China employment lawyer

China employment law is technical and local and nearly all foreign companies get it wrong. See China Employment Law: Local and Not So Simple. It is one of the most consistent and expensive problem areas for foreign companies doing business in China and it has become a massive growth area for our law firm. More than ever, China wants harmony. And don’t forget, China is a communist country. Combine these two and you have a country that badly wants to keep its workers happy, especially as compared to your run of the mill foreign company that competes with Chinese businesses.

If you have employees in China or you are thinking of having employees in China you should have at least a basic knowledge of what you must or should be doing as an employer in China. This book, for the low low price of less than $20 in paper form, gives that to you. It is also sold as a Kindle version for $9.99, but you really should spend the extra $10 to be able to have it in physical form in your office so that you and others can consult it easily whenever necessary. You can get this book at Amazon or at Barnes & Noble.

Disclaimer: This book is written by our lead China employment lawyer, Grace Yang and we get a cut of every sale.

Our typical attorney-client interaction on China employment laws usually goes something like this:

  1. Foreign employer company contacts one of the China lawyers at my firm after having terminated an employee and after that employee has either sued or threatened to sue, oftentimes over a technical legal violation by the foreign employer.
  2. One of our China employment lawyers looks at the case and determines the termination did not comply with China (or perhaps local) laws and the employee will almost certainly prevail in his or her claim. See China Employee Terminations: Don’t Get Lazy.
  3. We explain the above to the foreign company employer and we learn the company is violating China’s employment laws in various ways with all of its employees.
  4. The foreign company employer wants its violations excised.
  5. We then conduct an employer audit to determine what other employment problems need fixing. See China Employment Compliance and Audits: THE New Big Thing.
  6. The employer audit invariably generates a laundry list of employment problems that need fixing.
  7. We fix the employment law problems, one by one.

Nearly all foreign company employers have employment problems in China because Chinese employment laws are so complicated and so localized, because China is so tough on foreign employers, and because pretty much every employee in all of China fully understands the leverage they hold over the foreign employers.

The typical small to mid-sized foreign company goes into China with maybe one or two foreign employees and one or two Chinese employees, none of whom know anything about Chinese employment laws (on the local, regional or national level) and all of whom are focused on getting the business off the ground more than on complying with the letter of the multiple sets of China employment laws. On top of this, at this time, they are usually a tight-knit group of founding employees who view themselves as much as founders as they do employees and who all get along with each other and view their futures with the company as bright. But as the company grows, nobody realizes how important it is to grow out the company’s employment compliance as the company expands and even if they did, nobody in-house knows how to do it. And why spend money trying to complying with obscure employment laws when there has never been a problem with those laws?

But then a problem arises and a China employment attorney at my firm gets called — usually by someone high up in the U.S. or in Europe or in Australia. This person is often the head of HR, the CFO or the CEO, or the GC and they are trying to find out what is going on with HR in China and they are getting only vague or nonsensical answers from their people in China and they are starting to worry. They see the potential for big problems down the road and they want to nip those in the bud now.

Foreign companies with employees in China need to get on top of their China employment situations and stay there. China Employer audits are the way to go in most situations, but in the meantime and as a supplement, someone at your company needs to understand China employment law basics. Someone at your company needs to know enough to be able to spot your company’s China employment law issues before they escalate.

The China Employment Law Guide is the book for that and you really really really should buy it and put it on your shelf. And when I say put it on your shelf, I mean you should buy the softcover version (not the Kindle version) so you can literally put it on your shelf. You actually should get a couple copies and give them to anyone in your company who manages your China employees or plays any role in their hiring or their firing or their vacation time or…. This book is meant to be used for background and for reference and as a decision-making guide.

Just a little bit about Grace Yang, its author. Grace grew up in Beijing and excelled at and graduated from China’s best law school there — Beijing University. She then came to the United States and graduated from the University of Washington Law School where she again excelled. Grace is our firm’s lead China employment and labor lawyer and she is the lawyer at our firm to whom everyone else goes for China employment and labor law questions. Grace is a licensed U.S. lawyer (licensed in Washington and New York) and she splits her time between Seattle and Beijing.

Anyway, did I tell you that you should buy the book? Of course I did and you should. What though will you learn from this book? Among other things, you will learn the following:

  • The basics of China’s employment law rules
  • How to draft an employment agreement that works for your China locale
  • How to draft China employer rules and regulations (aka employee handbooks)
  • The other agreements you should consider for your China employees
  • Frequently contested issues, such as overtime, vacation days, commission payments, and leaves of absence
  • Employee terminations
  • HR audits
  • Most importantly, how to keep your company out of trouble
  • AND MUCH MORE!

So just click here and buy the book.

 

 

You did do that right?

China business basics

Every so often, one of our China lawyers will get an email from a blog reader asking for a recommendation of THE book to read to “better understand China” or “to get a better handle on China.” These requests often come 2-3 weeks before the person is heading off to China for the first time and they oftentimes mention wanting something that will give them a quick overview.

