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A More Practical Guidance on Tax Treatment of Treaty-Based Royalties

The Notice of the State Administration of Taxation on Certain Issues Regarding the Tax Treatment of Treaty-based Royalty Payments (※Circular 507§), issued in September, is aimed at some practical issues concerning avoidance of double taxation with respect to taxes on royalty payments.

By this circular, the State Administration of Taxation clarifies some terms involved in treaty articles and specifies the applicants of several categories of the royalty payments.

Circular 507 clarifies the difference between providing service and licensing or transferring certain technologies, and in which the key is whether the recipient has the use right. Besides, Circular 507 also lists four specific situations in which the service fees would be considered as service incomes instead of royalty payments.

Circular 507 also illustrates the definition of Information Concerning Industrial, Commercial or Scientific Experience, a term contained and listed in royalty payment article.

Under Circular 507, once a particular treaty*s royalty article clearly defines the term ※royalties§ to include the income derived from the use of industrial, commercial or scientific equipment ( the rental payments under Chinese tax rules), such income should be treated as royalties. While this rule does not apply to the incomes from the immovable properties, the one governed by other specific treaty.

Last but not the least, Circular 507 also points out to which beneficiary owners shall the royalty article be applied to, which can be a resident of the Contracting State, and those received the royalty payment from a Chinese PE of a foreign enterprise....

General 0 Comment December 15, 2009, 9:42 am

SAT Imposes New Rules Governing IIT on Individual Sub-Leases

On 18 November 2009, the State Administration of Taxation (SAT) has promulgated the "Notice on Levying Individual Income Tax on Income from Individual Sub-Leases".

According to the Notice, the income from sub-leases by individuals is taxable for individual income tax purposes. The Notice provides that rents payable to a landlord by a sub-lessor may be deducted from income from a sub-lease in the calculation of individual income tax, provided that the lease contract as well as legally valid receipts of the rents in question is produced.

Under the notice, the order of the items deductible before individual income tax on a lease as specified is:
(1) taxes paid in the course of leasing a property;
(2) rents paid to a landlord;
(3) the actual cost of decorating a leased property paid by the taxpayer in question; and
(4) other costs deductible in accordance with the applicable tax laws.

General 0 Comment December 7, 2009, 3:33 pm

Effective Communication

※Communication leads to community, that is, to understanding, intimacy and mutual valuing.§ 每 Rollo May (1909 每 1994).

Mr May*s quote has applicability to a different number of situations where by communication is a necessary tool of operation and a obligatory tool for the completion of tasks and, as a vital aspect of our day to day lives, it is important that communication is both effective and transparent.

As members of the GALA (Global Advertising Lawyers Alliance) alliance, and as advertising and marketing lawyers ourselves, we here at Lehman fully understand the need for full and clear communication. We know and recognize the implications from a lack of effective or even no communication.

On Thursday November 26, 2009 AmCham-China will be hosting a forum to discuss how best to improve internal communications within the workforce. For further details, and registration please visit: http://www.amchamchina.org/event/467

For further details regarding Lehman, Lee & Xu*s advertising and marketing services, or any other questions please contact us on mail@lehmanlaw.com, or visit our website at www.lehmanlaw.com

General 0 Comment December 1, 2009, 2:18 pm

Insurance Funds Can Be Invested

According to the new Insurance Law of the People*s Republic of China, insurance funds can be invested in real estate industry from 1st October, 2009.

In the past, the use of insurance funds in China is restricted only to bank deposit, trading of government bonds and financial bonds and other forms of fund utilization stipulated by the State Council. However, since the last century 90's, a large number of insurance companies have begun to purchase their own property used for commercial rental and a large number of insurance funds have been used to buy shares of some real estate companies. Actually, the insurance companies have already got involved in the real estate industry. Now the changes of law make these conditions legalized.

Though it makes the area of the investment of insurance funds broader, there are also some problems requiring the attention before the government releases the "insurance company real estate investment management approach Pilot".

Lehman lawyer HaoJunbo remarks that there should be also some restrictions on the use of insurance funds invested in real estate industry. For example, according to "management approach (discussion paper)", insurance companies can invest in real estate just through the purchase of property, shares the project company, asset-backed debt investments, and real estate-related financial products. Furthermore, the proportion of the investment in real estate industry should be within reasonable limits. Both the safety and the efficiency should be considered by the government....

General 0 Comment November 20, 2009, 6:02 pm

MOC launches anti-monopoly investigation of Lotte's purchase of Times Retail

On 16th November, the Ministry of Commerce (MOC) has launched an anti-monopoly investigation of South Korea-based Lotte's purchase of Times Retail.

