What Contributes to China’s Low Crime Rate?

Overall crime rates in China are low, particularly compared to other major developing countries. As a western trained lawyer living and working in China over 30 years, I have seen this first hand.

There are many reasons for this. Firstly there is the Chinese culture, which is probably the most significant factor behind the low overall crime rates. China and the Chinese take pride in a history of thousands of years of civilization, philosophy, a culture of respect, and the influences of Confucianism, stressing respect for authority, and Buddhism which encourages letting go of selfish desires. Because of this background committing a crime is shameful to Chinese people, not just individually but to their family. If a person commits a crime, the entire neighborhood will know of it, and will look down on that person and their relatives.

Violent crimes are rare in China. Not least because of the pervasiveness of the Chinese security state and police force. Also a factor, criminal punishments are invariably harsh, even something as small as a street brawl can carry hard consequences. Particularly for drug related crimes, which often carry the death penalty. Prevalence of violent crimes are reduced overall as a result of the almost total lack of guns in the country.

Each community in China has a neighborhood committees (居委会) which closely monitors activity in the neighborhood and residential complexes. These local committees are highly attuned to developments in the neighborhood and are very responsive. There is almost always one or more guards in a neighborhood keeping an eye on things.

When there are issues or disagreements in a neighborhood, residents, security guards and local police will firstly encourage those involved to engage in a mediation process, and work toward resolving the issues through discussion. In most cases, a dispute or disagreement can be peacefully resolved between two parties with a mediator in the middle. When issues are resolved in this way, it takes away the incentive and opportunity for a crime. Anger is dispelled in a public forum. Matters resolved via this mediation process are not reported as crimes because no crime has been committed. This lowers overall crime rates.

Published by Edward E. Lehman on February 8th, 2018 tagged Uncategorized | Comment now »

How Effective is the USPTO IPR Attaché Program in China?

The IPR Attaché Program was formally initiated by the United State Patent and Trademark Office (“USPTO”) in 2006. Although the aim for such Program was to promote IPR protection and enforcement domestically and abroad, to secure strong IPR provisions in international agreements and to encourage strong IPR enforcement by U.S. trading partners by deterring intellectual property theft and for the benefit of U.S. foreign, economic, and political interests, the actual achievements brought on IPR protections by such Program are unclear. Instead, there were many concerns raised within the government and by the public regarding the Program due to its inherent deficiencies in methodology and management structure.

The role and responsibilities of the attachés in relation to the International Trade Administration’s (“ITA’s”), Commercial Service (“CS”), and the US Department of State remains unclear, and the effectiveness of performances of current attachés in their respective US overseas missions cannot be guaranteed. The way the program works is that Attachés leave the USPTO and become a member of the Foreign Commercial Service (“FCS”) employees according to the memorandums of understanding between the USPTO and the FCS. As a result of this institutional crossover, expectations and priorities regarding the attachés’ responsibilities within the FCS are not clear and often overlap with duties shared by regular FCS officers. Due to lack of oversight, the performance of the attachés and their effectiveness at their intended role cannot be monitored and ensured.

Effective training on attachés should also be a critical point as the USPTO has recognized. However, though the USPTO has tailored and amended their operating plan for the Program, formal training for attachés to work on specific IPR protection related tasks in embassy is still limited. Analysis of the program has revealed that lack of a high workload, limited class openings, weekend training schedules and a general and personal lack of interest to attend specific training courses overall limit the attachés’ participation in training programs. As a result, there is very little improvement on performance of individual attachés or the larger program in performance of the core IPR protection mission.

Importantly, attachés are often sent to foreign countries along with the FCS with little to no training in the local language. Language training or proficiency is not mandatory, there is no foreign language fluency requirement. This is most puzzling given that the attachés are intended to communicate directly with local governmental officials and establish relationships with them in the host countries, with the goal of promoting the programs goals of IP protection for USA companies. One of the roles and responsibilities of the attachés is to provide training to host government officials and offer legal and technical IPR expertise at the post. Obviously there can be only extremely limited success at these goals where the attachés cannot communicate effectively in the foreign country.

In all, the USPTO has been trying hard to perfect the IPR Attaché Program for many years, but there are still many doubts and blurry fields as to the effectiveness of the function and development space for such Program.

Published by Crys Zheng on February 1st, 2018 tagged Uncategorized | Comment now »

When A China Employee is Injured on the Way to Work, is it a Work-Related Injury?