Amazingly enough, there are a plenty of really good, really short books that qualify, including the following three:

  1. Modern China: A Very Short Introduction,  By Rana Mitter. 168 pages. 2016. Oxford Univeristy Press. Mitter is a Professor of the History and Politics of Modern China and Director of the University China Centre at the University of Oxford, authored this book and it is an excellent short history on China. It does a great job of conveying an overall sense of China in an amazingly short time.
  2. The One Hour China Book (2017 Edition): Two Peking University Professors Explain All of China Business in Six Short Stories.  By Jeffrey Towson and Jonathan Woetzel. 152 pages. 2014. This book truly does take about an hour and in that time you will gain a pretty respectable sense of what is going on business-wise in China.
  3. China in the 21st Century: What Everyone Needs to Know. 192 pages. Jeffrey N. Wasserstrom and Maura Cunningham. Wasserstrom is a Professor of History at the University of California, Irvine and the Editor of the Journal of Asian Studies. Cunningham is the Diigital Media Manager of the Association for Asian Studies. This book is meant to be basic and it is, but it is a good a first book as can be found and it is not in any way simplistic.

Any (and all) of these three books would make for excellent reading on an airplane flight for those heading to China for the first time. The One Hour China Book is best if you are going to China for business, but it would be good to supplement that book with one or both of the other two. If you are going to China as a tourist or to teach English or to study, I recommend reading both Modern China and China in the 21st Century.

Any others?

Doing Business in Myanmar Burma

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.

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

Today’s post is on how optimism is waning as things just keep getting worse.

1. The electricity situation here is going to get worse before it gets better.

a. Foreign oil & gas companies are pulling out of their offshore blocks en masse. They had a requirement to drill or walk away, and they are walking away. Low gas prices drive part of it, but also the royalties schemes with the Burmese government are the other part. Prevailing wisdom is that they will return later when the blocks go up for bid again, and offer a lot less and drive a harder bargain with the Burmese government.

b. Several of the schemes for producing more electricity have hinged on gas coming in from offshore. The 2 gas turbine plants running are getting their gas for free from the government, from the Yadanar fields that have been in production since the 90’s.  But production is dropping in quantity and quality and Thai TPP has first call on it. 

c. The government has given a green light for companies to do LNG, but the only credible one is led by Total. We have already been approached by one group of unqualified Burmese rent seekers who have had a gas turbine project on the back burner for more than 4 years, who now say that they want to add a LNG gasification plant.  They are offering nothing more than a 60-acre parcel that they don’t seem to own yet, but want 20% equity in the thing.

d. Coal is what the IFC and world bank are pushing the government, but there is a lot of grassroots-level pushback. A lot of communities have suffered pollution from coal-burning cement plants, and there is concern for waterways as well. Still, a so-called “clean coal” plant would be 5-7 years in the making, and would also require importing all the coal, as there is no source of suitable coal in the entire country.  

e. All of this, and electricity demand is growing 15-20% year-on-year.  The government still subsidizes costs of electricity and consumers pay very little of the costs of delivery. Last year the costs of subsidies were north of $900 million, with $358 million of that for Rangoon Division alone.  The government will not grant a power purchase agreement (PPA) to any foreign or domestic provider that covers CAPEX and running costs, let alone allow for a decent return, so private power providers are staying away. Raising rates for the consumer to the point where costs of delivery are covered is regarded as political suicide.

f. With the above in mind, consensus is that it may be as late as 2025 before we see something positive in the electricity sector.


2. Politics in general. 

a. The consensus is that Burma’s political reforms plateaued more than a year ago and are in fact in a gentle backslide. Readers will note that National League for Democracy head Daw Aung San Suu Kyi (ASSK) has been stripped of a few honors, and is in fact held in some mild disdain by many outside the country. 

b. In her defense, the military still holds control of the key ministries of defense, home affairs, and borders.nationalities. I can tell you from long and painful experience that out in the provinces it’s still 1965, as all of the authorities at the state, district, township, all the way to the village level are still appointed by the military-led home affairs ministry. 

c. On the other hand, ASSK has been decidedly unwilling to weigh in on the racial strife in Rakhine state, and her attitude towards the various ethnic armed groups is pretty much “it’s my way or the highway”. As a result of her unwillingness to play a part the groups that have any combat power at all have taken to the field again. None want to sign the national ceasefire agreement until they get what they want. The only signatories to the agreement are groups that have not fired a shot in anger for decades. Still, some trouble has recently been brewing with signatories the Karen National Union, who are pissed at Burmese Army encroachment into territory that was agreed to be off-limits.



3. Everybody and his brother wants to build and operate special economic zones and industrial parks.

Here, there, and everywhere.  Even the Korean government Ministry of Land & Housing is doing a 600-acre park(KMIC/ Korean Myanmar Industrial Center) about 100 miles north of Rangoon, jointly with a Korean private company.

a. We cannot understand the drive for these parks, especially in areas where the roads and other infrastructure, -to say nothing of electrical power availability- are in general lacking.

b. A key thing, one I focus on whenever I talk to developers of these things is: “Which companies have already weighed in as tenants?”.  The answer is invariably “nobody yet”. 

c. A lot of the developers are either ignoring or worse yet, -ignorant- of certain facts about Burmese workers.  They are not highly mobile, like the hundreds of millions of Chinese who gravitate to Shenzhen and other Chinese megacities for work. My best guess is that 4/5th of these parks are sited in areas where labor is going to be a problem.

d. For the garment manufacturing sector, the lack of US GSP for textiles and garments has really slowed things up. Last week the government passed a daily minimum wage of MMK 4800 (USD $3.63), and the factory owners bitched a blue streak. 