On 20th October, Lotte announces that it bought a 100% stake in Times Retail for HK$4.87b. However, according to the existing law in China, the purchase must get through the anti-monopoly investigation by MOC.
According to &Provisions of the State Council on the Standard for Declaration of Concentration of Business Operators*, the business operators shall file a report for the concentration to the Anti-trust Administration in advance if any one of the following thresholds is met:
a) the total global business revenue of last fiscal year of all business operators attending the concentration is over RMB 10 billion, as well as among which the business revenue of last fiscal year in the territory of the PRC of each of at least two business operators are over RMB 400 million;
b) the total business revenue of last fiscal year in the territory of the PRC of all business operators attending the concentration is over RMB 2 billion, as well as among which the business revenue of last fiscal year in the territory of PRC of each of at least two business operators are over RMB 400 million.

For the turnover of Times Retail were more than 4 billion Hong Kong dollars last year, an anti-monopoly investigation by MOC is inevitable. Will the MOC approve the purchase?

Lehman lawyer HaoJunbo remarks that according to the Anti-monopoly Law of the People*s Republic of China, it may be assumed to be have a dominant market position where a business operator is under any of the following circumstances:
a) the relevant market share of a business operator accounts for1/2 or above in the relevant market;
b) the joint relevant market share of two business operators accounts for 2/3 or above; or
c) the joint relevant market share of three business operators accounts for 3/4 or above.
From the view of market share, this purchase will not constitute a monopoly. Lotte and Times Retail together are only 70 in China, but Wal-Mart, Carrefour, RT-Mart, etc. have already more than 100. However, according to international anti-monopoly practices, there may be a different conclusion considering about specific regions or industries.

General 0 Comment November 20, 2009, 5:20 pm

Yale China Law Center seeking Research Assocation position based in Beijing

The China Law Center of Yale Law School is seeking a graduating senior or recent university graduate for a Research Associate position based in Beijing. The Research Associate will support Center projects in China by conducting research and writing on issues related to legal reform; interacting with scholars, officials, and lawyers in China; and performing administrative and logistical tasks.

Interested applicants should send a cover letter and resume (including contact information for references) to The China Law Center at yalechinalaw@gmail.com. Applications should be submitted by April 15, 2008 but will be reviewed on a rolling basis beginning March 31, 2008. Applicants will only be contacted if invited for an interview. The Research Associate will receive a competitive one-year fellowship stipend for the 2008-2009 year.


General 0 Comment March 18, 2008, 1:48 pm

Seeking Chinese Participants in a Course on Legal Pluralism and Socio-Legal Studies

From the China Law mailing list:


The International Commission of Legal Pluralism will organize an International Course on Social Justice for the Poor and Weak, through the perspectives of Legal Pluralism and Socio-Legal Studies

10-19 July, 2008, Kunming, China

In July 2008 the International Commission of Legal Pluralism will organize a course in Kunming, China, about theories, knowledge and methodologies of socio-legal studies and legal pluralism. The purpose of the 4-day course is to familiarize the participants with the current international debates and insights in socio-legal studies and legal pluralism and to offer them a comparative perspective that allows them to rethink their own research and practical work. At the centre of the discussion will be issues of rights protection, gender, natural resource management and land tenure, conflict resolution in the context of globalising economic, political and legal developments. These issues converge in the theme of social justice for the poor and weak.
Participation is limited to 25 persons, to allow for maximum discussion. A balanced participation is sought which includes a strong presence from China (about 10-15), but also attracts young scholars from the region (5), other developing countries (3) and a limited number from western countries (3). The participants are academics and/or practitioners, e.g. NGO activists or government officials, who deal with issues related to social justice in their academic or practical work. During this intensive training the Chinese participants will be able to build a national and international network both with other participants and with the teaching staff. As in past courses (held amongst others in Wellington (New Zealand), Accra (Ghana), Williamsburg (USA), Moscow (Russia), Chiang Mai (Thailand) and Fredericton (Canada)) the teaching teams will consist of senior academics of various backgrounds drawn from the Commission and of colleagues from the region, in this case from China. The course is followed by an international conference (15 July until 20 July) on organized as part of the bi-annual meeting of the International Union of Anthropological and Ethnographical Sciences. The conference covers the same topics and themes as the course. Students will be given the opportunity to present their work and directly engage with leading scholars and practitioners in their fields, allowing them to become part of a regional and international network.

The course will cover the following topics: Theories and methodologies in socio-legal studies and legal pluralism, dispute resolution and social control, gendered perspectives on law, natural resources management, legal development cooperation, disaster management and conflict research, law and religion, the concept of justice in legal anthropology.

Selection, Fee, and Funding
Prospective students should be either young scholars studying for a PhD degree or having just finished one, or they should be practitioners whose work is directly related to issues to be discussed in the course. Students should be able to demonstrate an English language ability that allows them to read and actively discuss relevant academic literature. Students will be selected based on their motivation to join the course. Such selection will also be based on a balanced regional participation as outlined above.
The course fee is 100 USD and the conference fee, following the course, is 150 USD. Other costs include accommodation, food and beverages, which will be arranged at prices as low as possible. The course organizers are currently working on securing funding for the non-Western participants. It is hoped that in this way, most of the costs they have can be covered by the organization. However as such funding is not yet certain prospective participants are encouraged to also seek their own funding.

