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Edward Lehman Twice Guest on TV Shows

August 31, 2007 - by Greg

The Anti-Monopoly Law was promulgated yesterday to take effect on August 31, 2008. Our own Edward Lehman was a guest on CCTV 9 on live editions of BizChina and Dialogue. You may view the shows below.

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For Dialogue, please click here (Part 1 and Part 2).

For BizChina, please click here.
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General 1 Comment August 31, 2007, 5:38 pm

Feng Xiaogang Shoots Commercials to Promote Better Manners Ahead of Beijing Olympics

August 30, 2007 - by Robin

Top Chinese director Feng Xiaogang has made eight TV public service commercials featuring some of the country's biggest stars that denounce bad manners like littering, spitting and queue-jumping ahead of the Summer Olympics next year. To view these short films, please click here.

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"Besides showing the world its new image - its architecture, many modernized aspects of the city - Beijing should also show foreigners that the quality of its residents is quite good," Feng, one of China's most successful commercial directors, said at a press conference in Beijing last week.

Among China's three most powerful directors, Feng Xiaogang is perhaps the only grassroots hero. People often refer to Zhang Yimou and Chen Kaige as masters, but when talking about Feng, they smile as if he is a sweet neighbor who always invites you to share his dumplings.

His popularity is largely built on hesuipian, a word specially created for his early films screened during December and next February, roughly the time between New Year's Day and the Spring Festival, when people tend to spend more time in cinemas.

Feng's smash comedies on ordinary urbanites' lives topped the domestic box office from 1997 to 99. His films also raked in most money from mainland theaters in 2001 and 2003. In 2006, his first attempt at a costume epic, The Banquet (Ye Yan), won $19.7 million despite savage reviews.

Feng did not grow up in a film studio, or have a director father as Chen does; neither did he have Zhang's chance to work on a film soon after graduation. The painting-lover from a single-parent family never got a chance to enter any academy, which sets him apart from most mainland directors.

If there is a secret recipe, he says, it is the passion and courage to try. "To me, turning something impossible into possible is really tempting and exciting," says the 49-year-old director.

Among the preparations to groom the Chinese capital's image ahead of the Olympics, Beijing is spending US$40 billion (30 billion) to upgrade its subways and roads. Government-sponsored etiquette campaigns aim to stamp out bad manners like cutting in line, spitting, littering and reckless driving.

Nearly 90,000 taxi drivers in the capital are also working hard on their English. Officials are trying to wipe out "Chinglish," the ungrammatical English that can be visible on billboards, menus and storefronts.

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Under the slogan "Welcome the Olympics, Improve Manners and Foster New Attitudes" and "I Join, I Contribute, I Enjoy," Beijing citizens are now invited to cultivate civic behavior and good habits, to spread the Olympic spirit of unity, friendship and peace and to create a good image of the host city full of enthusiasm, friendship and hospitality.
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China News 9 Comment August 30, 2007, 10:58 am

Macau Happenings

August 29, 2007 – Ryan Beers



Macau is heating up. I have been hearing stories for a few years now about how it has changed, and although I live about an hour away by ferry, I have yet to visit this new Disneyland for grown-ups.

The latest casino to open, the Venetian Macau, is now the biggest on the globe.

Macau’s recent revolution has really come on the back of China’s recent and massive economic development, as well as the removal of monopoly powers from Stanley Ho.


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Things are not all going well in Macau however. High rollers club, Tryst, closed down its doors within a few months of its grand opening, because. I think that their target audience did not really align with those appearing in the picture below, demonstrating that “Chinese gamblers eschew nightclubbing in favor of the casino's baccarat tables”. Also, those in the area who want to be “cool” can simply spend their money and party in nearby Hong Kong.

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China Business 5 Comment August 29, 2007, 2:12 pm

Outsourcing Words of Wisdom

August 24, 2007 – by Ryan Beers

Here is some text from a blog article from well known China blog site, Chinalawblog, commenting on outsourcing a companies’ production to China. Working out of Lehman Lee & Xu’s Shenzhen office, we deal with these issues on a daily basis, and the following points are something I also wish to impress upon companies intending to manufacture out of the Pearl River Delta.

