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November 10, 2006

Guess What? New Rules!

The Wall Street Journal reports on new Chinese banking regulations that will further delay Citigroup's China strategy.

The rules will "strengthen and improve the supervision and management of foreign banks and promote the stable operation of the banking sector," the State Council said in a statement Wednesday.

One would think, given the state of the Chinese banking system, that foreign banks require less supervision. But China can be -- how can I put it nicely? -- counter-intuitive.

Posted by Richard at 2:02 PM | Comments (0)

November 8, 2006

The Cost of Free Trade in China: Corruption and the FCPA



Posted by Richard at 4:07 PM | Comments (0)

The Cost of "Free Trade" in China: Corruption and the FCPA

Bloomberg reports that a Beijing court has fingered IBM in the China Construction Bank corruption prosecution of Zhang En-zhao, the bank's former Chairman and once winner of an"Economic Person of the Year" award. Zhang is now the Person of 15 Years, the length of his sentence.

Documents issued by the court state that the company paid an agent US$225,000, which sum was channeled to Zhang. (No, no, we're not talking about Wang Xue-bing, Zhang's predecessor, who was also forced to resign and convicted of bribery. This is the the new guy. Well, not any longer.) We must note, however, in all fairness, that the mere inclusion of this information in a Chinese court document does not necessarily make it true. Regardless, it is now in the public realm.

The idea that one must buy favor permeates Chinese society, even down to the lunch offered by a family member asking for assistance. But bribery and the Foreign Corrupt Practices Act do not mix well. Since most commercial transactions can not be accomplished in China without the former, in one form or another, the latter tends to suffer when sales figures must be met. As to the actual payment of moneys, most corporations in China who fork it over do not do so directly, but instead make use of third (and fourth) parties -- often foist upon them by potential customers, but sometimes selected. Payments may be made within China or even overseas through a wide range of entities that may help mask the payment. One can be as sure of crisp US $100 bills in a satchel as often as numbered Swiss accounts.

An important note: the use of agents does not necessarily shield the American executive from prosecution. Actual knowledge that a payment or a promise to pay will be forwarded to an official is not required: constructive knowledge -- you "should have" known, given the facts -- can make the exec just as liable.

And is it even debatable that Zhang is an official for the purposes of the FCPA, when the CCB is a quasi-governmental organ of the state of China? The big spender [click this link if you want a good time] in China remains the state. How does the exec defend foregoing a big sale to a quasi-governmental organ and a payment to its key decision-maker in a market your headquarters believes will save the company?

(By the way, when senior management passes out copies of the FCPA -- with the notation in biro "read this and make sure you do not violate this law," as once happened to an American I know, it does not mean they care whether you violate the law, but just that they don't.)

The U.S. Department of Justice has grown increasingly serious about enforcement of the FCPA in recent years -- note the FIS investigation already in progress at the DOJ and in China, also stemming from the Zhang corruption case. But the acts of corporate bribery in China are so numerous, the proof for which is at best difficult to develop, that this the notation in Chinese court documents is an obvious anomaly. (Then again, when all the facts are known, it may be as much of a slam-dunk as might be attributed to George Tenet.) A squealer would seem to be the more common route to an investigation.

If you have not seriously considered it before, now is the time to give serious consideration to the value of risky behavior in light of the demands presented by the FCPA, the DOJ and, now, it appears, the Chinese government.

Posted by Richard at 1:50 PM | Comments (0)

November 1, 2006

The Vast Chinese Archive of Unexecuted Judgments

Click the little triangle to listen to today's post.

Posted by Richard at 8:41 PM | Comments (0)

The Vast Chinese Archive of Unexecuted Judgments

Don Clarke's, Chinese Law Prof Blog, heartily recommended for attorneys with an interest in China, takes note that 800,000 judgments -- the number given by Supreme People's Court president Xiao Yang -- have gone unexecuted.

While Don cautiously and with merit suggests that we haven't as yet the perspective to say if this is objectively good or bad, the gut tends me towards the position that it should not give much confidence in the value of a Chinese judgment.

Indeed, that a number was even publicized gives credence to the notion that unexecuted judgments have become a problem of major proportions in the eyes of the judiciary -- one need only note below the euphemistic phrase "“执行难”问题." Even granting the questionable perception of openness, supposedly fostered by government, the number 800,000, without a verifiable basis, is very likely itself under-reported.