These days, in the coldest days of year, most area of China are snowing. This morning, our China lawyers was called into a client’s office for a meeting. Over the course of the meeting the question was raised by an employee of our client’s China company, stemming from a casual comment about the weather.

The employ told how she was walking to the office, and slipped on a patch of ice on the road.

Luckily our client’s employee in this case was not injured, but the employee wanted to know, whether if he had been injured, would the situation qualify as a as work-related injury under China law.

The situations that can be identified as occupational injury are set clearly in the Regulations on Work-Related Injury Insurance.  According to this regulation, work-related injuries are limited to situation in which an employee is injured at work during working hours, at the work place, or where the employee is injured while engaging in preparatory work or closing down work directly connected to the employee’s regular duties, before or after the standard working hours, in the workplace. A China work related injury may also be found where the employee is injured in by violence or in an accident in connection with performance of the duties of the employee during working hours in the workplace.

Outside the workplace, a work-related injury may be found where an employee suffers from an occupational disease contracted due to working conditions, or if an employee is injured during work related travel, or where the employee is injured in a traffic accident (or public transit accident) for which the employee is not principally responsible.

On this last point it is key to note that not every injury which occurs on the way to work qualifies as a work-related injury in China. If an employee slips on ice while walking, or falls into an open manhole while walking to work (these are seen more often than you might expect in China), this will not be covered as a work-related injury.

According to the Regulations, if an employee gets injured due to slip on his/her way go to or back from work, it will not be identified as work-related injured.

Published by Bonnie Zhang on January 26th, 2018 tagged Uncategorized | Comment now »

Revised SME Promotion Law to Reduce Tax Burdens of and Enhance Financing to Enterprises

SME Promotion Law of China (“Promotion Law”) was promulgated in 2003 aiming to improve the operation conditions of Small and medium enterprises (SMEs). However, due to lack of clear rules the enforceability has been an issue.

SMEs are making up 99.6% of all registered companies in China, contributing around 60% of the GDP and 70% of exports, hiring over 80% total employees in China. However most SMEs have been undergoing difficulties with access to bank financing while undertaking heavy tax burden.

Being aware of the growing importance of SMEs by China government, the revised Promotion Law was urged and issued in September of 2017 and is effective as of 1 January 2018.

The revised law grants various preferential treatment on taxation and governmental fees to SMEs to reduce their tax burden.

The policy on postponement, reduction, and exemption of enterprise income tax and value-added tax as well as simplified taxation administration procedure shall be applicable to the qualified SMEs so that their tax burden can be mitigated. In addition, the administrative charges shall be reduced or exempted for applying for and maintaining Intellectual Property Rights.

To solve the issue of underfunding, the revised law provides that the banking regulatory authority will urge banks to lift the tolerance on non-performing loan to SMEs and extend the service networks to more counties and town, and promote the development of small and medium sized banks and internet financing, as well as encouraging SMEs to obtain secured financing by putting up accounts receivable, intellectual property rights, inventories, machinery and equipment, etc. as collaterals.

The revised law also promises better governmental services to SMEs and encouragement of technology innovation.

The Promotion Law will apply to the foreign invested enterprise as long as they meet of criteria of SMEs.

Still the implication of the revised law will rely on more detailed measures and policy to be made and enforced.

Published by Edward E. Lehman on January 19th, 2018 tagged Uncategorized | Comment now »

The First Public Library Law Comes into Effect in China

When it comes to January 1st of each year in China, there are normally many new laws and regulations came into effect, which are direct measures of the government is taking to better solve many social problems and improve people’s livelihood . This year, one noticeable among many new enacted laws and regulations is the Public Libraries Law, which an important law in the area of public culture.

At present in China there are about 3153 public libraries set up by the government at the county level, however the network of public library facilities is not perfect enough, especially in some rural areas and the central and western regions. There are still gaps in the public libraries, about 12% of the counties in the country do not have public libraries. In addition, the service function of the public library is not fully played, because the service efficiency the utilization rate of these libraries is very low. For many people, it is still a hard problem to read book.

The new law is aimed to solve the above mentioned problems. In the new law, it defined the basic principles of state support of Public Library Development in old revolutionary base areas, ethnic minority areas, border areas and poverty-stricken areas. And the new law makes it clear that the key tasks for the public library service are extending to the grassroots and strengthen the humanistic care for minors, the elderly, the disabled and other special groups.