“1. Chinese suppliers. Since Chinese suppliers run the gamut from superb to criminal, you must check out any potential supplier in advance. A basic credit check will reveal whether the Chinese company with whom you have contracted is the factory owner, not just some broker posing as such. A thriving company is less likely to risk its reputation by cutting safety corners than a company on the verge of going under.
2. Quality control. Because most Chinese product arrives already packaged for retail sale, a statistically valid inspection system within China is critical. The Chinese government has its own inspection system for food and drugs, but to reduce costs, many Chinese suppliers intentionally avoid this system. You have to ensure your Chinese supplier is licensed to manufacture the product you’re buying, licensed to export it and follows Chinese government inspection procedures.
3. Contracts. Your contract with your supplier should detail your safety and quality control requirements and your inspection rights. If the contract states you’re responsible for inspection, you must inspect. Your contract with your Chinese manufacturer can either shift liability toward or away from you.
4. History. You know who your problem suppliers are and you need to replace them now before they cause even bigger problems. Ask a product liability defence lawyer whether having to deal with a bunch of e-mails from you to your supplier complaining of “continual quality shortfalls” is going to be good for your product injury lawsuit. Actually, don’t bother, you know the answer.
5. Insurance. Insurance is not a replacement for the above, but it’s your backup. Insurance almost never covers more than your legal fees and out of pocket damages; it will not cover your time spent defending lawsuits, nor will it cover your damaged reputation.
6. Marketing. Don’t make claims about your product you can’t support. Many North American importers claim their Chinese product is manufactured to a standard that simply is not followed in China. Things like this just give the plaintiff’s lawyer more ammunition against you in any legal proceeding.”

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China Blawg (en) 2 Comment August 23, 2007, 2:15 pm

China's online game industry continues to surge forward

August 23, 2007 - by Robin

China's online game market is seen growing 35% to hit $1.3 billion this year, according to Credit Suisse, amid strong growth in Internet users, launches of high-quality games and appreciation of the yuan currency.

Revenue from China's online gaming industry reached 8 billion yuan (about US$1.04 billion) in 2006 and could possibly quadruple by 2010 as internet access becomes increasingly omnipresent.

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The meteoric growth in online gaming has created vast opportunities for telecom, internet, computer, software and consumer electronics firms, which pocketed 33 billion yuan (US$4.3 billion) from online gaming in 2006, said Wu Shulin, the deputy director of the General Administration of Press and Publication, at the 2007 China International Audio-Video and Electronic Publishing Expo in Shanghai.

China, the world's second-largest Internet market after the United States, has more than 140 million Web users according to statistics from China Internet Network Information Center.

Young people aged between 18 and 30 account for the majority of the estimated 31 million people playing games online in China, according to U.S.-based information technology market research house International Data Corporation (IDC).

Following "Legend of Knights Online", the first online game developed by Beijing-based Kingsoft company in 2003, Chinese game makers have developed over 40 online games.

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"Navigation World", a game produced by Suzhou Snail Network Game Technology Co., has been successfully exported to Europe and the United States, the first time a Chinese company has entered the "kingdom of games".

But what is so profitable has become a social problem. Last month, the Chinese government mandated that games have monitoring software that warns under-18 gamers to exercise at the three-hour mark. At five hours, it is game over.

When a warning is not enough, web addicts may be turned over to the Internet addiction clinic in Beijing, where patients, typically teens, come to be cured at a steep cost of $40 a day through medication and military-like training.
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China News 2 Comment August 23, 2007, 11:07 am

Beijing Residents Enjoy Clean Air and Less Traffic

August 22, 2007 - by Greg

Recently Beijing residents have enjoyed cleaner skies and less congested roads.

The Associated Press reports:

Air pollution has emerged as a key problem for Beijing as it gears up for the Olympics. International Olympic Committee president Jacques Rogge warned during a visit earlier this month that some Olympic competitions might be postponed if the city did not clean up the pollution. (click here for the story)

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Reported by the government as a trial-run prior to the Olympics, starting Friday, cars whose plates ended in either even or odd numbers were permitted to drive only on alternating days. Even-numbered plates were permitted to drive on Friday and Sunday while odd-numbered plates on Saturday and Monday. With Beijing's car population over 3 million, this resulted in a reduction of 1.3 million cars per day. Those who could not drive were forced to car pool, take public transport or taxis (which were not subject to the rule).

Interestingly, Beijing will be supplementing this somewhat transitory scheme through the commencement of a bicycle rental program which is expected to introduce approximately 50,000 more bicycles to Beijing's streets. There are expected to be about 200 rental locations around the city with costs of around RMB 20 per day or RMB 100 for annual agreements.

Though both schemes are a welcome improvement to city residents and Jacques Rogge, both seem to be rather short-term in nature.
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China News 5 Comment August 22, 2007, 10:29 am

Australian Artists in Shenzhen, and a new Aussie Ambassador for China!

August 21, 2007 – by Ryan Beers

The Shenzhen Daily has reported on an exhibition of Australian art in Shenzhen. Three Australian artists, one a native of Guangzhou, will have their work open to the public at the Guan Shanyue Art Museum until the September 2.

The artist originally from Guangzhou, Mr Jun Chen, was once the hot favorite to win the Archibald Prize winner in Australia. This prize is regarded as “Australia’s most prestigious and well known competition for portraiture, and is the most prominent of all art prizes, in Australia.” Mr Chen immigrated to Australia in 1990, and he was tipped favorite to win by bookmakers in 2006, for his painting below, the honors being taken by another artist.

