China

China Legal 2015: More, More, More

Foreign companies in China should be increasing their guard against these listed items in 2015, most of which result from the slowing economy.

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For foreign companies doing business in China, 2015 will look much like 2014, only “more so.” Foreign companies should be increasing their guard against the following things in 2015, most of which result from the slowing economy.

1. China will increase its efforts to root out and shut down unregistered foreign businesses, especially those that operate in China but have an entity in Hong Kong without one in the PRC.

2. China will increase its crackdowns on foreigners living in China without proper visas. China’s economy is slowing, and going after foreigners has always been a good way for its government to increase its credibility with its own citizens.

3. China will increase its tax collection efforts. China has stepped up its transfer pricing efforts, and if your China operations are not making a healthy profit, be prepared for the tax authorities to impute healthy profits to it. If you do not already have a good China accountant, now is the time to get one.

4. Litigation will increase. Chinese companies are getting increasingly aggressive in suing their foreign counterparts in China, and even in the United States. If you fire or lay off your Chinese employee without first getting a signed settlement from them that actually works in China, your chances of being sued and losing are great.

5. China’s crackdown on corruption, particularly against foreigners, will increase. Chinese lawyers have become aware of U.S. Department of Justice and SEC rewards and they are hustling for clients. Are you confident that none of your current or terminated employees will turn you in for a multimillion dollar reward?

6. Scams against foreign companies will increase and continue to get more sophisticated. Your defense is to conduct due diligence before doing your China deals.

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Dan Harris is a founding member of Harris Moure, an international law firm with lawyers in Seattle, Chicago, Beijing, and Qingdao. He is also a co-editor of the China Law Blog. You can reach him by email at firm@harrismoure.com.

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