Application, Contact and More Information
Scholars and practitioners interested in and qualified to partake in this course are warmly welcomed to apply. The application should include a motivation letter, a resume, information about the level of English, and an abstract of a paper to be presented at the conference, as well as a choice of panel. More information about the panels in the conference is attached to this message. Applications are to be sent to Janine Ubink: j.m.ubink[at]law.leidenuniv.nl .

For more information on the Commission of Legal Pluralism and past courses and conferences visit: http://www.commission-on-legal-pluralism.ch/ . For more information about the conference in Kunming visit: http://www.icaes2008.org/ .


General 0 Comment February 22, 2008, 10:17 am

American Citizens Services Closure Schedule

To our American friends in China -- please be sure not to miss the U. S. Embassy's announcement that the American Citizens Services will be closed on the afternoon of December 21, and all day December 24, December 25, and January 1. Before the days of e-mail, Mr. Lehman used to hold the title of "Warden" charged with the task of alerting other Americans who lived in Beijing any messages from the Embassy. Funny how times have changed for the better.

Lehman, Lee & Xu will be open for business as usual, except on January 1.

To all of our friends around the world -- stay safe, stay warm, and stay out of trouble! Our firm and our clients are populated with all types: Jews, Christians, Muslims, Buddhists, believers, agnostics and atheists. We are a representation of what is happening in China today. All we wish for is peace on earth, goodwill to all, and stand steadfast that everyone needs a "moral compass" to survive and thrive in modern China. Happy holidays.

General 0 Comment December 17, 2007, 9:10 pm

Perspective on the Amendments to China*s Trademark Law

By Cherry Jin

An additional layer of protection has been added to the China Trademark Law in the form of Amendments concerning Geographical Indication. In Article 3, this protection is termed ※Original Appellations.§ In subsequent articles, however, the term ※Geographical Indication§ is used.

Although these two descriptions are identical in meaning, it is not made clear in the Amendments that they are merely different descriptions of the same concept. This oversight has generated considerable confusion. In many other countries, such as the United States, the Geographical Indication is usually protected via a ※Certification Trademark§ and/or a ※Collective Mark.§ In China, however, only the ※Certification Trademark§ has been adopted to protect the Geographical Indication.

Additionally, Chinese Trademark Law protects only the ※Exclusive Right to Use a Trademark,§ while in several other countries and organizations protection is also provided by the ※Trademark Right§ and the ※Exclusive Right§ (Sole Right). It would be a step in the right direction if, in the future, Chinese trademark registrants were also provided with this even more integrated property right.

A somewhat related issue is that cybersquatting on domain names and certain Internet keywords has become increasingly commonplace in China as an ever-increasing number of Chinese use the Internet. Many trademarks have been registered as part of domain names or Internet keywords. The Amemdments are silent regarding any particular legal action that registrants could take to fight such infringements.

Another interesting matter concerns what happens when a design patent contains a registered trademark (filed by others at the Trademark Office). Article 23 of the China Patent Law states: ※Any design for which a patent right may be granted must not be identical with or similar to any design which, before the date of filing, has been publicly disclosed in publications in the country or abroad or has been publicly used in the country, and must not be in conflict with any prior right of any other person.§

※Prior right§ in this context is understood to mean the prior trademark rights and/or copyrights held by other parties. If a trademark registrant applies for a design patent with his own registered trademark, it could not be deemed to be in conflict with the prior right. On the other hand, if this registered trademark is owned by another party, the State Intellectual Property Office will likely conclude that the design cannot be patented and, therefore, that a patent right cannot be granted.

In light of all of this, it must be remembered that neither the TMO nor SIPO has the last word concerning trademark law. In China, the National People*s Congress PC Standing Committee makes all final decisions regarding amendments to laws or regulations.

General 0 Comment November 21, 2007, 3:40 pm

Chinese Companies Layoff Workers to Dodge New Labor Law

November 9, 2007 - by Robin

Chinese companies are trying to evade a new law that will make it harder to sack employees, according to China Daily.

The new Labour Contract Law, to take effect early next year, offers staff with more than 10 years of service at a company the right to sign a new contract that will make it harder to fire them.

I find it interesting that the new Labor Contract Law has led to many firms trimming their staff before it actually comes into force and firing employees becomes more difficult. I suppose this could be considered an unintended consequence of institutional design - except it seems the lag time between the passing of the law and its coming into effect was provided for especially for this reason, suggesting this effect was deliberate.


Major telecom equipment maker Huawei recently ordered 7,000 employees who had been with the company for more than eight years to resign and then rejoin. To encourage them to accept the new arrangement, Huawei worked out a compensation scheme based on length of service, salaries and bonuses. The total cost of the package is expected to reach 1 billion yuan (US$134 million).