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The exhibition’s opening ceremony was also attended by Australia’s new Ambassador to China, Dr Geoff Raby. Dr Raby flew in to Shenzhen on Tuesday, August 14, and later that evening was also treated to a welcome dinner by the Australian Chamber of Commerce. The dinner was held at the Shangri-La Hotel, Shenzhen, and was well attended by Australian company representatives and professionals.

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China Culture 4 Comment August 22, 2007, 8:59 am

China Continues to "Heat Up"

August 15, 2007 - by Robin Teow

Every day, countless analysts and pundits prophesize the ascendancy of the world's new economic superpower. However, little do they know that a more intricate story belies the rosy picture of a modernizing China.

China's inflation rate accelerated to 5.6% in July - the highest monthly rate in a decade - driven by a 15.4% surge in politically sensitive food prices over the year-earlier period, according to statistics released by the National Bureau of Statistics recently.

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A big jump in the inflation rate, which weakens the purchasing power of ordinary Chinese citizens, is a disquieting trend in the eyes of Beijing leaders. Shrinking farmland and increased demand is making meals more expensive, raising concern that social unrest will emerge among rural people living on 3,587 yuan, or $463, a year. The People's Bank of China has vowed to inject 5 billion yuan into credit cooperatives in grain-producing regions to boost lending to farmers. In the past, most notably in the months leading up to the 1989 Tiananmen Square protests, inflation has been the cause of great social unrest.

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Wealth disparity has been growing at an alarming rate despite government efforts to stop the trend, according to the National Development and Reform Commission. The richest 10% of Chinese families now own more than 40 percent of all private assets, while the poorest 10% share less than two percent of the total wealth [Chinadaily]. If it continues this way for a long time, the phenomenon may give rise to various sorts of social instability. China has had Asia's second-biggest and second-fastest-growing wealth gap since the 1990s, exceeded only by war-wracked Nepal on both counts, according to an annual survey conducted by the Asian Development Bank. China has seen thousands of protests in recent years, some of them violent, over land seizures and other economic grievances blamed on the growing gap. The communist government has made narrowing the income gap one of its top priorities and a corner stone to building a harmonious society.

Despite having a US$2.8 trillion economy, more than 84 million urban residents in China survive on government dole and unemployment in rural areas remains a big problem forcing rural people to migrate to cities in search of work. Moreover, this summer a staggering 4.95 million students, 820,000 more than 2006, graduated from institutions of higher learning, with about 1.4 million of them unlikely to find a job befitting their degree. Such is the demand for new jobs that China needs to create an estimated 13 million jobs every year to prevent unemployment from rising.

The relentless rise in house prices shows no sign of slowing down and this adds to Chinese fears. Chinese housing prices rose in May by 6.4%, the fastest year-on-year monthly increase in 18 months, in the latest sign that the economy is outpacing both the government's and the market's expectations.

Environmental degradation continues to exact a heavy toll and upset the everyday life of the people more severely. According to the State Environmental Protection Administration (SEPA), 70 percent of China's rivers and lakes are polluted, and more than 300 million people have no access to clean water.

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While China continues to expand in its quest to reclaim its historical greatness, one must not lose sight of the continuing social and economic problems that are facing the local Chinese at home. It is imperative that Beijing adopts more stringent measures to safeguard the immediate interests of its people. Facts have proven time and time again that growth and prosperity brought about at the expense of a stable and harmonious society are empty.
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General 1 Comment August 15, 2007, 5:54 pm

Sourcing in Guangdong and avoiding scams

August 14, 2007 – by Ryan Beers

Please, those foreign companies intending to purchase product out of Guangdong (or I figure anywhere in China) please do some basic due diligence on the Chinese supplier. It is very easy to set up a website containing photos and testimonials demonstrating the quality and integrity of the promoted company. Scratch the surface a little, or undertake some minor legal due diligence, and you may in fact find that no such entity exists, or that if it does exist it may be extremely difficult to locate.

We are continually surprised at companies from outside China who are willing to transfer tens of thousands of US dollars into Chinese bank accounts, with little more than an Alibaba contact and a few reassuring emails from a polite English-speaking contact within the company. Normally, the contact says: “yes the product is good quality, yes we can provide warranty, yes we can make exactly the same as sample, yes we want a long term and fruitful relationship, yes we are friend and no don’t worry we will refund etc etc”. Seemingly, foreign companies require little more, and happily proceed with the initial deposit.

What sometimes happens next is the supply company miraculously disappears, or if the product is sent (normally upon payment of the balance of the purchase price!) it turns out to be shoddy substituted product or in no way conforming to the agreed specifications.