4. When Trump tore up the TPP.
Many describe this action as “pressing pause on American plans for Asia”. Well, the Chinese have not pressed pause, but rather accelerated plans. Not too long after Trump’s inauguration ASSK spent time in Beijing getting initiated into resumption of Burma’s status as a Chinese client state.  

a. The Chinese are now everywhere in Burma, pursuing developments that are all rather land-intensive.  In addition to the Kyaukhpyu SEZ up on the NW coast, they are going after another 4-5 developments each over 5000 acres.  What they all have in common is a lack of focus on fundamentals.

b. For its part the Burmese government is overwhelmingly receptive to all of this, as the Chinese are looking at other big-ticket infrastructure things that no other donor government is looking at doing.

c. As an aside, the current Burmese government still does not issue sovereign debt. A lot of the ADB and other sovereign wealth fund loans have gone to private concerns like Yoma/FMI.

d. And of course the Chinese are in no way, shape, or form inclined to carp on Burma’s human rights situation.
e. I was on a 4-month project in Magway division last summer, and a cast o’1000’s of Sinopec people were all over Burma’s onshore oil patch doing seismic work. In another year parts of the division are likely to become a forest of drilling rigs.

5. FDI is flat, and declining.
But the Burmese do not seem to understand how to incentivize investment, because they are so bound to the cronies; they simply will not allow investment conditions that might conceivably afford a foreign company an advantage over locals. 

a. The only exception to the rule I can see is telecoms, with Ooredoo and Telenor getting licenses in early 2014. But those two companies were flummoxed to see the Japanese KDDI/Sumitomo step in and work with the legacy government MPT to revitalize what should have been a failing competitor. And more recently the Vietnamese Army VietTel paired with the Burmese Army UMEHL to form a 4th contender, MYTel/MecTel.  

b. Some sectors like mining still require foreign companies to take on local partners, most of whom offer little in the way of value. Still, in the border areas controlled by favored (and not-so-favored) ethnic armed groups, there’s not shortage of dirty smash & grab mining operations. Most are for gold, some for tin, others for antimony.

c. Oddly enough, the areas where completely level free market playing fields exist are the areas under government-granted autonomy to the various ethnic armed groups, e.g. DKBA, KNU, and the UWSA areas (as noted above).

d. As of a few weeks ago the US was waaaaaay down the DICA-published list of investment source countries. If you can get its website to kickstart itself, the Directorate of Investment and Company Administration is here.

e. Entertaining to read was the 2017 State IG report on AmEmbassy Rangoon. According to the IG report:

-There are now around 127 American direct hires assigned to the embassy, and an additional 388 or so as local hires/local nationals. I have no idea what they do all day. None whatsoever. Our prospects and prestige here have pretty much sunk that low; it’s possible that nobody in the Hitler’s Bunker-modeled embassy building knows this.

-The embassy has at least 71 leases for housing for which it pays at least $10.7 million a year. Just this number makes the embassy the single biggest American economic player in Burma. If all that is spent on office space for USAID and its contractors is figured in, we could be talking north of $100 million/year just for expatriate quality-of-life maintenance. Staggering. Naturally USAID’s contractors bill back all of that overhead, which is likely deducted from whatever was allocated for Burma aid. That would explain why I don’t see much evidence of USAID doing anything in the areas of Burma I work and know best.

-Puzzling is that the IG points out that 5 people in the embassy produce 5 different translated local media reports per day. I guess foreign service officers no longer read newspapers in the local language at the start of their work day. (The report does note that language training prior to assignment only enables our diplomats to engage in greetings and informal chit-chat) Go here for the whole thing.

6. We do indeed have an American Chamber of Commerce chapter here, but most members are local companies.
The chamber does not do a hell of a lot. The New Zealand and French chambers are very active and do a much better job of engagement. Still, American involvement in Burma’s economy is waaaaaaaay down the list, as reflected in the Myanmar Investment Committee’s monthly stats. China (of course), Korea, and Japan are the big hitters. In terms of American economic activity, Coca-Cola is the most visible.
a. We do have a Hard Rock Cafe now, started by a couple of Crony Princelings, but as they can’t seem to properly manage it, and are usually out of a lot of menu items, the place is not popular.
b. Other US brands here are Ford (RMA Group Thailand) and Chevy (AA Medical Group). Neither brand is exactly punching above its weight against used Toyota products and the Korean offerings. Nearly 2 million cars have gone on local roads since the last letter. The government is now wisely stipulating that cars coming in be less than 2 years old and be left-hand drive (the majority are Japanese used cars less than 7 years old, and right-hand drive).
-I bought the very first off the local assembly line Suzuki Super Carry Kei truck. The Japanese cleverly used the way-back machine to incorporate 1960’s design and technology which is dirt-simple and appropriate for Burmese countryside conditions. Electronic nothing, points and condenser, carburetor. $5700 delivered, with Rangoon city plates, vice triple that for a used truck from Japan.
 Burma Law Firm
c. Out in the sticks where I work, US farm machinery manufacturers have once again screwed the pooch by not sending in an “A Team”; they’d rather find a local dealer and half-assed support it. Kubota owns the market now, having figured out a way to offer financing to whole villages for a package of everything needed to plant and harvest rice. Older Burmese farmers have nostalgia for Ford and John Deere tractors, and every once in a while I run across the bones of one of these in out-of-the-way places.
-I had a major jade mining company looking for new heavy trucks; could not get any US maker on the plane to come for a meeting. That $57 million all-cash deal went to Komatsu. The buyer had been vetted for all sorts of US Treasury stuff, so that could not have been the problem.
d. As with China, we have KFC and Pizza Hut, franchised from YUM! by local moneybags Serge Pun’s FMI/Yoma. Both are popular but face stiff competition from Lotteria and other established local and foreign brands. FMI/Yoma spent awhile sorting out the supply chain, as YUM! actually has standards for what goes in their food.