Apparently Huawei is not the only company going through this. US retailing giant Wal-Mart fired about 100 employees at its sourcing center in China last October, claiming the layoff was part of its global restructuring.

Huawei has issued a statement to the China Daily denying that it was trying to dodge the law and claiming that the layoff was part of a strategy to enhance competitiveness.

Hmmm...I am not too sure about this. It seems to me that Huawei's employees are merely entering into new contracts without affecting their continuity of service. If the existing contracts end one day and their employees show up at work on the next day with new labor contracts, would not the 10 year rule still apply to them since there is no actual break in service between the terms of the contracts?

Anyway, in response to such widespread practice, Beijing has issued a warning against such companies and is in the process of formulating special regulations dealing with companies that seek to bypass the new law.

General 0 Comment November 9, 2007, 7:08 pm

Patent Applications Soar in China

November 8, 2007 - by Robin Teow

China received 268,926 patent applications in the first six months of 2007, up 7.3% over the same period last year. These are official statistics compiled by China Council for the Promotion of International Trade (CCPIT). For more details, please take a look at this article from Xinhua News.


It is interesting to note that China now ranks third-behind Japan and the United States, but in front of the European Union-in terms of the total number of patent applications filed. Some argue that that China will soon transform itself into an innovation nation due to the skyrocketing number of patent applications filed in recent years. But is this the case?

The number of patent applications filed is one indicator of the rapid development in innovation. However, it must be borne in mind that patent applications may not accurately reflect innovation. Most of the patents filed in China are for new design appearance or new model, which does not necessarily involve great technical innovation. Also, in order to boost patent applications, some local governments have provided patent funds to local enterprises and science institutes for them to file their patents, resulting in the sharp rise in application number.

Nonetheless, Beijing's relentless efforts to raise IP awareness among its people must be applauded. After becoming a member of the World Trade Organization, China has strictly abided by the WTO obligations in terms of IPR protection and has been dealing with IPR disputes with the United States, the EU and Japan in a cooperative way. I believe that with the remarkably accelerated industrialization that is taking place now in China and CPC's continuous commitment to strengthening technological innovation and developing high technology, it is only a matter of time before China becomes the next global technology powerhouse.

General 0 Comment November 8, 2007, 5:22 pm

New Prescriptions for Growth

November 5, 2007 - by Nicole Huang

Recently, a lot of pharmaceutical companies are looking for the rapid progress through innovation in China. Their goals are not merely limited to introducing new drugs to China but even to eventually create them here. Therefore they increase their investment and attention into the department of R & D, such as the company Lilly, GlaxoSmithKline, AstraZeneca, Novo Nordisk and so on.

There are more advantages for these foreign pharmaceutical companies to improve and develop R & D here in China now because the central government pushes for more R & D in order to enhance the science and technology climate, the environment for pharmaceuticals is changing. Increased state funding to research institutions, universities and other science-and health-related bodies-many which provide resource to foreign partners in China-are being planned to help drive the industry to world-class heights. Incentives such as preferential tax schemes are now being implemented to support private R & D activity and build an enterprise-based innovation system as well.

However, there are some obstacles the foreign pharmaceutical manufacturers should be prepared to face such as China's rigid regulatory environment, high turnover and intellectual property infringement and so on. Fortunately, the Chinese government is aware of these issues and seems committed to improving the situation.

General 0 Comment November 5, 2007, 1:23 pm

Bye-bye Nestle, Hello Mengniu

November 1, 2007 - by Robin Teow

US fast food group KFC, a unit of Yum! Brands, has signed a China dairy agreement with Mengniu Dairy, China's top dairy producer, ending its 20 years supply relationship with Nestle, according to China Daily. Milk and other dairy products made by Mengniu will be sold at KFC's 2,000 plus outlets in China from next year.



Mengniu has been aggressively expanding its sales channels beyond supermarkets and retail outlets amid stiff competition with Inner Mongolia Yili Industrial Group Co. and Bright Dairy & Food Co. in the world's fastest growing dairy market.

In June Mengniu also took over the dairy products account of Starbucks from Nestle.

Well...I guess this is another good example of multinational companies' continuous commitment to localize their products or services in China with a view to attracting Chinese consumers. This also serves as a strong warning for foreign brands about nationalist sentiment in China's flourishing consumer market. Multinationals that seek to make a virtue of the fact that their products come from a specific foreign country may struggle in today's Chinese market as confidence in domestic brands continues to rise and affluent class continues to grow.

General 0 Comment November 1, 2007, 1:52 pm

Face the product safety, win the special war.

October 31, 2007 - by Emma Tang

First pet food. Then toothpaste and tires. Now toys.

The cascade of defective imports from China in recent months reached a peak

Though only a fraction of Chinese products were involved in the recalls, it has scarred the US psyche enough to trigger a China phobia. The resultant threat to Chinese exporters notwithstanding, the task of rebuilding the 'Made in China' brand opens up enormous opportunities for the country to win back the trust of global consumers.