This can be avoided to a great extent by making some initial due diligence enquiries (without spending a lot of money) to find out if the company is registered, whether it actually has permanent office premises, whether it owns a factory, the likelihood that assets will be available to be frozen in the event of claims. These actions will never completely eliminate risk in Southern China, but will surely help for you to filter out undesirable suppliers and assist in the event you wish to chase debts or claims.

Of course, you could go one step further, and have a law firm actually draft an enforceable Purchase Contract.


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General 3 Comment August 15, 2007, 9:28 am

Managing Dispute Resolution Costs in China

August 14, 2007 - by Edward Lehman

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The costs for dispute resolution legal services in China have continued to climb and become more prolific over the two decades that I have been working as a foreign lawyer in China (Beijing and Shanghai). For clients who encounter dispute resolution in China (the situs of where most Chinese companies have their assets and may be held accountable) it is entirely possible to keep the entire process within a reasonable budget.

Costs are a concern for every client, whether they are foreign or domestic. Concentrating on costs is good for both the lawyer and the client, in setting boundaries for the dispute matter and in managing expectations. Dispute resolution seems to be terrifying for many because the process and the procedures in China represent the unknown. Our law firm and certain specific lawyers, such as Tim Meng, Kenan Jiang, Ryan Tang, and Hao Jun Bo are among the absolute best dispute resolution professionals at the 'top of their game' in a surprisingly small trial bar here in China. After working with them for many years, and having managed every aspect of dispute resolution in over thousands of cases on a wide range of matters, in almost every possible tribunal in this country, and concerning billions of dollars, I am happy to share what little I have learned from these superstars.

The laws, regulations, and policies in China are dynamic and ever changing (we believe in a positive direction) and the horror stories are well documented in the western media of dispute resolution failures or shortcomings about China. There is little positive news about success stories, which occur everyday in various tribunals throughout the "Middle Kingdom". Keep in mind that China is a civil law country, which follows the same type of legal system prevalent in continental Europe, Japan and Korea. Such systems contain laws, regulations, and policies loosely founded upon the German Civil Law of 1896. Why the long explanation? The Common Law concept/foundation of stare decisis or courts and authorities being bound by case law does not exist here as it does in say the United States. Therefore, one bad decision does not necessarily "make bad law" for future cases, but may be used as only a possible "guidepost" on how the courts may react to a particular case with a specific set of similar facts. It is not conclusive by any means.

Dispute resolution in China is popular, despite the press reports. More cases are arbitrated in China than any other place on Earth and not by a little. China's arbitration bodies entertain twice as many matters as the International Chamber of Commerce, Swedish Chamber of Commerce or even the American Arbitration Association. That being the case, dispute resolution fees have become extremely costly, even for the wealthy and deep-pocketed multi-national corporations operating in China. The last thing any clientwants is a bill that exceeds expectations - and, truthfully, that is the last thing...

General 1 Comment August 14, 2007, 1:09 pm

United States Embassy Selects Lehman, Lee & Xu

August 13, 2007 - by Charlotte Fernee

The United States Embassy has selected Lehman, Lee & Xu from every Chinese law firm in Beijing to assist and give counsel for their labor and employment law issues in China.

Ground was broken February 10, 2004 for what Charles E. Williams, Director and Chief Operating Officer of the Bureau of Overseas Buildings Operations described as, "The largest single construction project undertaken by the Department of State on foreign soil." Chinese subcontractors are providing much of the labor, and building materials are of both American and Chinese origin. The entire planning and construction process for the new Embassy is occurring simultaneously with the planning for a new Chinese Embassy in Washington, DC, underscoring the words of Ambassador Clark T. Randt, Jr: "The United States' bilateral relationship with China may well be the most important relationship in the world today." Expected completion of the new Embassy will be in time for the 2008 Olympics.

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The Embassy has retained the Lehman law firm to review the China Mission Locally Employed Staff Handbook and determine whether it is compliant with local labor regulations, to review drafts of the Embassy's contract agreements with the DSB and advise if there are clauses in the contract that expose the China Mission to unnecessary liabilities, and to provide advice regarding local pension and supplementary pension program regulations. Lehman, Lee & Xu will also provide advice regarding the use of offshore pension programs, and regarding local laws as they relate to benefits such as the heating allowance and other requirements. They will also provide legal counsel in matters relating to labor disputes as necessary.