In the future, it becomes a legal responsibility of the people’s governments at or above the county level, to establishment, guarantee and supervise the legal responsibility and it requires governments at all levels to increase the investment to public library, strengthen the fixed premises and mobile services, self-help service facilities of the public library to form a service network of public library service which covering both urban and rural areas.

To make the people enjoy a more full public library service, the new law is also make it clear that the following four services provided by public library should be free:

1) inquiry and borrowing of documents and information;

2) public space facilities, such as reading rooms and self-study rooms, are open

3) public welfare lectures, reading promotion, training and exhibition;

4) other free service items provided by the state.

The new law makes it practicable of the central government’s requirements of   promoting the social development of public cultural services.

Published by Edward E. Lehman on January 19th, 2018 tagged Uncategorized | Comment now »

New Food Safety Regulations Hit the China Delivery Sector

China is taking on the powerful food takeout and delivery business. New regulations recently issued aim to improve the safety of takeout and delivery food, which is a major business in China’s large cities.  The regulation requires that any business offering a food preparation and delivery service must maintain a real restaurant wit a physical presence. The restaurant must be properly licensed to provide food preparation services.

In short, food preparation and delivery services which have arising primarily as online delivery services, will be held to the same regulatory standards as sit-down restaurants.

If a food preparation and delivery service violates the regulations, authorities will order online hosting platforms to take down the services food advertisements, and the business will be suspended.

In addition, those online platforms offering advertisements of food delivery services are required to develop a food delivery safety control system, and are required to obtain and publish relevant operational permits for each of the food preparation companies listed on their online platform.

The law goes further to require preparation and delivery personnel to maintain good personal hygiene, utilize clean and food safe containers, and have an obligation to prevent contamination. Employers of food prep and delivery personnel are required to provide training and appropriate tools to keep food safe along its journey to your door.

Published by Edward E. Lehman on January 19th, 2018 tagged Uncategorized | Comment now »

China Improves Quality of Life with New Green Tax

China’s “green tax law comes into effect this month. The law is considered a major landmark in China environmental law and protection.

The new environmental protection tax will replace an older pollutant discharge fee. This fee has been on the books since 1979, however there has been a history of uneven enforcement and evasion in some parts of China.

It’s interesting to note that the enterprises and individuals who will be subject to the “new” green tax are essentially the same as those required to pay the old pollution fee. Its primary targets are enterprises discharging any pollutant. Four categories of pollutants are recognized under the law: air, water, solid waste, and noise pollution.

Though some in China had hoped for a “Carbon Tax” a carbon dioxide taxation scheme was ultimately not included.

The tax is calculated based on type and volume of the specific pollutant discharged and will closely follow the former pollution fee system. There are exceptions available if pollutants will be discharged in relatively small amounts.

The new tax law clarifies issues of enforcement and administration which were found regarding the pollution fee, centralizing the process. The law is the first time tax and environmental authorities in China will work cooperatively to implement and collect a tax.

It should also be noted that the law calls for penalties to polluting enterprises for environmental damage caused by the pollutants they have discharged. This will be on top of the standard tax, and will serve as further deterrent to widespread pollution.

The law is rightly viewed by many in international and Chinese environmental circles as a major step forward. By centralizing and modernizing the collection process, effective coverage will be increased, allowing authorities to maximize the impact and benefit of the law.

This follows the trend in China of increasing environmental protection in the wake of three decades of widespread economic growth.

Published by Edward E. Lehman on January 17th, 2018 tagged Uncategorized | Comment now »

China to Open Financial Sector to Foreign Banks

Our China lawyers work with many foreign clients seeking to establish a banking or financial entity in China. We are always happy to help these clients, but must let them know up front that this is a rather complicated and difficult process. Further, we find that foreign investors encounter substantial difficulties when seeking to participate in the China banking and financial business.
With the new year, all of this may be about to change. In keeping with the spirit of the 19th CPC National Congress’s which announced the goals of promoting “all-round opening”, the China Banking Regulatory Commission (CBRC) intends to revise regulations relating to Foreign-funded Banks.
Key items to be revised are as follows:
1. The CBRC aims to publish further regulations clarifying the conditions, procedures and application process for the establishment of foreign funded banks and equity investments made by the foreign funded banks to gain partial equity positions in local Chinese banking and financial institutions.  In short, the goal is to establish a clearer legal basis for foreign invested banking institutions to participate in the China market.
2. The CMRC plans to open up operations to foreign invested banking institutions by simplifying approvals in managing overseas finances, trusts securities and other matters. Rather than an extensive approvals process, Foreign invested baking institutions will be required to report on these activities periodically to regulators.
3. Finally, the CBRC hopes to equalize market access standards between local banks and foreign invested banks, including simplification of establishment of branch offices, and simplification of procedures for raising and issuing debt among other changes.
These changes are not yet fully implemented, and the plan remains open for outside comment. Lehman, Lee & Xu China lawyers are watching this and other China banking and financial markets related developments and will keep you informed.
Published by Crys Zheng on January 11th, 2018 tagged Uncategorized | Comment now »