7. Americans are leaving.
A few weeks ago we had American lawyer Eric Rose announce that he was throwing in the towel. He had been one of Burma’s biggest boosters, and carried a lot of water when it came to sanctions lifting. He will be missed.

As always, if any you should find yourself in Burma, I’d be more than happy to help.

China Lawyers
China Law Blog is getting “social.”

When we first started this blog we would fairly often get hundreds of comments on one post. With the changes in how so many of you actually see our posts and the importance of social media, those days are over. Or at least they have diversified.

As part of that diversification, we have ramped up what we do on social media as well. we started a China Law Blog Group on Linkedin to create a spam-free forum for China networking, information, and discussion. That group is always growing at it is now has more than 11,500 members and the number and quality of our discussions keep rising as well.

We have had some great discussions, as evidenced both by the numbers (we’ve had discussions with 50-100 comments) and on their substance. Our discussions range from the practical (“why is it so difficult to do business in China” or ”what do I need to do to get my Chinese counterparty to follow my contract) to the ethereal (“when will we know China is taking innovation seriously”).

The group has a large contingent of members who live and work and do business in China and a large contingent of members who do business with China from the United States, Australia, Canada, Europe, Africa, the Middle East and other countries in Asia. Some of our members are China lawyers, but the overwhelming majority are not. We have senior personnel (both China attorneys and executives) from large and small companies and a whole host of junior personnel as well. We have professors and we have students. These mixes help elevate, enliven, and enlighten the discussions.

What I think truly separates us from most (all?) of the other China groups on Linked, however, is how we block anything and everything that even smacks of spam. We have become so proficient at not allowing spam to see the light of day that hardly anyone even tries to sneak anything past us anymore.

If you want to learn more about doing business in China or with China, if you want to discuss China law or business, or if you want to network with others doing China law or business, I urge you to 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!

Our China Law Blog Facebook page also just keeps on growing and it now has more than 19,000 likes/followers. We use that page  to go a “bit wild” because there is no massive government there to restrain us. That page deals with China law, sure, but it also deals with politics, tourism, food and fashion, business, culture, language, and just about anything else China-related. Our goal with that page is to educate and entertain. Please check out our Facebook page too, by clicking here.

And last and least, after a three-year hiatus, I went back on Twitter and I even occasionally post there as well, especially to promote our own firm’s China and international events. Click here for that.

China employment law guide
Want to know more about China’s employment laws? Buy the book.

One of the most important things you should know about China employment law is that employees have many rights that they cannot contract away. For an example of this, see China Employers: Pay Your Employees on Time to Avoid Lawsuits and Penalties. China employee working hours is another good example of this.

As I have written previously, most China employees can only work under China’s “standard working hours system,” and in most places in China, that means a 40-hour work week — 8 hours a day and 5 days a week. Many foreign employers dislike this system because it means any work done outside standard working hours is overtime and must be paid accordingly. China’s laws recognize this standard system is not practical for certain positions and for certain industries and it allows for two major exceptions, with one being the flexible working hours system. This system is somewhat similar to the salaried employee system in the United States in that it allows employees to work flexible hours without overtime.

China’s flexible hours system sounds good to foreign company employers, but they so often mess it up that it sometimes seems most would be better off were it not to exist at all. To get one or more of your employees in under the flexible working hours system, you must secure prior government approval and this can be a painful and frustrating process, even for those of us who do it all the time. The requirements for getting an employee under the flexible hours system (like pretty much everything else employee related in China) are localized and can change without notice. The local government decision on whether to grant a flexible hours exception rests with local employment officers and they have plenty of discretion and their interpretations of the law can vary. Making things worse, an approval is usually valid for only one year so you need to renew it every year, and the renewal process can be just as arduous as the initial application. Once any of our China employment lawyers gets an approval, we are always certain to send that same lawyer back for any subsequent approvals, figuring that we are not going to mess with what works.

Because of these difficulties, we are starting to see China employers come up with “creative” ways to get around this problem. For example, instead of seeking government approval before they designate the employees to work flexible hours or securing approvals for renewals when the validity periods are expiring, they enter into a “well-written” Chinese-language agreement with the employee that specifically states the employee will work flexible hours and any overtime pay will be dealt with accordingly. Bad idea. The validity of these sorts of agreements has been tested by China’s courts, and the employers have lost nearly every time. In a recent case in Fujian Province, an employer argued that the local law requiring prior government approval for a flexible hours system is not mandatory and because the employer and his employees had agreed to such a system of their own free will, their agreement did not violate any mandatory laws and should be respected. No surprise to anyone who knows China’s employment laws, but the court did not side with the employer and it instead ordered it to pay all overtime, plus penalties.

There are actually a few very limited circumstances under which employers do not need prior government approval before they can make an employee work flexible hours, but those exceptions vary by locale and they can change without notice as well. On top of this, we are aware of situations where the law says government approval is not required for certain positions but the local labor authorities nonetheless still mandate prior approval. Your outcome will ultimately come down to your locale, but our advice to clients is never to institute a flexible hours program without first getting sign off from the relevant authorities. Failing to do so can lead to lawsuits and penalties.