Reacting quickly to the US recalls, China in August set up a Cabinet-level panel on food safety and quality control under Vice-Premier Wu Yi, known in China and abroad for her toughness and efficiency in getting things done. Within a week, a nationwide campaign was launched to ratchet up efforts to improve product quality and supervision.

Eight categories of products are under the microscope, including pork, drugs, agricultural products, processed food, toys and electric wires. The government has also begun to sponsor quality-control training for some specific industries. The campaign's goal: improving product quality in four months.

The State Council has also defined the liability of enterprises as the first person-in-charge for the product quality and food safety, as well as the related responsibility of local governments.

But it is not just a problem of having the right regulations; it will take a long time to educate producers and the general public.

But in the long view, the happened are not all bad. It will Chinese makers better understand global regulations, improved their awareness of quality and the need for quality supervision systems, arise their enthusiasm to participate in this special war to protect the safety and interests of the general public, as well as a war to safeguard the 'Made in China' label and the country's image

China is a country of high sense of responsibility, and even with only 1 percent of products of inferior quality, the country will not shy away from or cover them up but spare no efforts in tackling and solving the problem in an honest manner.

General 0 Comment October 31, 2007, 3:43 pm

Change of the function of HR

October 30, 2007 - by Nicole Huang

The HR function has been changed from its traditional role of handling paychecks, benefits and training to one of strategic partner in business growth. The Ninth Annual HR Conference held in Shanghai this year discussed warmly in the topics of organizational development and organizational capability.

There are several fields of the organizational development and organizational capability. Firstly, change of the management. Although the change of management will have to face a lot of problems such as bringing about a loss of momentum and energy; change management can help companies through a transition period by eliminating anxiety, stress and uncertainty and creating enthusiasm. According to the survey carried out by Bain & Co., the reason for change needs to be rooted in external factors or environment. For example, the changes in the marketplace, trends in technology, consumer demands and competitive environment.

Secondly, HR also needs to be able to identify high potentials and what competencies need to be developed.

Thirdly, the structure change to support business. The experts suggested combining the business and HR competencies and Hr practitioners need to add value beyond administration and understand the business needs of the company and be on the same page as the company leaders.

Then, improving the effectiveness of on boarding process, the increases in the return on the initial investment will be rapid by shortening the productivity curve, increasing employee engagement and reducing turnover.

Last but not least, the importance of the employee value proposition. If the employee value proposition can be improved well, it will increase the attractiveness of the company to potential employees and increase the commitment of hired employees. And the effective employee value proposition can reduce the compensation premium organizations have to pay to hire talent as well.

General 1 Comment October 30, 2007, 4:31 pm

New Babies Are Named "Olympics"

October 26, 2007 - by Maggie Xu

A cousin of mine who was born in 1990 named ''Yayun" as his given nime, for remembering the 11th asian sports held in beijing. 17 years have past, beijing, as the capital of China, will hold its first Olympics.

A latest survey shower that growing numbers of Chinese parents choose the words "Ao Yun" or "Olympics" into their babies' given names.

The survey says it well demonstrates Chinese people's enthusiasm for the 2008 Beijing Olympics. According to the survey, there are 3491 people around the country who are named after "Olympics". Among them, 3216 male Chinese and 275 female chose "Ao Yun" as their first name.

Meanwhile, the survey also finds that each of the five words in the phrase "Bei Jing Ao Yun Hui", or Beijing Olympics, is a Chinese family name. The number of Chinese who have one of the five words as their family names is 40,607 in total.

The survey also anticipated that large number of babies to be born in 2008 might be named "Ao Yun."

General 1 Comment October 26, 2007, 4:09 pm

More democracy for China?

October 18, 2007 - by Robin Teow


China will continue to power the engine of economic growth by quadrupling the per capita gross domestic production (GDP) of 2000 by the year 2020. And the rapid growth will be under the condition of reduced consumption of resources and greater efforts in environmental protection.

China will also manage to narrow the widening income gap, expand democracy for its 1.3 billion people, modernize its 2.3 million armed forces, enhance the soft power of its culture, and work to sign a cross-Straits peace agreement on the basis of one-China principle.

Hu Jintao, general secretary of the 16th Central Committee of the Communist Party of China (CPC), outlined the country's ambitious goals for economic, political and social developments, as well as the nation's position on the world stage, at the opening of the 17th CPC National Congress on Monday.


It is interesting to note that the Chinese characters for democracy (鏍翋) turned out to be one of the most extensively used political concept in Hu's report, showing up at least 60 times. Nevertheless, it must be pointed out that Chinese democracy is different from Western-style democracy and hence possesses distinctive Chinese characteristics. In building socialist political democracy, China has always adhered to the basic principle that the Marxist theory of democracy be combined with the reality of China.


