China

When it comes to negotiating, Chinese companies view American companies as easy marks: impatient, unfocused and too willing to compromise to avoid losing out. Accordingly, Chinese companies often employ the following three negotiating techniques:

1. Wear down the American side down with endless issues. This tactic actually has two variants. In the first variant, the Chinese side raises a series of issues. Once these initial issues are resolved, the Chinese side then raises a series of unrelated new issues. This process never stops, because the list of issues is endless. The second variant is for the Chinese side to make several unreasonable demands and then refuse to address the American company’s concerns at all. Both variants are designed to induce the American side to concede on all major points out of a desire to keep the deal moving forward….

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Ed. note: The Asia Chronicles column is authored by Kinney Recruiting. Kinney has made more placements of U.S. associates, counsels and partners in Asia than any other recruiting firm in each of the past six years. You can reach them by email: asia@kinneyrecruiting.com.

Our advice to any Mandarin speaking 2L summer associate who is interested in a future transfer or lateral US associate move to Hong Kong / China: It’s not just about corporate and other transactional practices any more. If you are more interested in litigation than transactional, don’t hesitate to choose litigation or a litigation-related practice area. There is a sharply growing need at top US firms in Hong Kong / China for laterals and transfers in US litigation (mostly FCPA / White Collar work), Anti-Trust, and Disputes / Arbitration. This is not just a trend, it’s a permanent change on the landscape. We find it exciting that Mandarin speaking JDs now have more options to choose from in positioning themselves for a future Hong Kong / China move. Feel free to contact us at asia@kinneyrecruiting.com if you are a summer associate interested in Asia and have any questions about choosing a practice. It can be one of the biggest decisions you make in your career and yet one usually made without much analysis. Also, feel free to contact us if you are an associate interested in joining an FCPA / White Collar practice or Disputes practice in Asia. We have made numerous such placements in the past few years and a number of our candidates are interviewing for FCPA / White Collar positions at present in Asia.

Check out this relevant recent Legal Week article by Elizabeth Broomhall, where Kinney Recruiting’s Evan Jowers is quoted several times: Courting Eastern promise – the drive by international firms to recruit more disputes lawyers in Asia.

At least once a month, one of the China lawyers at my firm will get a call from someone asking us to form a “China company” for them before they start doing business in China “next month.” The problem with this is that forming a China company typically takes at least four months and after you finish this post you will understand why.

American lawyers often take on domestic company formations as a loss leader because the work tends to be fast and easy and they expect that the firm will get additional legal work once the company is formed. With China company formation, I often joke that the process is so onerous that our client never wants to speak with us again after we finish…

double red triangle arrows Continue reading “The Agony And The Ecstasy Of Forming A China Subsidiary Company (WFOE)”

I estimate that 90 percent of U.S. companies doing business in or with China have intellectual property requiring protection from China. Therefore, it is always a surprise to me how many of these companies seem to treat their intellectual property in China as an optional or secondary matter when it really should be one of the first issues they consider when approaching the China market.

Let’s first get clear what I am talking about when I use the term “intellectual property.” IP is not patents, trademarks, copyrights, etc. These are simply tools for protecting intangible assets.

So what is intellectual property?

double red triangle arrows Continue reading “How To Protect Your IP From China: It Is Possible”

A few weeks ago, China’s police accused GlaxoSmithKline’s former head of China operations of making  illegal payments to Chinese doctors to boost GSK drug sales. Last fall witnessed the high-profile trial, conviction, and life sentence of Bo Xilai, the former head of the Chongqing Communist Party, on bribery charges. These two cases send a clear warning: Beijing is cracking down on corruption. Hard.

The GSK case shows that China will not tolerate corrupt activities by foreigners in sensitive industries, especially when such activities result in higher consumer prices. Beijing going after a foreign company for allegedly increasing health care prices is a smart political move, especially since the Chinese web is rife with complaints about exactly that.

But at the same time, it has become clear that Beijing is serious about rooting out corruption. The Party leaders in Beijing know that widespread corruption weakens their legitimacy and they are looking for ways to combat it. The important link between the Bo Xilai and the GSK cases is that they both involve defendants — a political elite and a foreign entity — whose arrests have engendered widespread discussion and sent a strong signal that no one in China is safe from prosecution. While Westerners are mostly complaining about the GSK arrests (multiple GSK employees have been arrested in addition to its former head of China operations), the Chinese internet is mostly loving it.

As a foreign company doing business in China, how should you react to the recent corruption crackdown?

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We’ve been talking about officially-sanctioned Chinese hacking for years. Whether the narrative involved offensive attacks on U.S. systems or industrial espionage, the “China threat” was a reliable talking point when discussing cybersecurity. Was the extent of the threat a little overblown? Sure. Hey, the Pentagon needed to spook some legislators into opening the pocketbook. But the idea that the Chinese government was trying diligently to hack into American systems was accurate.

And now the U.S. is doing something about it. It may not be much, but the Department of Justice is filing charges against five Chinese officials in the People’s Liberation Army (known as Unit 61398) for industrial espionage….

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I am writing this from Hanoi, Vietnam, where I have been for the last week, working on legal matters for American companies doing business in Vietnam. Viewing firsthand how Vietnam has responded to this week’s anti-Chinese riots has prompted me to write on the impact those riots and the sentiments that led to them might have for American businesses in Vietnam.

Many American companies doing business in China have what is commonly referred to as a “China plus one strategy.” Such companies will have the bulk of their Asian operations in China, but will also be active in at least one other Asian country to hold down costs or reduce over-dependence on China. The increasing cost of labor (and other inputs) in China has accelerated the number of companies considering this strategy.

If you do a Google search for “China plus one,” Vietnam is listed one, two and three as the “plus one” that specifically mentions another country. It is also the country my law firm’s clients most often mention when considering where to go outside China.

Why do I see Vietnam as the ideal plus one country?

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There are three rules for making contracts enforceable in China:

  • Make the jurisdiction a China court.
  • Make the governing law Chinese law.
  • Make the governing language Chinese.

American companies routinely insist on contract provisions that effectively render their contracts unenforceable in China. By their own efforts, they make their contracts worthless, much to the amusement of the Chinese side of the transaction.

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It is perhaps a truism by now, but if you are doing business with China, you need to be on your guard against fraud. Recently, an old chestnut known as “the switched bank account scam” has seen a dramatic resurgence, because it has become so easy to perpetrate and so difficult to prevent.

Here’s how bad things have gotten: a year ago Interpol released a Purple Notice detailing the scammers’ M.O., but my firm’s China lawyers are receiving even more frantic phone calls now than last year….

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I get at least an email a week from law students seeking advice on what they should be doing to secure a law firm job involving China. This post is my once and future answer to those emails.

Two kinds of firms have a China law practice: mega firms (I began my career at one) and high end boutiques (I founded one). A small number of in-house lawyers also do China work, but nearly all of these lawyers went in-house after working for a mega firm or a high end boutique. Both kinds of firms generally interview only law students with top grades from highly rated law schools.

This means that entry-level China law jobs in the United States are generally limited to only the best students at the best schools. On top of this, most mega firms do not have recent graduates work on international law matters because they believe associates must first master corporate law or tax law or dispute resolution or labor law or IP law or whatever before being tasked with the additional layer of complexity of an international matter.

So what are the options for a law student who wants to practice China law?

double red triangle arrows Continue reading “So You Want To Be A China Lawyer? Fuggetaboutit!”

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