Even if you do everything right in securing relevant government approval, you also must then follow all the requirements of a flexible hours system and these too can be complicated and local. For example, in a case in Tianjin, an employer that obtained government approval to have an employee work under the flexible working hours system lost a lawsuit to an employee who worked 8 hours a day, 6 days a week for years without overtime. The court ruled that even though the employer had secured government approval for the employee to work flexible hours, because the employer made the employee report her attendance and work overtime as though she were still on a standard hours system, the laws on standard working hours must apply and the employer must pay this employee overtime pay for all past overtime work.

When it comes to China employment laws, you really need to get clear on what can be contracted away, and what cannot.

Towards that end, it is with great pride that I announce the recent publication of my book on China’s employment law, entitled, The China Employment Law Guide: What You Need to Know to Protect Your Company. The Kindle edition is already out and the softcover version will soon follow. I wrote this book intending it to be a quick and easy off the shelf reference for companies with employees in China. Please check it out and let me know what you think.

 

 

 

China negotiationsWay back in 2012, my good friend Andrew Hupert wrote a great book on negotiating with Chinese companies: The Fragile Bridge. And for the last five years, whenever anyone asks me what book they should read to learn more about how to negotiate with Chinese companies I always recommend The Fragile Bridge. Earlier this week, someone to whom I made this recommendation emailed me with the following:

Thanks for recommending The Fragile Bridge to me. Took me quite a while to get started with it but once I did, I couldn’t put it down. Hupert clearly knows how to handle Chinese companies and I appreciated how how he does not drone on for an extra 100 pages, as so many other others who write about China feel compelled to do. Any particular reason why you never recommended it on your blog?

Whoops. no particular reason other than oversight.

Here’s the thing, and somewhat in my defense: I hate writing book reviews. My father was an English professor and so I learned at an early age that good book reviews must consist of more than “loved it, buy it and you will too.” And yet writing much beyond that is a ton of work. Maybe worst of all, it requires reading a book slowly and taking notes, which contrasts with my style, which is to read books as quickly as possible with no note taking whatsoever.

When I tell people how tough I find writing book reviews, they always wonder why it would be any tougher than just writing a blog post. Most of my blog posts come fast to me because they mostly consist of my putting in writing what I tell clients as part of my work, or what I hear other China lawyers in my firm tell clients as part of their work. Or else it’s just me pulling from my own emails to clients or, better yet and easier still, my pulling emails from the other China attorneys in my firm to clients.

But writing a book review is real work for which there is no bill at the end. That’s what I call tough.

But I do agree that I should have reviewed Fragile Bridge a long time ago, so here goes.

Great book. Loved it. Uber-practical. If you will be negotiating with a Chinese company, you must buy it. Now!

But wait, there’s more. Amazon describes the book as follows, and I swear to you that its description is 100% spot on, and here it is;

Written by an American for Westerners negotiating in China, “The Fragile Bridge” dispenses with politically correct euphemisms and ivory tower pseudo-psychology. The Chinese want your technology, intellectual property and product designs. You want their markets, resources and labor. Knowing which 1,500 year-old philosopher uttered what esoteric phrase won’t help you safeguard your assets or keep your JV operating, but learning from the lessons of dozens of successful Westerners who have survived the China challenge just might. Andrew Hupert’s even-handed analysis uncovers the sources of conflict in Western-Sino negotiation and anticipates the trajectory that business disputes travel. “The Fragile Bridge” offers readers practical, insightful advice for avoiding, containing and managing China business conflicts of all shapes and sizes. Case studies and examples illustrate each observation. The book ends with a list of highly practical best practices that are appropriate for newcomers and “Old China Hands” alike.

How can you not want to read a book described as per the above? I particularly love the line about how “the Chinese want your technology, intellectual property and product designs,” because I’ve been known to start one of my China speeches with something like the following:

Big companies in China want to steal your IP. Small companies in China want to steal your IP. Government-owned companies want to steal it. Privately held companies want to steal it. And even that company that is run by someone who invited you to his daughter’s wedding—that company also wants to steal your IP. This is not a reason not to do business with Chinese companies, but it is a reason for you to be sure to do business the right way with those companies.

I gotta love an author who thinks like me.

Anyway, just buy the book.

 

China LawyersWe created a China Law Blog Group on LinkedIn to provide a spam-free forum for China networking, information and discussion. We are nearing 11,500 members and the number and — most importantly — the quality of our discussions continues to increase as well.

We have had some great discussions, as evidenced by their numbers (discussions occasionally get more than one hundred comments) and their substance. Our discussions range from the practical (“how do I open a China bank account” or ”what do I need to do to comply with China’s new work visa policies for foreigners” or “what are you hearing about China’s crackdown on xyz?”) to the ethereal (“when will China surpass the West in innovation?”)

The group’s diversity is its greatest strength. We have a large contingent of members who live and work in China and many who operate businesses there. Our LinkedIn Group also has many members who do business with China from the United States, Australia, Canada, Europe, Africa, the Middle East and from other countries within Asia. Many of our group members are China lawyers (both inside and outside China and both in-house and with private law firms) but the overwhelming majority are not. We have senior personnel from large and small companies and a whole host of junior personnel as well, again, both within China and outside China. We have professors and we have students of all levels. This mix helps inform, elevate and enlighten the discussions.

Perhaps of most importance is how we block anything and everything that resembles spam. We have become so proficient at this that virtually nobody even tries any more to inject spam into any of our discussions. Many of our members have commented on how much they appreciate our vigorous no-spam policy. I assure you that will never change or even moderate.