In his speech, President Hu vowed to make communist rule more inclusive and better spread the fruits of China's economic boom. China will "expand people's democracy and ensure that the people are the masters of the country," Hu said. China needs to improve institutions for democracy, diversify its forms and expand its channels, and carry out democratic election, decision-making and administration and oversight in accordance with the law to guarantee the people's rights to be informed, to participate, to be heard and to oversee, Hu added. However, reflecting Hu's cautious manner, he was vague on just how proposals for expanded democracy would be carried out.

Well...it is certainly not easy to talk about democracy when you are managing a Communist country that is home to one-fifth of the world's population. President Hu's advocacy of democracy should be applauded. Any move to infuse democracy especially in a country like China must be done with prudence and caution. Socialist market economy constitutes an actual basis for developing socialist democracy. Therefore, in order to develop democracy, it is imperative that China first fully develops market economy. A market economy characterized by freedom, equality, and competition is a training ground for the people to learn about democracy and cultivate democratic quality and capability.

General 0 Comment October 18, 2007, 2:01 pm

Police issue alert over Games ticket frauds

October 15, 2007 - by Maggie Xu

BEWARE of fraudulent [url=http://www.tickets.beijing2008.cn/]Olympic Games tickets souvenirs and sto...

General 0 Comment October 15, 2007, 9:23 am

Property Heavyweights Dominate Forbes' China List

October 10, 2007 - by Robin

I was browsing through Danwei yesterday and came to find out that, to my surprise, the richest person in China is in fact a 26 year old girl in Guangzhou, Guangdong Province. God...I am in the wrong city!

Due to soaring demand for homes and real estate investments in China, Forbes Asia's Annual list of the 40 richest people in China had property magnates in three of the four top spots, with a real estate scion, Yang Huiyan (栦需潾) of Country Garden Holdings, topping the ranking at $16.2 billion. Yang's fortune also makes her the richest woman in Asia.

The total net worth of members of the 2007 list more than tripled to $120 billion from $38 billion last year, reflecting China's rapid growth and a surging stock market that has almost tripled in value this year. The economy expanded 11.9 percent in the second quarter from a year earlier, the fastest pace in more than 12 years.


Yang, daughter of the Country Garden founder and chairman, Yeung Kwok, holds a controlling 59.5 percent of the builder. She was followed by Hui Wing Mau, also known as Xu Rongmao, the chairman of Shimao Property, with $7.3 billion. Shimao's Hong Kong-listed shares have gained 68 percent this year, compared with the 39 percent gain in the benchmark Hang Seng index.

The total net worth of members of the 2007 list more than tripled to $120 billion from $38 billion last year, reflecting China's rapid growth and a surging stock market that has almost tripled in value this year. The economy expanded 11.9 percent in the second quarter from a year earlier, the fastest pace in more than 12 years.

All 40 members of the list this year are billionaires, up from 15 last year, according to the magazine. The ranking of Huang Guangyu, the chairman of Gome Electrical Appliance , who was No. 1 last year, fell to No. 10, even as his wealth increased 56 percent to $3.6 billion.

Forbes said it compiled its list by looking at shareholdings in public companies and estimating what holdings in private entities would be worth if public.

There are approximately 641 million people in the Asia-Pacific region who live on less than $1 dollar a day. And there is one woman who is worth $16.2 billion. Unbelieavable!

General 2 Comment October 10, 2007, 2:12 pm

The Significance of a Smile

Septemper 20, 2007-- Kaitlin Foley

With the Summer Olympics less than a year away, many efforts are underway to transform Beijing. While there are several efforts to improve the physical environment of the city, there are also campaigns to transform the image of the Chinese people. Organizations and committees are being asked to shape the atmosphere and reception that many tourists will confront as they travel to Beijing.

One of the current campaigns is the ※smile campaign.§ According to a China Daily article last 5300 Beijing volunteers have signed up to welcome and serve the athletes and tourists during the Olympics. Throughout the city there are pamphlets, posters, and publications urging Chinese to smile more and be friendlier. The official motto of this campaign is ※the smile of the volunteers is the best name-card of Beijing.§This group of volunteers is committed to creating a warm and welcoming environment. Many acknowledge that the actions of volunteers and individuals in the service and tourism industries will shape the image of Beijing, and China to the world.

Cultural differences have often been the cause of many misunderstandings. The Chinese have been unjustly criticized in the past for their cold, unfriendly demeanor. Gu Wen notes in a China Daily article on the smile campaign that in the West people associate a smile with positive characteristics, such as being friendly and trustworthy. However, traditionally Chinese tend to encourage a more serious look. A smile to a stranger is often not thought of as a friendly gesture, but can be thought of as being silly or a sign of an alternative motive.Thus, the difference in the significance of something as simple as a smile can create problems in cross-cultural interactions.

