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Doing Business in China: Some Key Differences
Carl B. Cheng October 27, 2017
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Doing Business in China: Some Key Differences Legal Developments Relevant to Austrian Companies Question and Answer Session
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Doing Business in China: Some Key Differences
Business Activities
Corporate Vehicles
Approval Process
Protecting Intellectual Property Rights
Land
Labor
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Business Activities
Foreign Investment Guidance Catalog
Business Scope Issues
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Business Scope
Design, development of computer software, internet technology, providing relevant technical consultation, sales of self-produced products (those subject to administrative licensing may only be conducted with the necessary licenses).
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Corporate Vehicles
Wholly foreign owned enterprises
Joint Ventures
Companies limited by shares / Limited liability companies
Partnership Enterprises
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Wholly Foreign Owned Enterprises
Foreign Investor
Wholly Foreign Owned Enterprise
100% equity
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Disadvantages
Limitations on foreign control?
Commercial necessity for a Chinese partner?
Advantages
Limited liability entity
Full control over Board of Directors
Full control over management
Full control over personnel
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Equity Joint Ventures
Foreign Investor
Chinese Party
Equity JV
x% equity y% equity
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Advantages
Limited liability entity
May satisfy limitations on foreign control
May satisfy commercial requirements for a Chinese partner
Disadvantages
Lack of full control over:
Board of Directors
Management
Personnel
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Cooperative Joint Ventures
Foreign Investor
Chinese Party
Cooperative JV
x% cooperative contribution
y% cooperative contribution
CHINESE PARTY
One director
Fixed payment or preferential profit payment
Distribution on liquidation
FOREIGN PARTY
Management control
Profits less payment to Chinese Party
Distribution on liquidation
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Advantages
Limited liability entity
Possibly:
Greater control over Board of Directors
Greater control over management
Greater control over personnel
Disadvantages
Problems of a Joint Venture
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Matters requiring unanimous consent
• Amendment of the Articles
• Change in registered capital
• Dissolution
• Mortgage of assets
• Merger, division or other change in form
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Company limited by shares / Limited liability company
Company
Shareholders
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State Administration
of Industry and Commerce
Company
Ministry of Commerce
Company
Investor
Austria
Commercial Register
GmbH
Domestic Investor
China
SAIC
Foreign Investor
Approval Process
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Protecting Intellectual Property Rights
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Allocation of manufacturing capability
Product selection
Blackbox
De-commoditize
Suppliers
Customers
Workers
Strategic
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Land
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Labor
NOT employment at will
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Legal Developments
Foreign Investment: Approval to Filing
Electric Vehicles
Antitrust
Anti-corruption
Cybersecurity
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State Administration
of Industry and Commerce
Company
Ministry of Commerce
Company
Investor
Austria
Commercial Register
GmbH
Domestic Investor
China
SAIC
Foreign Investor
Foreign Investment: Approval to Filing
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Electric Vehicles
WFOE
Free Trade Zones
Vehicles subject to import duty of 25%
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Antitrust
Price Fixing
Resale Price Maintenance
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Anti-Corruption
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Criminal Law
Anti-Unfair Competition Law
Commercial Bribery
Reasonable and customary bona fide business hospitality
Seeking illegitimate benefits
Properly recorded on the books
Government Officials
Cash or equivalent in the context of public service activities
Gifts which influence impartiality
Entertainment with corrupt intent
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Cybersecurity Law Network Operators – own or manage IT networks
Checklist of technical security measures
Require public users to provide true identity and retention of web logs
Restrictions on transmissions of sensitive or inappropriate information
Restrictions on cross-border transfer of personal information and
important data (including cloud uploading)
Consent
Self-Assessment
Government Assessment
Questions and Answers
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Carl B. Cheng E-mail: [email protected] Phone: +8621 6061 3008 Ting Gao E-mail: [email protected] Phone: +8621 6061 3677 Xuezhong Lu E-mail: [email protected] Phone: +8621 6061 3661 Level 6, One IFC No. 8 Century Avenue, Pudong Shanghai 200120, PRC
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