If you want to learn more about doing business in China or with China, if you want to discuss China law or business, or if you want to network with others doing China law or business, I urge you to check out our China Law Blog Group on LinkedIn and join up. The more people who do join our China Law Blog LinkedIn group, the better our discussions. Don’t be shy; click here and join us!

And if you are a Facebook person, we can accommodate you there as well and I urge you to check out our rapidly growing China Law Blog Facebook page. Our focus there is on anything and everything that is China relevant. Our goals with our Facebook page are to entertain and to educate and to highlight issues that for various reasons we cannot discuss elsewhere; our Facebook page most certainly does not shy away from controversy. It also most emphatically covers more than just China law and China business. We post on China politics and diplomacy, China culture and history, China travel and tourism, China food and fashion. We post on pretty much anything we find interesting that day. And we give a lot of rope to the comments and that means we sometimes (like just this morning) get complaints about them from our readers. But we are of the view that you are big kids and recognize that it is not our role to protect you from what others might say. We are rapidly approaching 17,000 “likes” of that page (and growing at approximately 1,000 a month) so so we must be doing something right. Anyway, please check out our Facebook page too, by clicking here.

And last and least, after a three year hiatus, I went back on Twitter and I even every so often post on there as well. Click here for that.

China lawyer China attorneyAmerican and occasionally European law students and recent law school graduates are always contacting our China lawyers to ask what they must do to become international lawyers focused on China law. My advice to them is usually a somewhat rambling dissertation on the need to build a solid legal foundation while constantly working on improving your Chinese language skills. I then talk about how almost every lawyer I know just fell into/morphed into their practice area after many years as a lawyer. I always get the sense this is exactly what these law students/young lawyers do not want to hear.

They want specifics and I am giving lectures on following one’s heart, foundations, basics, training, morphing, and luck. They want to become a China attorney tomorrow and I tell them how if they follow an unclear and difficult and convoluted path they might become one some day.

Here then are some specifics, some of which are my own ramblings and some of which were purloined and appropriated from others.

Career Paths 

Many international firms in mainland China seek attorneys with American or British law degrees and high level Chinese language skills, but for various reasons, it is difficult to enter the China legal market without previous experience in the United States or the UK.

It is important to note that Westerners generally cannot become licensed China lawyers; they can only become Foreign Representative Attorneys.  and there is a law requiring Foreign Representative Attorneys have at least two years’ experience in another jurisdiction before they can work in China. Many lawyers get around this by splitting their time between another jurisdiction (including Hong Kong) and China. If you spend 6 months + 1 day in the other jurisdiction and the rest of the year in China, that will count as a year in another jurisdiction. If you do that for two years, you are eligible to work in China as a Foreign Representative Attorney. You still cannot “practice” law in China, but you can work there.

Generally, the best way to do this is to spend your first few years practicing law at a major US London law firm and then go to China to practice for a couple more years. This way you bring an American or British legal education and the requisite high level law firm experience. Even if your Chinese is excellent, your added value to a law firm in China is your American/British legal background. If you go to China immediately after graduation you cut into what you can offer. It is important to note thought that the real key to increasing your value as a foreign lawyer doing China law is to be able to read and write in Chinese. Being able to order a beer or discuss the weather in Chinese is great as a tourist, but nearly meaningless as a new lawyer whose chief job is usually to research and analyze written laws and contracts.

On the other hand, there is something to be said for going to China right after law school. Ten years ago if you went immediately to China you would arguably be ending your legal career before it began. I know a ton of fine lawyers who went to Japan or to Korea or to China and spent decades in those countries and by doing so became virtually unemployable as lawyers in the United States. Globalization is changing this rapidly, but it is still a little risky and I frankly do not know the current situation well enough to advise anyone. I have heard though that if you don’t want to be a partner at a major law firm, going to China first is probably fine. However, if you are looking for an American legal career, It is probably still best to stay in the States for at least a couple of years after graduating law school.

Law Schools

Speaking of law school, one of the more common emails our China lawyers get comes from law students and potential law students, asking us what they should start doing now to prepare themselves for a career practicing China law. My advice on that is also probably a bit too Zen-like for their tastes, but here goes. Get into the best law school you can, not in China. Take as many corporate and intellectual property and private international law courses as you can. Get the best grades as you can. Travel as much as you can. Hone your Chinese language skills as much as you can. Hone whatever other foreign language skills you have as much as you can.

Lately, I have been getting many emails from people who are already working in China in non-lawyer jobs, asking about getting a law degree from an English language law school program tied in with a Chinese law school. My response to them is to ask what that degree will allow them to do once they complete it, because it is my understanding that it will NOT allow you to practice law in either China or the United States. If anyone believes I have this wrong or if anyone is aware of a country that does permit a graduate with one of these degrees to practice law, please let me know via a comment below. See also China “International” Law Schools???!!!!

           Requisite Traits

Practicing law tends to require certain traits. Practicing law in China or even with China also requires certain traits. Far too many people get into law when it is not suited for them and they end up unhappy. You should passionately want to become a lawyer or not bother. You should passionately want to become a China lawyer or not bother.