Fortune Forum in Guangzhou Attracts Fortunate Few

Fortunate few (1,100 business leaders) at the Fortune Forum in Guangzhou

Blue skies and reasonable traffic flow a picture from the middle of what would be a very busy street during the 2017 Fortune Global Forum in Guangzhou

Last month was busy. This month manic, is it just me, or is it a sign that this is China’s Century? I do not know, but sure seems like it. In November, I was fortunate enough to be invited to be part of a recent international business delegation of “so-called celebrities” to a Chinese government sponsored One Belt One Road initiative to Xinjiang Autonomous Region.  Absolutely amazing, OBOR = opportunity.

This month, yikes now the Fortune Global Forum in Guangzhou, where the real celebrities like Tim Cook (Apple) and what appears to be almost-a-mini-Davos is taking place amidst some robust security and China’s penchant for hosting on a grand scale, in what has become one of the finest and most important-cities in the world, the capital of the Pearl River Delta- Guangzhou.
Chinese President Xi Jinping sent a message to attendees that the country would continue to open up and improve its business climate to create more opportunities and make a greater contribution to the world.

President Xi made the remarks in a congratulatory letter to the 2017 Fortune Global Forum, which opened in a balmy Guangzhou this week. It is certainly different from cold snowy Wulumuqi, but it underscores the fact that this government supports growth and China is not only open for business, it wants to be pro-active to the rest of the world it shall facilitate business whether it is so-called celebrities on the old silk  road or world-beaters in the Pearl River Delta.

In his letter, Xi said China would develop the open economy to a higher level, promote the Belt and Road Initiative, and push for a new pattern of all-round opening up.

Looking forward, he said China would enjoy robust development momentum, the people would have a greater sense of gain and the country would be more integrated into the world.

The president said China’s economy had the foundation, condition and impetus to maintain stable growth and sound momentum and that is what seems to be happening, these are not simply empty words. The One Belt One Road combined with the AIIB China managed iniatives to spur that growth is underway.

Fortunately, President Xi reiterated that China would not close its door to the world, and would only become more and more open, with its business environment becoming more open, transparent and regulated. Which I have been pleased to report upon as a legal commentator on 中央电视台 and see it up close on factory floors, in court rooms, and board-rooms across China.

President Xi message declared “China will continue to forge global partnerships, expand the common interests with others countries, further liberalise and facilitate trade and investment, and push for an economic globalization that is more open and inclusive, more balanced, more equitable and beneficial to all”.

President Xi encouraged global businesses to invest in China to share the opportunities brought by the country’s reform and development.

This three-day 2017 Fortune Global Forum has chosen “Openness and Innovation: Shaping the Global Economy” as its theme, drawing 1,100 participants, some of the world’s finest business leaders, including senior executives from the world’s top firms such as Alibaba, Tencent, Ford, HSBC and JP Morgan.

It is the fifth time that a Chinese city has hosted the forum. There was the youthful-looking- leader of the :Great White-North” Canadian Prime Minister Justin Trudeau as well as the lesser known (but about IMHO with the same relevance) Papua New Guinea’s Prime Minister Peter O’Neill addressing the opening of the forum. Hey China welcomes all this is a “big tent” indeed.

Apple CEO Tim Cook spoke stating China plays a leadership role in many areas, such as poverty reduction, manufacturing and innovation.

Apple CEO Tim Cook (right) speaks at the 2017 Fortune Global Forum in Guangzhou

Tim Cook unabashedly declared he has witnessed a “sea change” in China over the past quarter century from his nine-visits from Cupertino.

Cook said China is already “incredibly innovative” in the software industry and so many applications and ideas can only be created here. China also has a large pool of computer science professionals with skills that are very rare to find anywhere.