Lehman, Lee & Xu recently hosted the Director-General of the International Labor Organization, Juan Somavia, for a presentation of China's new Labor Contract Law, which will be implemented January 1, 2008. This new law will affect every employment relationship in China, as it creates new rights for every employee.
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Lehman Affairs 1 Comment August 13, 2007, 4:13 pm

Overview of China’s New Labor Contract Law

August 13, 2007 - by Sandy Lin

After four readings, the long-anticipated and hotly-debated Labor Contract Law (“LCL”) was passed by the Standing Committee of the National People’s Congress , the top legislature of China, on June 29th, 2007, and will come into effect on January 1st, 2008.
Before the passage of the LCL, China did not have one unified national law governing labor contracts, and various provisions in this regard used to be dispersed through many laws and regulations, at both national and local levels, with some inconsistencies and ambiguities. This has sometimes made it difficult for employers (in particular, those which are foreign-invested enterprises) to gauge their employment liability exposures and for employees to protect their employee rights and interests.
The LCL, hailed as a big improvement, has clarified issues such as the method of calculating severance pay, the length of probationary period, and the consequences of employers’ refusal to sign written labor contracts, just to name a few. In general, the LCL is a laudable attempt to enhance the protection of individual employees, with also some new rights to employers, such as the introduction of cap for the calculation of severance pay and expanded circumstances for economic lay-offs.
The purpose of this article is to outline the most significant provisions of the LCL.
Conclusion of Written Labor Contracts
The LCL requires that, when hiring employees, or within one month after hiring employees at the latest, employers shall sign written labor contracts with their employees. An employer, who has signed written labor contracts with its employees after one month but within one year, shall pay a double salary to its employees affected; an employer, who has failed to sign written labor contracts with its employees within one year, shall be deemed to have signed open-ended labor contracts with its employees, which can only be terminated for cause.
These provisions are pro-employees in an attempt to prevent employers from refusing to sign written labor contracts with their employees, a circumstance where the workers would encounter difficulties in proving the existence of employment relationships with their employers and their remunerations for employment as well.
Open-ended Labor Contracts
The term “open-ended labor contract” (or “labor contract without a fixed-term) refers to a labor contract with an indefinite term. By contrast, a “fixed-term labor contract” has a definite term specified by both parties.
There has been a common misconception among employers in China that an employer may terminate an open-ended labor contract with its employees at will due to the lack of a specified contract term therein. Employers must be aware that an open-ended labor contract will never expire because its term is indefinite, and an employer is not allowed to terminate an open-ended labor contract unless under very limited circumstances expressly stipulated in the Chinese law. Therefore, an open-ended labor contract provides extra protection to employees as opposed to a fixed-term one.
The LCL extends the circumstances where an employee may require the conclusion of an open-ended labor contract with his/her employer to the following:
1. the employee has already been working for the employer for 10 consecutive years;
2. When the employer initially adopts labor contract system or when a state-owned enterprise re-concludes employment contracts with its employees due to restructuring, the employee has already been working for this employer for 10 consecutive years, and will reach the statutory retirement age in less than 10 years; or
3. the employee has consecutively concluded two fixed-term labor contracts with his/her employer, and does not have any of the circumstances as set out in the LCL which can be used by the employer as legal reasons to refuse to sign a fixed-term labor contract.
Probationary Period

As an employer may terminate, virtually without cause, the labor contract with an employee who is still serving his/her probationary period, some employers have used abusively extended probationary periods to sack their employees unfairly.
To address this problem, the LCL links the length of probationary period to the term of labor contracts more clearly, and does not allow an employer to require the same employee to serve more than one probationary period. A probationary period is not allowed for a labor contract with a term of less than three months, and must not be more than one month if the term of the labor contract is between three months and one year, must not be more than two months if the term of the labor contract is between one year and three years, and must not be more than six months if the term of the labor contract is more than three years or the labor contract is open-ended.
The LCL also introduces three standards regarding salary payable to employees during the probationary period. According to Article 20 of the LCL, before the completion of his/her probationary period, the salary payable to the employee must not be lower than the minimum salary for the similar positions in the employer, or 80% of the salary as agreed in the employee’s labor contract, and must also not be lower than the minimum salary of the city where the employer is located.
Non-compete Clause
The LCL reduces the maximum length of the non-compete obligations imposed on an employee from 3 years to 2 years. In addition, the LCL also makes it clear that the non-compete obligations shall only apply to those employees who are senior management personnel, senior technical personnel, or hold other positions which shall be subject to confidentiality obligations. During the non-compete period, an employee bound by non-compete obligations shall not work for any other employer which produces or provides products or services similar to those of the employer, or start his/her own business to produce or provide such products or services.
However, the LCL does not provide for the standards relating to the amount of economic compensation which an employer shall give an employee for his/her assumption of non-compete obligations. Neither does the LCL adopt guidance on the application of non-compete obligations in terms of applicable scope and geographical territory, leaving them to the mutual consent of the employer and the employee.
Economic Lay-offs
The LCL expands the circumstances under which an employer may lay-off its employees to include the situations where the employer has changed its operations and where there have been changes to the employer’s economic conditions. The LCL also sets out certain new restrictions on economic lay-offs, and requirements for preferential retention.
Severance Pay
The LCL requires that an employer shall pay severance pay to an employee whose fixed-term labor contract expires, unless the employer offers to renew the employee’s labor contract with conditions not less favorable to him/her than those in his/her current contract, but he/she refuses the renewal. This is one of the most significant changes to the original rules on the application of severance pay, and may serve to prevent employers from intentionally using fixed-term contracts to avoid giving severance pay.
It is also worth nothing that a cap, which is triple the average salary for the last year in the city where the employer is located, is introduced for the calculation of severance pay for employees with high salaries.
Collective Labor Contracts
The LCL allows workers to negotiate collective labor contracts with their employers through the trade union, and in enterprises where the trade union has not been established workers may elect their own representatives to negotiate a collective contract with their employers under the “direction” of the higher-level branch of the All China Federation of Trade Unions.
After a collective labor contract has been concluded, it shall be submitted to the local labor administrative authority, and come into force unless the local labor administrative authority raises any objection to the collective contract within 15 days.
Labor Dispatch