The book, China CEO: Voices of Experience from 20 International Business Leaders, lists the traits CEOs seek in their expat managers for China and these traits are pretty much the same traits needed to be a good international lawyer or a good China lawyer.  Here is the list, with my comments in italics:

  1. Technical and Corporate Expertise: Select people with a rock-solid professional background and an excellent knowledge of the company.In the legal arena, this means smart people who understand complex legal issues, no matter what the country.  
  2. International Expertise: A posting in China becomes vastly more manageable after an assignment either in an Asian location or another developing market, or both. The key here is that the person who has spent time in another country tends to be better equipped to deal with other countries, including those countries to which he or she has never been. I have seen this time and again with both lawyers and clients. We have many clients who when their business dried up in one country moved nearly effortlessly to another country. We also see domestic companies that simply cannot make the leap to go international at all, even when they should. What you learn in one country (but obviously not everything) will help you in another country.
  3. Multicultural Mindset:When selecting an executive for an overseas posting, look for someone with an adventurous spirit, a sense of humor, and an open mind. This also applies to lawyers.  n an article I wrote a long long time ago on doing business in emerging market countries, I wrote on how doing business in an emerging market means taking nothing for granted:

I have a mantra for my own legal work in these countries that translates well to the business world: ‘Assume nothing, but assume that you are assuming things without even realizing you are doing so.’”

Things will be different. Very different. Things you take for granted in your home country might not exist in the emerging market country. Things you take for granted in your home country might be the exact opposite in the emerging market country. Things you think will be totally different in the emerging market country may be exactly the same. Things you thought you knew about emerging market countries based on what you know from another emerging market country may be completely different in a neighboring country, or even in another region within the same country.

The principle, one more time: Keep an open mind, and assume nothing.

  1. Commitment to Learn: Learn from those around you. Listen to your employees, JV partners, clients, and customers. This is equally true for international lawyers. 
  2. Humility: Be humble and avoid using an authoritarian style. Influencing and coaching is the way to get the best out of your Chinese employees. Of course. This is also the way to get the best out of the lawyers in other countries with whom you will be working.
  3. Strength: Be unyielding in defending core corporate values and culture. In the legal context, this means doing things by the law, even if you see others around you not doing so. This also means always telling your clients the truth.
  4. Patience: Be patient; use a step-by-step approach in China, not a Big Bang approach. I will borrow again from my emerging markets article:

Exercise Extreme Patience.  This principle stems from the maxim that everything takes twice as long as you think it will. If it takes twice as long in the West, triple that in emerging market countries. You’ll go in both as a businessperson and a teacher — and in both roles, the learning curve of your partner will almost certainly take way more time to deal with than you think.

For example, many emerging market countries have a history where “bad business” meant “thinking long-term.” A year or two after the fall of Soviet communism, I was involved in a matter where an investor put $250,000 into a Russian joint venture. The business very quickly was making good money and all indicators pointed towards steadily increasing profitability. But, quite quickly, the Russian company stole the $250,000. Was it so irrational for him to think so short term in a country where the government and tax systems had such a history of unpredictability?

  1. Guanxi-BuildingBuild your guanxi not only internally (with subordinates, peers and superiors) but also externally with clients, suppliers and government officials). A strong guanxi network is a fundamental element of your success in China. As a lawyer, both you and your practice will benefit by your doing more than just staying in your office poring over law books. Get to know your clients, your fellow lawyers, good people in the industries in which you are working, and treat them with respect. This is basic good business for anyone. An international lawyer friend of mine (with a great international law blog) recently sent me a very popular and highly regarded book, The Go-Giver, Expanded Edition: A Little Story About a Powerful Business Idea, that expands on this in all (not just China) contexts. I highly recommend this book to anyone contemplating a career in law or in business. Lawyers who succeed widely generally work well with others. 
  2. Speed: Be flexible and quick. Stay well informed; the business environment in China is in a constant and rapid flux, probably much more so than in other markets. This is true of international law as well, and if one is going to practice in this area, one must enjoy and thrive on constant change and even constant uncertainty. You need to be prepared to work tirelessly just to keep up.

 

Are you Sure?

A few years ago, a law student emailed me a link to a Quora question and answer session on what it takes for someone to succeed in working for a company in China as a foreigner. The law student specifically referred to answers given by David Wolf and asked whether those things apply to China lawyers as well. They most certainly do.

The specific question on Quora was “What are the key skills needed to succeed working for a company in China as a foreigner?” David Wolf’s excellent answer shows as number one because the highest number (including a number of prominent China bloggers) voted it number one. Wolf’s answer was that “as someone who has hired on behalf of large and small companies here in China, I can tell you the kind of young foreigner who gets hired has most or all of the following: (my comments are in italics)

