Doing Business in China: A JD Supra Legal Reader

For your convenience, here’s a roundup of recent legal commentary and analysis on a broad range of issues facing companies doing business in and with China:

Life Sciences Health Industry China Briefing – June 2012 (Reed Smith):

“China’s new patent regulations allowing the government to force drug companies to grant compulsory licenses for generic versions of their products if it is deemed to be in the ‘public interest’ has the pharmaceutical industry worried about where China will draw the line, attorneys said. The new regulations issued by China’s State Intellectual Property Office last month say the government can order compulsory licenses for generic drugs when there is a ‘national emergency or any extraordinary circumstances, or for public interest purposes.’” Read on>>

China’s Migrant Workers (Fisher & Phillips LLP):

“China has an enormous ‘floating population,’ consisting of people migrating from the countryside to the cities, from underdeveloped areas to developed areas, and from central and western regions of the country to the eastern regions. In search of jobs and higher wages, these migrant workers constitute much of the workforce in manufacturing, construction, and social services industries. Migrant workers are generally paid lower wages, endure long overtime hours, work in poor or unsafe working conditions, and are frequently owed back wages by employers.” Read on>>

Building Compliance Relationships in China (Thomas Fox):

“The author posits that the central feature to a successful business relationship in China is trust. But he cautions that trust must be developed in two ways; from the head and the heart. He terms the first type of trust or ‘trust from the head’ as ‘cognitive trust’ which ‘emanates from the confidence that one has in a person’s accomplishment, skills and reliability.’ The second type of trust or ‘trust from the heart’ is called ‘affective trust’ and he believes that this ‘arises from feelings of emotional closeness, empathy and rapport.’” Read on>>

Update Regarding Securitization in China (Dechert LLP):

“China issued a notice on May 17, 2012, jointly promulgated by the People’s Bank of China (PBC), the China Banking Regulatory Commission (CBRC) and the Ministry of Finance (the Notice), re-launching its pilot securitization program… The Notice marks a milestone in the development of asset-backed securitization in the country.” Read on>>

CSRC Proposes Relaxing Qualified Foreign Institutional Investor (QFII) Conditions (K&L Gates LLP):

“On June 20, 2012, the China Securities Regulatory Commission (CSRC) announced that it had started public consultation on a series of proposed rule changes that will lower some of the thresholds and otherwise relax some conditions for non-Chinese investors to obtain a license to be a qualified foreign institutional investor (‘QFII’). Under Chinese securities regulations and capital controls, non-Chinese firms and persons cannot invest directly in the Chinese securities markets – most notably the primary equity markets, those for China A Shares in Shanghai and Shenzhen – unless they have a QFII license.” Read on>>

WTO Panel Rules on Electronic Payment Services in China: What to Expect (Davis Wright Tremaine LLP):

“On July 16, 2012, the World Trade Organization (the ‘WTO’) issued its panel report regarding certain measures affecting China electronic payment services (‘EPS’). The report concludes that certain restrictions on the provision of such services violate WTO trade rules, but the report is not a wholesale victory for the United States and its effects may not prove as far-reaching as the U.S. government would appear to believe.” Read on>>

Hong Kong Capital Markets Quarterly News — July 2012 (Morrison & Foerster LLP):
“In May 2012, the Law Reform Commission published a report proposing that a mechanism for class actions should be adopted in Hong Kong… Under the existing law, the sole machinery for dealing with multi-party proceedings in Hong Kong is a rule on representative proceedings under the Rules of the High Court, which was criticized as restrictive and inadequate by the Chief Justice’s Working Party on Civil Justice Reform in its Final Report in 2004.” Read on>>

New Entry-Exit Law Targets Illegal Foreigners in China (Bryan Cave) :
“On June 30, 2012, the Standing Committee of the National People’s Congress passed the Entry and Exit Administration Law of the People’s Republic of China (‘Law’)… In addition to laying out the basic framework of the entry and exit administration for both foreigners and Chinese citizens, the Law increases the severity of punishments for foreigners illegally living and working in China and for the employers who illegally employ them.” Read on>>

New Immigration (Exit-Entry) Law Enacted by China’s Congress (Gary Chodorow):

“Foreigners’ work-based residence certificates will be valid for a minimum of 90 days and a maximum of five years. That represents the halving of the prior minimum validity period of 180 days, an effort to more closely monitor foreign workers. Non-work-based residence certificates will be valid for a minimum of 180 days and a maximum of five years.” Read on>>

Dispute Resolution in China 2012: The Disintegration of CIETAC (Sheppard Mullin Richter & Hampton LLP):

“Most experienced China hands instruct their clients to, at all costs, avoid selecting Chinese arbitral institutions such as the China International Economic & Trade Arbitration Commission (CIETAC) or one of the city-level institutions such as the Beijing Arbitration Commission or Shanghai Arbitration Commission for resolving commercial disputes. This recommendation is based upon a number of key systemic problem areas including, but not limited to, unqualified staff and arbitrators, language difficulties, decisions driven by politics or local protectionism, rules that allow the tribunals to ignore the law/facts and to base decisions on equitable grounds or ‘fairness’, and lack of effective tools for interim relief.” Read on>>

Yearlong Crackdown on Economic Crimes in China’s Guangdong Province Underscores Need for Corporate Compliance (Bryan Cave):

“Chinese media sources report that more than 1,000 officials across Guangdong province in southern China have been investigated for corruption as part of a yearlong crackdown on economic crimes, including commercial bribery. In Shenzhen, across the border from Hong Kong, authorities have arrested 146 party officials and civil servants since February for corrupt activities involving RMB 150 million (more than US$30 million).” Read on>>

China 20/20: Legal & Regulatory Developments – July 2012 (Orrick, Herrington & Sutcliffe LLP):

“On June 7, 2012, the State Internet Information Office and the Ministry of Industry and Information Technology jointly published the draft amendment to the Measures for the Administration of Internet Information Services… According to the draft amendment, service providers must obtain a license from the relevant Internet information content administration department in order to engage in online forum, blog, micro-blog or information searching services.” Read on>>

Trade & Manufacturing Alert – July 2012 (King & Spalding):

“The 12th Five-Year National Plan clarifies the priority development directions and tasks of the seven industries. In particular, the energy-saving and environment protection industry should (1) make breakthroughs in efficient energy utilization, pollutant prevention and safe disposal, and resources recycling technologies; (2) develop new and efficient energy saving, advanced environment protection, and resources recycling equipment and products; and (3) promote clean production and low carbon technologies.” Read on>>

SAFE’s New Rule on Domestic Individuals’ Participation in Equity Incentive Schemes of Offshore Listed Companies (Morrison & Foerster LLP):

“China strictly regulates cross-border investments including both inbound and outbound investments. The laws and regulations promulgated by the PRC government concerning inbound investments from foreign investors since China adopted its open-door policy to foreign investments in early 1980s have been evolved into a more developed and established statutory regime to date, acclaimed internationally as a great contributor to China’s economic success for the past 30 years.” Read on>>

PRC Companies Can Now Tap Hong Kong’s Public Debt Market Via ‘Dim Sum Bonds’ (Pillsbury Winthrop Shaw Pittman LLP):
“Since the second half of 2007, China’s financial institutions have been allowed to issue RMB-denominated bonds in Hong Kong (so-called ‘Dim Sum Bonds’). No mechanism existed for non-financial PRC institutions to offer these bonds directly. Therefore, institutions generally offered Dim Sum Bonds through their Hong Kong or other offshore subsidiaries.” Read on>>

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