Labor dispatch, not clearly regulated before the adoption of the LCL, has been found being used by some employers as a way to cut the direct employment relationships between them and employees dispatched by dispatching agencies to work for them, and thus make them escape paying statutory employment benefits or even remunerations to the dispatched employees on the ground that the dispatched employees were not hired by them.
As another significant change, the LCL sets out new nationwide rules to regulate labor dispatch. The LCL requires that a dispatching agency shall sign a fixed term contract with a term of more than two years with its dispatched employees and to pay salaries on a monthly basis. The LCL also restricts the use of labor dispatch arrangements to temporary, auxiliary or fungible positions, forbids entities to establish any labor dispatching agency to dispatch workers to work for themselves or their subsidiaries, and imposes a requirement for “equal pay for equal work”.


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China Law 4 Comment August 13, 2007, 3:46 pm

Will foreign investment in China’s real estate market be cooled down?

August 10, 2007 - by Sandy Lin
In recent years, with China’s economy booming, many foreign investors have seen good investment opportunities in China’s real estate market, and made considerable investments, mainly by acquiring assets or equity interest of Chinese real estate developers. China’s central government, concerned about the economy’s overheating, and the probable negative impacts of foreign hot money on the economy, has take measures, including issuing new laws and regulations, to cool down the foreign investment in China’s property market.
Here comes another regulation restricting foreign investment in China’s real estate sector. On July 10, 2007, the State Administration of Foreign Exchange ("SAFE" ) of China issued a document entitled the Circular of the General Affairs Department of SAFE on the Distribution of the List of the First Group of Foreign Invested Real Estate Projects which has Filed with the Ministry of Commerce, which is also known as the Circular 130. Though technically not a regulation, it will have the same impact on a market participant as any regulation in practice.
The main purpose of Circular 130 is to disallow any foreign investor of a foreign-invested real estate enterprise ("FIRE" ) to register foreign debt of the FIRE, which means that any foreign investor of a FIRE can only make equity investment, and an important channel for foreign hot money to enter China (i.e., by registering foreign debt) is cut.
According to Circular 130, SAFE will not register any foreign debt of a FIRE if the FIRE obtained approval from the local Bureau of Commerce ("COFCOM" ) and filed with the Ministry of Commerce ("MOFCOM" ) after June 1, 2007. This also applies to FIREs that are established and approved before June 1, 2007, where such FIREs wish to increase their registered capital after June 1, 2007.
This is the 4th time since July 2006 that China has promulgated policies specifically targeted at foreign investment in China’s real estate market. On July 11, 2006, several government departments of China jointly issued the Market Access and Administration of Foreign Investment in Chinese Real Estate Market ("Circular 171" ). According to Circular 171, although FIREs will not be restricted from financing from onshore sources, those FIREs with total investment amounts equal to or more than US$10 million will still be restricted from borrowing more than 50 percent of its total investment amount.
Obviously, Circular 130 is another restrictive measure of the Chinese government to cool down foreign investment in its real estate market. However, it seems still too early to conclude if Circular 130 would work effectively.


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China Business 0 Comment August 10, 2007, 1:45 pm

Bankruptcy Law has brought tremendous influence to Civil procedure in Mainland of China

August 10, 2007 - by Kenan Jiang

The new Bankruptcy Law came into force as of June 1, 2007. The applying of the item of this new law will change many former legal opinions in laws as labour law , contract law, civil law, and civil procedure, etc. The influence the bankruptcy law has brought to civil procedure is obvious and important. Attorneys shall pay attention to this kind of change , otherwise mistake will happen in litigation processs or in contract drafting. Oppositely, If these change in laws can be taken advantage of, it will bring new idea and strategy for the triumph which seemed impossible in former time.

Here some examples.