The Apple CEO said skills, rather than low labor costs, are what lure foreign companies to China. For some reason he failed to mention the 1.4 potential consumers, but that might be It too, the Chinese market, I guess? He did go on however and mention to get into the weeds of what Foxconn does for them as a OEM manufacturer.
“The products we do require advanced tooling. In the United States, I am not sure our tooling engineers can fill a room. In China, you can fill multiple football fields,” he said.
Apple now has around 2 million developers using its platform in China.

Cook said many companies have come to recognize the importance of vocational expertise. (I note, but he did not attribute same as notion promoted by TV celebrity Mike Rowe and the Koch Brothers in America). Tim Cook went on to explian that China understood that right from the beginning and gave it a leading position in manufacturing.

On other fronts, Cook said China is doing an unbelievable job in poverty reduction, which deserves applause. ( And the nation is very fixated on doing the right thing to avert climate change, according to Cook.

Turning to regulation, Cook said each country decides on its laws and regulations. As a foreign company, it either participates or stands on the sideline.
“You get in the arena because nothing gets changed from the sideline. When you participate, you are subject to the laws and regulations in the country,” he said. I particularly liked and appreciated those comments as Apple is suing Qualcomm in China to contest the payment of what has been deemed “essential patents” are not all relevant to Apple’s products perhaps and an epic battle which is taking place in the Courtroom in Beijing and will probably because of the speed of the judicial system in China over the USA and the EU as the first outcome of what will be a big outcome between the two giant corporations. As a legal professional that has attended my share of court hearings before the China IP Court in China, I can say Apple is not on the sidelines to be sure.

We shall keep you posted. His comments might be a foreshadow of a possible appearance where CEO Tim Cook might make an appearance at the IP Court for a hearing to see for himself the legal process, as Chinese legal counsel have been utilising more and more testimony and written statements by stakeholders and CEO’s who wish to see the process himself.

Published by Edward E. Lehman on December 7th, 2017 tagged Uncategorized | Comment now »

Tips To Protect Yourself In International Trade

As an international law firm, our China lawyers are often contacted by foreign companies seeking our assistance in dealing with international trade disputes. In just this last week, we received two new inquiries from potential clients which hope to engage our service to get back a payment made to a supplier in China. One American company had paid $80,000 to a Chinese company for a shipment of white socks, but when the socks arrived, they were discolored and made with low quality material. The client couldn’t get anyone to buy them, and come to us for help. However it turns out this client didn’t sign a formal contract with the Chinese supplier, they just sent the money.

The other case to cross our desks was a Polish company which had paid over $130,000 to buy a certain chemical to be used in a production process. However after they tested the received material it was discovered that the content of the containers was not as pure as the supplier had originally indicated. While this company did have a contract, the contract did not include the purity requirements.

We see these kinds of disputes all the time. In order to help all of those companies which potentially do business with China, here are some tips to follow in the process of international trade with Chinese companies.

1. First, perform due diligence research on your Chinese clients or vendors.

Before doing any business, it is wise to do a deep due diligence review on the other party of the business. This means checking relevant original certificates, such as the official Business License, any permits or qualifications for the manufacturing or in/exporting of the products; examine the production capacity or scale of the target partner; if possible examine the financial status, credit record etc. The more you get to know your international partner, the safer you will be.

2. Prepare a comprehensive and effective China enforceable contract.

This is the best way to make sure your China transaction is safe. Before you send any money to the Chinese company or send any product, hire a good China lawyer to prepare a sound legal contract with terms on the quality, inspection method, shipment arrangements, payments arrangements, dispute resolution method etc. to clearly list out the responsibilities of each party and the methods to resolve potential disputes. In our experience, most of our clients who encounter international trading disputes have ignored the importance of having a good contract. Lack of contracts or unclear responsibilities for the parties are the common causes international trade problems. This is the most important and professional part in the International Trading, the most prudent way is engage a local professional lawyer to draft or review the international trading contract.

3. Pay more attention to the payment method.

In the modern world, it is very fast and easy to make an international payment. But once those funds have left your account, they can be impossible to get back, when doing so may rely on the legal system of a foreign country. The recommend way to make payment during the international trading is make payment by using an old fashioned Letter of Credit. A Letter of Credit is issued by a reliable bank and before the money is paid to the other party, relevant supported documents must be provided to and examined by the bank.

Published by Bonnie Zhang on December 5th, 2017 tagged Uncategorized | Comment now »