This negative impression of Chinese people is what many are attempting to avoid with the current civilian campaigns. The Beijing Olympics, stand as a significant opportunity for China to shape and create their image for the world. Li Binghua, the Vice Executive President of the Beijing Olympic Organizational Committee (BOCOG) was quoted in an article in the People's Daily saying the national image relies on the service and actions of the individuals interacting with and serving the athletes and tourists at the Olympics.

While many workto transform the city into a ※city of smiles,§ one may wonder how successful this effort will be. While in the end it is just a smile, this campaign reflects an attitude and mindset change taking place.It seems everywhere you look in Beijing there is talk of the Olympics. As people get caught up in the whirlwind excitement, many are embracing the motto behind the Olympics "One World, One Dream."


General 1 Comment September 20, 2007, 11:19 am

Face to Face with No.13 Typhoon

Septemper 19, 2007-- Maggie Xu

This morning when I opened my mailbox, an email sent by our gentle HR manager arouse my attention: our Shanghai office will be closed tod...

General 0 Comment September 19, 2007, 2:19 pm

What? Beijing is the most beautiful city in China?

September 17, 2007 - by Robin Teow

According to a study conducted by China Institute of City Competitiveness, the capital city was voted as China's most beautiful city. Hong Kong SAR on the other hand was chosen as the safest and second most beautiful. Beijing came in ahead of 558 other mainland cities and the two SARs, with a score of 0.756 points out of one for its impressive historical monuments and tourist attractions. The study took into account the cities' urban design, infrastructure, architecture, culture and natural beauty. Other factors such as preservation of historical monuments, air quality, the transportation network, city life, public space and GDP also formed part of the assessment. You may find the relevant China Daily article here.

Fellow blogger Wangbo was not impressed though. In an article entitled "Make Sure You're Sitting Down", he had this to say:

"Alright, now that you've finished laughing.

I've even heard people call Tianjin "beautiful" (all Tianjinren of course), but I have never heard anybody describe Beijing as beautiful...well, maybe some of my students from Beijing have said something along those lines, as well as those from outside Beijing who say things like "I like Beijing because it's the capital of China" and other non-sensical rubbish. Anyway: Beijing the most beautiful city in China? You'd have to be on a serious mixture of various hugely powerful hallucinogens to think such a thing. I mean: Dalian, Qingdao, Xiamen, Guilin... Shit, even Changsha is more beautiful than Beijing. And Taiyuan would be if it weren't for the pollution."

I tend to agree with him. Beijing may be the capital of China and may boast one of the world's new seven wonders, some of the most sophisticated and innovative architecture and infrastructure and some of the most remarkable historical monuments and cultural relics in China, but to say that it is the most beautiful city is still a bit too far-fetched in my personal opinion.

Pollution is especially bad in the city. Beijing's coal-burning factories, power plants and vehicles regularly spew enough fumes to shroud the city in a brown, pungent haze. Residents have grown used to the soot that coats their clothes. Some even wear surgical masks when walking outdoors to guard against the filth. The situation has become more dire as the city is feverishly refurbished for next year's Summer Olympics.

On a normal day, Beijing's pollution is so bad it exceeds the safety benchmark set by the World Health Organization by nearly five times.

The result might come as a surprise to many visitors to China, home to clean and leafy cities such as Qingdao and Hangzhou in the east and the picturesque walled ancient capital of Xi'an in the north.

To me, air quality and beauty go hand in hand. Well...you may disagree with me.

General 3 Comment September 17, 2007, 3:59 pm

Price of Pursuing Modernization

September 11, 2007 - by Maggie Xu

As everybody knows that Beijing is a city with long history of more than 3000 years. Being a capital city of six Dynasty in ancient china, a large number of ancient architectures built by our ancestors are retained, which luckily survived the Anti-Japanese war and liberation war before the foundation of the PRC.

The old circumvallation and traditional buildings like Hutong & Siheyuan have become a distinctive symbol of the city of Beijing. They are viewed as precious heritage for both China and the world. However, with the accelerating development of economy and society, large-scale destroy of traditional buildings recently in Beijing has been launched like a raging fire. New modern skyscrapers have been built here and there with great enthusiasm by the real estate developers. As a result, Beijing shows people a different face far from the outlook we are familiar with.

Is this a good thing or bad thing? Some people say that it is the inevitable outcome with the progress of society and it is good to see that Beijing has becoming more and more international and modern. While from my understanding, the disadvantage outweighs the advantage in a good 2 aspects: firstly, the wonderful childhood memories have gone with the wind, it is almost impossible to remember the history of the city and themselves with the disappearance of demolishment of traditional houses ; Secondly, Beijing is losing its features and becoming identical to other big cities.

During the rush hours every day, when I walked along the 3-ring road, viewing those glass-wall tall buildings, I felt unease and upset. This is no longer the place where I love and treasure so much.