When a bankruptcy application has been accepted by a court, three important changes will happen to the relevant civil procedure regarding to the litigation with the debtor., such as :

1.the procedures for execution against the debtor shall be suspended and the relevant measures for preserving the debtor's assets shall be released.


2.Any civil action or arbitration involving the relevant debtor that is in the process of trial shall be suspended.

3.The relevant debtor's civil action shall be only filed with the court which accepts this bankruptcy application

There are many new ideas we can draw from this

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China Law 0 Comment August 10, 2007, 1:42 pm

Director-General of the International Labor Organization (ILO) visits Lehman, Lee & Xu to learn about new Labor Contract Law

August 10, 2007 - by Greg

Juan Somavía, Director-General of ILO, the Ambassador of Chile Fernando Reyes and his first secretary Gloria Cid, visited Lehman, Lee & Xu's Beijing office yesterday to obtain advice and information about the new Labor Contract Law that will enter into effect in January 2008.

Mr. Juan Somavía was elected to serve as the ninth Director-General of the ILO by the Governing Body on 23 March 1998. His five-year term of office began on 4 March 1999, when he became the first representative from the Southern hemisphere to head the organization. In March 2003, Mr. Somavía was re-elected for a second five-year term. An attorney by profession, he has held many positions in the United Nations and other inter-governmental organizations before joining the ILO, such as the Presidency of the United Nations Economic and Social Council and the Preparatory Committee for the World Summit for Social Development in Copenhagen.

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The General Director of the Firm, Edward E. Lehman along with the members of the Spanish Department hosted the visitors, by offering a presentation about the new Labor Contract Law. Afterwards they met to casually discuss the imminent effects of the new law on China's labor and social unrest. Both Somavía and Lehman emphasized that harmonizing interests of all players involved will result in better enforcement of the new law. "Governmental authorities, labor unions and workers should find a balance to effectively enforce the law. This is the only way to guarantee an effective implementation of the law in the future", Somavía stated.

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Juan Somavía will be in Beijing this week where he will participate along with Tian Chengping, the Minister of Labor and Social Security of China, in a seminar titled "Growth Employment and Decent Work", from August 13th to 15th.
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Lehman Affairs 0 Comment August 10, 2007, 11:22 am

Some Initial Thoughts on Challenges of Doing M&A in China from an M&A Novice

August 9, 2007 - by Alex Clar

Globally, the M&A market has continued its dramatic growth with the value of all M&A deals thus far in 2007, worth a staggering US$1.7 trillion. In regards to China, most attention has been on these mega-deals involving the Chinese making foreign acquisitions, such as Lenovo and IBM, and the more recent deal of the Chinese Government purchasing a stake in Barclays.

Far less attention seems to be given by the Western press on the growing frenzy of M&A activity in China. This firm certainly seems to be busy enough. Generally nonexistent about a decade ago, M&A activity in China now involves some hefty numbers. The PRC Ministry of Commerce ("MOFCOM" ) reported 674 M&A deals (involving both foreign companies/ foreign-invested companies buying Chinese companies and Chinese companies buying each other) in the first half of 2006, reportedly worth about US$41 billion.

However, it is interesting to consider the trends. Chinese domestic M&A deals appear to be increasing in numbers, while foreign deals in comparison appear to be stagnant or have experienced a slight decrease, despite last year's enactment of the Merger & Acquisition of Domestic Enterprises by Foreign Investors (effective September 8, 2006). The overall value of foreign deals is still larger than domestic deals, but this appears to be largely buoyed by a few very large deals i.e. exceeding US$1 billion.

In the end, it appears that foreign investors are still daunted by the idea of engaging in M&A activity in China. One can more easily picture applying for the appropriate licenses and setting up a venture in China, maybe even getting involved with a local Chinese partner. However, the idea of outright acquiring a Chinese company sounds a little more complicated. M&A is complex enough in the U.S., how much more for acquiring a company or merging with a company in a "developing country" (let's not quibble on whether China is developing or not)?

On the face of the process, it looks similar in terms of the basics, with the usual steps of entering into a memorandum of understanding/letter of intent, engaging in due diligence, entering into a contract, dealing with a regulatory authority, etc. However, the M&A market and regulatory environment in China is indeed very different from a Western version, in particular, when one looks at the U.S. version. In terms of regulations, China has been described as having a very "restrictive" environment for M&A investors. However, actually, in comparison to the U.S., at least simply on paper, it appears that the American system has far more rules to abide by. In the U.S., one has to consider regulations and opinions issued by the Securities Exchange Commission (SEC), Federal law, state corporate codes (Delaware being the most well known) and extensive case law. These are very detailed rules...

