degree from Peking University School of Law (“Beida”) and her J.D. from the University of Washington School of Law. During law school, Grace won “Best Written Contract” in the University of Washington Contract Drafting & Negotiation Competition and the Pro Bono Student of the Year Award for her involvement in several community-based volunteer legal service projects.

Grace has spoken at a ton of seminars and webinars on various different aspects of China employment law and always to rave reviews and you do not want to miss this one.  For more information and to sign up, click here.

 

Doing business with China
State dinners are nice, but….

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

Over the past decade, I have come to the reluctant conclusion that most Mexican companies are unwilling to spend the time or the money to get timely, experienced, and appropriate help when doing business with China. I cannot tell you how many times in just the last year a Mexican company has come to me for my “quick” advice on “a few key terms” of a deal they are just about to close without having ever conducted even the most basic legal due diligence. Is the Chinese side a real company? Are they dealing with an authorized representative? Is the deal legal under Chinese law? Will they have any recourse if something goes wrong?

Mexican companies doing business with China (and many of the business consultancy firms advising them) do not seem to care about these questions, and it stems from a false distinction between “business” and “legal” affairs. A company is both empowered and constrained by business norms, but those norms have no meaning without a legal framework. It’s not one or the other – it’s both. And comprehending the importance of both business and legal affairs is all the more important in countries like China where the law is often interpreted with an eye to both politics and the economy. But few Mexican entrepreneurs see law that way – they only care about the deal, and they tend to think of the law as an obstacle.

Many Mexico experts boldly claim that Mexico can rely on its treaty network to expand its imports and exports, but this is a triumph of theory over practice. Few Mexican companies truly understand how to conduct business internationally, as witnessed by the underutilization of the free trade agreement network already available to them. According to a report by the Congressional Research Service, approximately 80% of Mexican exports go to the United States (don’t get me started on the amount of FDI we get from America), but most Mexican companies are not familiar with the applicable terms of NAFTA. This lack of sophistication leads to bad business decisions. I regularly receive emails from Mexican companies that have fallen for the Chinese bank switch scam and hope that I can help get their money back.

Having worked with many Mexican companies in improving how they do business in China and with China, I worry that too many Mexican companies continue to ignore the law (largely because they don’t care about it) and never truly become “international.” Plenty of Mexican companies buy low cost off-the-shelf Chinese products to import into Mexico and there are also a number of Mexican companies that intermittently supply products to China with little or no added value. But how many Mexican companies have strong investments in China or regularly sell large amounts of product there? Not many.

To put it bluntly, if our government and our companies do not start spending more money for high-level assistance to get more sophisticated about China, our government’s current international diversification strategy will fail, at least for China. Before we spend more money encouraging Mexican companies to go abroad (or at least to somewhere other than to the United States), or promoting Mexico as a target for foreign investment, we need to spend more money educating Mexican companies on how to conduct business internationally. We need to get them to think more about the importance of the relationship between China law and business.

Otherwise, we’re just going to be spinning our wheels.

For more on business between Mexico and China, check out the following:

 

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

 

En los últimos diez años he llegado a concluir, si bien renuentemente,  que la mayor parte de las empresas mexicanas simplemente no están dispuestas a invertir el tiempo y el dinero necesarios para obtener ayuda oportuna, experimentada y adecuada para hacer negocios con China. No saben cuántas veces fui contactado el año pasado por alguna empresa nacional buscando mi “rápida” asesoría sobre “algunos puntos específicos” de una transacción que estaban a punto de cerrar, sin haber realizado la más básica debida diligencia siquiera.  ¿La contraparte china estaba debidamente constituida? ¿Estaban los mexicanos lidiando con un representante legalmente facultado de la empresa china? La transacción, ¿era legal bajo el Derecho chino? ¿Tenían claros los recursos o medios para hacer valer sus derechos si algo salía mal?

Ni las empresas mexicanas haciendo negocios con China (ni las consultorías de negocios asesorándolas) parecen preocuparse acerca de las cuestiones anteriores, lo que es consecuencia de la falsa distinción que hacen entre lo “comercial” y lo “legal.” Una empresa es, a un tiempo, empoderada y constreñida por reglas de negocio, pero esas reglas carecen de sentido sin un marco jurídico. No se trata de privilegiar una sobre la otra-ambas son relevantes. Y comprender la importancia, tanto de las cuestiones de negocio, como jurídicas es aún más trascendente en países como China, donde la norma frecuentemente se interpreta teniendo en cuenta consideraciones políticas y económicas. Sin embargo, pocos empresarios mexicanos ven al Derecho de esa manera: sólo les importa cerrar el trato, y tienden, por tanto, a concebir al Derecho como un obstáculo para lograrlo.

Muchos expertos mexicanos aventuradamente afirman que México se puede valer de su red de tratados internacionales en vigor para aumentar las importaciones y exportaciones, pero aquí es donde la realidad supera a la ficción, la verdad. Pocas empresas mexicanas verdaderamente entienden cómo realizar negocios internacionales, algo de lo que puede dar cuenta la subutilización de la red de tratados mencionada y que está a su disposición. De acuerdo con un reporte del Servicio de Investigación Académica del Congreso de EE.UU., aproximadamente 80% de las exportaciones mexicanas van a EE.UU. (y no me hagan hablar acerca de la cantidad de IED que viene de ese país), y aun así, la mayoría de las empresas mexicanas no están familiarizadas con los términos aplicables del TLCAN. Esta falta de sofisticación lleva a malas decisiones de negocio. Cotidianamente soy contactado por empresas mexicanas que han sido presa de la llamada “Estafa de Suplantación de Cuenta Bancaria China” esperando que les ayude a recuperar su dinero.

Habiendo trabajado con muchas empresas mexicanas en mejorar la manera en que hacen negocios en y con China, me preocupa que demasiadas empresas siguen ignorando la ley (en muy buena parte debido a que no les importa el Derecho) y, por tanto, nunca se internacionalizan realmente. Con sus excepciones, muchas empresas importan de China productos producto terminado de bajo costo, y también existen algunas empresas que, intermitentemente, proveen productos a China de poco o ningún valor agregado (agroproductos, recursos naturales, etc.). Pero, ¿cuántas empresas mexicanas tienen fuertes inversiones en China o venden regularmente grandes cantidades de producto? No muchas.

Seamos claros, si nuestros sectores público y privado no empiezan a destinar más recursos a obtener apoyo especializado de alto nivel para sofisticarse acerca de China, la actual estrategia de diversificación comercial del Gobierno Federal va a fallar, al menos, para China. Antes de que sigamos gastando dinero en animar a las empresas mexicanas a ir al extranjero (o al menos, a un lugar que no sean los EE.UU.), o promover a México como un destino para flujos de IED, debemos gastar en educar a las empresas mexicanas acera de cómo hacer negocios internacionalmente. Necesitamos que éstas comiencen a pensar más acerca de la importancia de la relación entre Derecho y negocios en China.

De otro modo, nos la pasaremos perdiendo el tiempo, haciendo cosas que no logran nada.

Para más información acerca del clima de negocios entre México y China, chequen los enlaces siguientes:

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