How to balance the economic development and the conservation of traditional architectures? It is a question facing many of us. We may learn from other cities, Paris, for example, to avoid the high price in the process of pursuing modernization.

General 1 Comment September 11, 2007, 9:05 am

President Hu Attends APEC Summit in Sydney

September 6, 2007 - by Robin Teow


Chinese President Hu Jintao arrived in Australia on Monday for a seven-day state visit before heading to the 15th economic leaders' informal meeting of Asia-Pacific Economic Cooperation this coming weekend.


This year marks the 35th anniversary of the establishment of diplomatic ties between China and Australia.

In recent years, cooperation between the two countries has been expanding steadily, particularly in mining, infrastructure, energy and environmental protection.

China is now the second largest trading partner of Australia, while Australia is China's ninth. In 2006, bilateral trade amounted to US$32.9 billion, up 20 percent from the previous year.

In the first half of 2007, bilateral trade reached 19.5 billion dollars, a 35 percent increase over the corresponding period of 2006.

APEC is the premier forum for facilitating economic growth, cooperation, trade and investment in the Asia-Pacific region.

Since its inception in 1989, APEC has grown to encompass 21 members spanning four continents, and represents about 40 percent of the world's population, 56 percent of global GDP and 48 percent of world trade.

APEC members include Australia, Brunei, Canada, Chile, China, China's Hong Kong, Indonesia, Japan, Malaysia, Mexico, New Zealand, Papua New Guinea, Peru, the Philippines, Russia, Singapore, South Korea, Chinese Taipei, Thailand, the United States and Vietnam.

Security around the city is tightening up as senior officials from Pacific Rim nations began meetings to prepare for a summit of regional leaders that will tackle trade and global warming.

Parts of Sydney began to resemble a besieged camp, with police erecting a 10-feet-tall security fence, dubbed by local media the Great Wall of APEC near the summit site. The 5km fence will isolate the leaders, who include US President George W Bush and Russian President Vladimir Putin, in the Sydney Opera House and surrounding hotels.


While Australian security officials say they have received no intelligence of a terrorist threat to Apec, they have launched the country's biggest ever security operation.


The Australian government has spent A$169 million ($199m) in the past six years preparing Apec security.

Many Sydney residents have vented their frustration against Apec security, claiming it will turn Sydney's inner city into a fortress, with people asked for IDs and bag searches.

The city's underground railway network will be closed during the Apec weekend and motorists have been warned to stay out of the city as many roads will be closed.

General 4 Comment September 6, 2007, 3:31 pm

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.


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

For BizChina, please click here.

General 1 Comment August 31, 2007, 5:38 pm

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.


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.


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.


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.

General 1 Comment August 15, 2007, 5:54 pm

Sourcing in Guangdong and avoiding scams

August 14, 2007 每 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.



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

Managing Dispute Resolution Costs in China

August 14, 2007 - by Edward Lehman


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

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

Of Pants, Falling Down, and the Law

June 20, 2007 - by William Han

Non-Americans like to recite stories of unreasonable tort cases as proof of American idiocy 每 you know, like someone suing McDonald's because the hot coffee scalded his lips. But usually the stories don't involve judges as litigants.

In recent weeks, however, a pair of such cases involving judges reached US courts. In one case, Robert Bork, the federal appeals judge who in 1987 was nominated to the Supreme Court, is suing the Yale Club in New York after taking a fall when delivering a lecture there. For the pains he has suffered, Judge Bork seeks one million dollars in damages plus legal fees.

In a second case, Roy L. Pearson, a federal administrative judge, is suing his neighborhood drycleaners for $67.3 million for allegedly losing his pants. Paul Rothstein, a professor of law at Georgetown University, probably expressed the sentiment of most when he said, "I don't know of any other cases that have been quite this ridiculous".

The state of affairs in China is more or less antipodean. Chinese courts commonly award damages equivalent to just a few thousand US dollars even for cases of grave personal injury or even wrongful death. In fact, damages in China are so limited that plaintiffs' lawyers make every effort to litigate in foreign jurisdictions, not to mention other disadvantages such as the possibility of corruption and bias.

What explains the difference? Oliver Wendell Holmes, back in 1881, wrote that tort law is without "a theory," an overarching rationale for how it functions. "All that can be done is to point out a tendency, and to justify it." So what justifies the diverging tendencies in US and Chinese tort regimes?

One explanation for astronomical awards in the US may be that American plaintiffs do not have many avenues of redress outside of the judicial system. The other two branches of government, Congress and the Executive, generally do not concern themselves with one individual American's broken leg (or even lost pants). This, plus an adversarial system that places the onus on the plaintiff, as well as the often very high costs and hassles of pursuing a case, means that it makes a degree of sense for the system to overcompensate winning plaintiffs. It is not that Judge Bork's fall is worth a million dollars, and Judge Pearson's pants are certainly not worth $67.3 million. Rather, ...

General 0 Comment June 20, 2007, 12:00 pm

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