General 1 Comment August 9, 2007, 2:04 pm

Countdown Beijing

August 8, 2007 - by Robin Teow

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The most spectacular sporting event on the planet will lift its curtain in one year's time in one of the most vibrant and dynamic cities in the world. While Beijing is still abuzz with the hum of bulldozers and construction works, the organizers of the 2008 Summer Olympics are confident that all preparations for the Games are on track. China has waited almost 100 years for this moment and you can bet Beijing is leaving nothing to chance to make 2008 Olympics the grandest summer parties of all and to present a truly modern Beijing to the world come August next year.

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Challenges remain over issues such as pollution and traffic congestion. "Clean words, clean environment, clean air", these are the words that appear repeatedly on giant billboards erected across the city that serve as a reminder to Beijing's approximately 15 million residents to get rid of their bad habits and clean up their act as part of the Chinese government's continuous and relentless efforts in improving the city's image in the run-up to the 2008 Olympics. Addressing the "ceremony of mobilization and pledging of the people from all circles for Olympic one-year countdown," president of the Beijing Organising Committee for the Olympic Games (BOCOG) Liu Qi emphasized it was up to individuals to make certain the city was ready to host the Games when they open at 8.08 p.m. on August 8, 2008.

One thing for sure – the passion and the energy of the overwhelming majority of the Chinese people for the Games. According to Yang Lan, a popular television host often dubbed as China's Oprah Winfrey, who was instrumental in securing China's bid for the Olympics and now an Olympic ambassador, in a recent interview with CNN's Talk Asia, a survey was conducted by a domestic company in China when Beijing was bidding for hosting the Olympics Games. A whopping 97% of the local people surveyed threw their weight behind the Chinese capital's bid. Fearing that the number might have been distorted since public support had never been so strong in the history of the Olympics, the International Olympic Committee decided to carry out an independent survey. The result showed that 98% of the Chinese people supported the bid. More than 560,000 people have applied to be one of 100,000 volunteers required for the Olympics and Paralympics. I am now finding my own ways to sneak into the picture.

2008 Beijing Olympics...We are Ready!



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China News 5 Comment August 8, 2007, 7:25 pm

Smart Shenzhen

August 7, 2007 – by Ryan Beers

Today it was reported that Shenzhen is planning to develop its own “silicon valley” in the spirit of those in LA and Zhongguancun in Beijing. It will be located the Nanshan area, which is Shenzhen’s version of Haidian in that it is the district within which many education institutes are situated.

I see this as a further step in this city to progress its previous capabilities as a mass manufacturing center, into a high tech city, and is a key indication of the city’s aspirations for the future.

There are already famous high-tech industrial parks in Shenzhen, offering lower tax rates for companies operating within those areas as well as support services, and this new silicon valley will help attract those talented individuals who will be able to bring the front end intellectual property closer to the manufacturing source. I guess the idea is to get the brains in Shenzhen, then manufacture the products in Shenzhen, then simply ship the products straight out of the Shenzhen ports.

It seems like an ambitious and positive plan for the future of the city.
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China Business 2 Comment August 8, 2007, 9:17 am

Lehman, Lee & Xu Announces New Initiative to Assist NGOs in China

August 3, 2007 - by Greg

China's economy has been growing at a tremendous pace over the past several decades. However, social initiatives and consciousness have not developed at a corresponding rate and lags significantly behind economic change. Such a situation requires the assistance of NGOs and other charitable organizations.

At the instructions of managing partner, Edward Lehman, Lehman, Lee & Xu has commenced the new initiative to assist NGOs in China. The firm has been involved in a number of similar projects in which it has assisted charitable/non-governmental organizations to obtain tax-exempt status, which is relatively new in this growing natiion. Lehman, Lee & Xu would like to play a small role in this effort through providing low-cost legal services to these organizations.
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Lehman Affairs 0 Comment August 3, 2007, 5:36 pm

Lehman, Lee & Xu Hosts Summer Clerk Reception

August 3, 2007 - by Charlotte

Lehman, Lee & Xu hosted a reception for Summer Law Clerks yesterday at Sunflower Restaurant and Café in Doncheng district, Beijing.
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Lehman Affairs 0 Comment August 3, 2007, 9:38 am

Free sofas up for grabs!

August 1, 2007 - by Robin

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This was the ad published in Beijing Business Today some time in June, speaking of free sofas up for grabs in a challenge that created a stampede. The promotion was being held at "secret locations" in five different cities for a week.

The ad referred to a Sina blog, hosted by Cai Ming, in which each day, by visiting the blog, readers were given announcements of the specific location of the sofas and the quickest to reply to the blog would win a free sofa.

抢沙发(Qiangshafa) (meaning 'grab the sofa'), written in Chinese plays on the internet language used by many Chinese internet users to mean being the first to start a thread of comments on a posting.

Judging by the amount of people that went crazy for the free sofas, I would say that Boloni's advertising and marketing team did pretty well, as did of course Sina blog.
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China News 4 Comment August 1, 2007, 1:56 pm