Xiao Yang's remarks:

最高法称执行难问题未根本扭转 80余万案件积压

新闻来源：法制网 转载时间：2006-10-31

最高人民法院院长肖扬今天向十届全国人大常委会第二十四次会议作“关于开展规范司法行为专项整改报告”时说，经过一年来对执行积案的集中清理，人民群众反映强烈的“执行难”问题尚未得到根本扭转，有80余万件积压案件未能执行。

　　肖扬说，为缓解“执行难”问题，在专项整改中，各级法院采取多种措施：严格执行条件，解决暂缓执行、中止执行、终结执行、查封案外人财产和超标的查封的问题。此外，加强执行管理，将选定评估和拍卖机构的环节作为整改的重点，切断拍卖过程中不正当的利益联系，彻底杜绝拍卖中的暗箱操作；建立执行款专用账户，防止个别法院违法使用、截留、挪用、侵吞、私分执行款物。强化执行公开，解决消极执行、拖延执行和执行人员的违法违纪问题。

　　肖扬表示，全国法院执行案件信息管理系统正逐步扩大试点范围，力争明年起全面实施。通过互联网公开执行信息，加强与有关部门配合，对不履行生效裁判的被执行人实行财产申报、强制审计、限制出境、公布被执行人名单等措施，促使被执行人自动履行义务。

Posted by Richard at 7:46 PM | Comments (1)

October 27, 2006

ICBC and the World's Biggest Swinging Bank Award

The ICBC IPO and the "UTD" Syndrome. Click the little triangle to hear today's post. (If you are reading this in an RSS viewer and the podcast does not display, you may hear it at www.asiabizblog.com or on iTunes in the business podcast section.)

Posted by Richard at 3:42 PM | Comments (0)

ICBC and the World's Biggest Swinging Bank Award

The IPO and the "UTD" Syndrome

ICBC, one of China's big four state banks, has now privatized. Or so it might be presumed, as the bank has issued stock; the extent to which the bank is no longer subject to state direction remains a significant question.

At a minimum, ICBC can now claim the World's Biggest Swinging Bank Award with an IPO of gargantuan proportions. (Investment bankers, gasping with dropped jaws, raise their heads in an expression of collective awe.)

The stock opened up 17-plus percent. But we think it more than likely that the UTD (Up, Then Down) Syndrome, a classic symptom of the chronic illness of Chinese stock markets, will shortly take effect and the stock will plum the depths of many an investor wallet. We'll keep an eye on the share price over time -- not because we have money in it (if we'd had, we would have been out of it by now.), but simply for the vicarious thrill of the roller-coaster ride.

Posted by Richard at 1:28 PM | Comments (0)

October 23, 2006

Chinese Patent Owners in U.S. Courts

This FT article avers that Chinese have begun to "aggressively" protect their patent rights in the U.S. Unfortunately, the writer does not attempt to quantify the assertion, giving perspective through context, but relies entirely on a few quotes from American lawyers whose firms would very much like to drive that business.

The mere fact that Chinese make use of the American court system isn't news. One remembers stories of a similar ilk about Japan and Taiwan in the 70s and 80s. Of more importance is the extent to which the Chinese have become "aggressive" pursuers of patent rights -- if indeed they have -- and not in comparison to a past devoid of such legal behavior, but to similar high-growth economies in their hey-day, such as Japan and the little Tigers.

Posted by Richard at 1:05 PM | Comments (1)

October 13, 2006

IBM Moves Division HQ to Shenzhen

The New York Times reports that IBM has moved its procurement division from Somers, NY to Shenzhen.

Just 20 years ago, IBM had only a handful of staff resident in China, not buying, but selling PCs made elsewhere in Asia and the U.S. Yes, even in the U.S.

Tempus fugits. One is only surprised how long it took IBM to place its most senior procurement manager and his staff nearest its suppliers.

Posted by Richard at 12:08 PM | Comments (0)

September 19, 2006

Event: Bilateral Investment Treaties and Political Risk Insurance

The Federation of International Trade Associations and Dutch company Omni Bridgeway will present a free event in Manhattan:

Date: 28th September 2006
Time: 5:00 PM until 7.30 PM
Location: AIG - 70 Pine Street, 60th floor, New York, NY
(The seminar will be followed by cocktails & hors d’oeuvres.)

For further information, visit this page on the Omni Bridgeway website.

Posted by Richard at 5:13 PM | Comments (0)

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