  1. Chinese language skills: Language is the key to culture, and if you don’t understand the culture here, you aren’t going to add much value, and you’ll be gone within 2-3 years. Sure, a lot of people speak English, and it is easy to operate in an English bubble in larger companies. But the better your Chinese and the better your appreciation for the culture, the better you’ll fit in. For lawyers, being able to read and write a language are more important than being able to speak it and law students need to realize this. Being able to order a beer in Chinese is great, but being able to read and analyze Section 308 of such and such code and being able to read a ten-page contract in Chinese in the same amount of time it would take you to read it in English is what law firms need.
  2. Communications skills: industry specific knowledge and skills can be learned. You need to come in with the clear ability to express yourself in both written and spoken form. Absolutely. Want to piss off a client?  Send them a long email giving them six options without making any recommendation. Want to make a client happy?  Send them an email clearly explaining and ranking their best three options.
  3. An ability to roll with the punches: operating in a cross-cultural environment is trying at the best of times, and at the worst of times would test the patience of a saint. If you are high-strung or expect things to work the way they’re supposed to all the time, don’t even get on the plane to come here. This is particularly true at smaller law firms and companies and this is a crucial element in my law firm’s hiring at all levels. One of our lawyers began with us as a legal assistant and we hired her for that position because she had great marks as a cocktail waitress at a Vegas casino. We figured if she could keep her cool while dealing with a bunch of drunk losers, she could keep her cool in a fast-paced office. We once hired a receptionist who had been the interface between a private school and the students’ parents because we figured if she could deal with parents who are wildly concerned with their kids, she could deal with clients who are wildly concerned about their legal matter. I love asking potential hires about their travels and I do so because I want to know if they like going to the same ski resort every year or prefer going to remote villages in Guatemala (which was true of another of our legal assistants). The person who treks to Guatemala in his or her spare time has learned to roll with the punches.
  4. A very clear idea of what you offer that is hard to find or is unobtainable from among your Chinese peers, and the ability to express that well. If you can’t tell me in 50 words or less what you have that I need but I can’t get from a fresh Tsinghua University graduate, you are wasting your time and mine. If a potential hire cannot pitch me on his or her skill-set, it is unlikely they will be able to instill confidence in our clients.
  5. Passion for the business that is so real that others can feel it walking into the room. If you interview with me and I think you have not spent hours poring over our website or that you are talking to me just because you want a job (as opposed to this job), you have no chance. I stretch this even further by wanting to see passion in other things as well. I want someone who shows passion for something and I do not care what it is. Passion translates. The last kind of person I want to hire (for a million reasons) is the person who just doesn’t seem to care about anything.
  6. Integrity: Like few other places on the planet, China will test your character and your ethics. If you do not know when or how to stick to your principles when the chips are down, you’re part of the problem. This is in many respects everything. The lawyer-client relationship is based on trust and it cannot work without it. 
  7. Excellent project management skills: This is something in fairly short supply among people coming out of school in China, and it is expected from expats. This is very important, but in law there is generally a high correlation between high grades and the ability to develop these skills.
  8. Creativity: I don’t mean Pixar-style creativity, but the ability to come up with new ideas, to not only think outside of the box but burn the box altogether. Far more important for the law than most law students realize, and more important in an international context than a domestic one.
  9. Last and by no means least, a demonstrated commitment to China: Most hiring decisions for China and Asia positions — even for multinational companies — are made on the ground here in the region. If anything, this is more the case now than it was a decade ago, as most firms have so expanded their operations in the region that the Asia HR function is managed separately. See number 5 above.

Go forth and prosper.

China Foreign PolicyForeign Policy Magazine just came out with an exceptionally clear-headed, exceptionally valuable article on the derivations/influences of China’s foreign policy, entitled (in part and when you see the full title you will probably understand why I shortened it) How China’s History Shapes its Policies Today.

I posted it on our China Law Blog Facebook page with the following lead-in:

Great article by some truly great people. Read it. Study it. This is the sort of article that could become seminal for understanding China foreign policy. Then read it again.

Not much more to say about it other than that if you have any interest at all in China foreign policy, in China’s place in the world, or even in China at all you need (yes need, not should) go read it. Now. Oh, okay, I cannot resist: Those who cannot remember the past are condemned to repeat it.

Your thoughts?

China IP LawyersOur China lawyers do the legal work on all sorts of transactions with China, ranging from relatively simply manufacturing contracts to purchase widgets to relatively complicated joint venture deals to technology licensing deals to mergers and acquisitions (involving both the purchasing of a Chinese company by a Western company to the purchasing of a Western company by a Chinese company). Nearly all of these deals have one thing in common: intellectual property. And on many (most?) of these deals, our lawyers will be far more skeptical of the intentions of the Chinese side than will our clients. We are perpetually concerned that the overriding goal of the Chinese side is to walk away with our client’s intellectual property without fairly compensating our client for that. That leads us to today’s question, which is one we are constantly asked in some form resembling the following: Do you really think XYZ Chinese company wants to steal our IP? To which the answer is pretty much invariably yes.

You can give all sorts of politically correct or politically incorrect answers as to why this is so, but it generally is. The answer I give is that Western companies want to steal your IP also, but because IP laws in the West are more developed and more likely to be enforced, their cost-benefit analysis is going to be different and so it will far less often make sense for them to try to steal your IP than it will for a Chinese company.

I was reminded of this ultra-common question today upon reading Mark Cohen’s always good China IPR Blog and his most recent post, entitled, Stealing IP from the Steel Sector. Mark’s post is about another article, Make the Foreign Serve China: How Foreign Science and Technology Helped China Dominate Global Metallurgical Industries, by Michael Komesaroff. Komesaroff nicely sums up China’s general thinking on IP with the following:

Chinese companies will infringe the proprietary technology of national champions as readily as they do to foreign competitors and the absence of an enforced intellectual property law accelerates diffusion of any new technology….with an endless supply of smart engineers and scientists, why pay for technology, something that you cannot touch, see, taste, or smell.

A reporter called me yesterday to check in on the “hot topic’ issues my firm’s China attorneys have been seeing lately. I told her of how my firm was getting a ton of matters involving Chinese companies claiming to want to invest in or buy out US technology companies, but in many instances, just using that claim as an excuse to “kick the tires” to see if there might be some way they can walk off our client’s technology for little to nothing. Just a more recent version of what Komesaroff describes in his article. For more on how Chinese companies have updated (but only slightly) their tactics of making off with Western IP and, more importantly, how to prevent that from happening to you, I urge you to check out the following.

Oh, and be careful out there.