Clean Development Mechanism: Untapped Potential
Under the United Nation's Framework Convention on Climate Change (UNFCCC), “developed country Parties should provide new and additional financial resources to support the transfer of technology and take all practical steps to promote, facilitate and finance the transfer of, or access to, environmentally sound technologies and know how to developing country Parties.” However, a UNFCCC report revealed that a large portion of developing nations do not take advantage of CDM projects to import technology.
As long as technology transfer from developed countries is a convenient low-cost means for China to reduce GHG emissions, why doesn't China have more CDM projects that involve technology transfer? [continue reading to see our analysis]
Wang Rui, Partner, International Trade
Continue Reading...Foreign Exchange Capital: Restrictions on Domestic Investment
Recently, the Chinese government issued a couple of new laws and regulations to curb overseas “hot” money and strengthen the administration of foreign exchange. On August 5, 2008, the State Council amended and promulgated the Regulations on Foreign Exchange Administration of the People's Republic of China which requires that foreign exchange and the fund for settlement in a capital account should be used as approved by relevant approval authorities. On August 29, 2008, the Circular of Relevant Implementation Questions Concerning the Improvement of Administration of Payment and Settlement of Foreign Exchange Capital of Foreign Invested Enterprises (the “Circular”) was then issued by the State Administration of Foreign Exchange (“SAFE”), according to which the RMB settled from the capital account of a foreign invested enterprise (“FIE”) should be used in accordance with the business scope approved by the governmental agencies and may not be used to make equity investments in China. This means foreign investors cannot directly make use of the foreign exchange in their capital account to invest in China, which is expected to have a major impact on domestic re-investment by FIEs.
In the past, a number of foreign investors used to invest in China by first establishing a FIE and then using the FIE as an investment arm to re-invest in China. Please note such an FIE referred to here is not the so-called “foreign funded investment company” (“Investment Company”) which is a special entity set up by foreign investors to mainly engage in direct investment in China. Rather it refers to such a FIE whose business scope may include production, retail, wholesale of products, consulting or technology services or other businesses rather than “investment” as permitted under PRC law.
Interestingly, the item of “investment” is normally not allowed to be included in the business scope of a FIE by approval authorities like the Ministry of Commerce (“MOFCOM”) and corporate registration bodies like the State Administration for Industry and Commerce (“SAIC”) along with their local counterparts. However, the Provisional Regulations on Investment within China by Foreign Invested Enterprises which was promulgated dated July 25, 2000 jointly by MOFCOM and SAIC does grant a FIE a qualification to re-invest in China. In practice, a FIE is permitted to conduct investment in China e.g. acquiring the equity interests of other FIE(s) or domestic company(s), but a FIE is required to use RMB to make such investment under the current PRC law. Thus a question arises: if a FIE has no or cannot obtain sufficient amount of RMB by whatever lawful means, could it be allowed to convert funds into RMB from its capital account for the purpose of investment? [continue reading to find out the current policy]
Huang Caihua, Associate, FDI
Continue Reading...New York: Current Trends Lead to Overseas Expansion
In the first half of 2008, overseas investment of Chinese companies has more than doubled from last year. This year, Chinese outbound investment has already reached 16 billion euros (nearly $23 billion) according to Bloomberg.
Correspondingly, we have seen an increasing number of our domestic Chinese clients invest abroad for both market seeking and resource seeking opportunities. We expect this trend to accelerate in the coming years as outbound rules continue to be relaxed and domestic companies shift their strategies to compete globally.
This trend, coupled with close working relationships with a significant number of American companies and law firms have lead King & Wood to establish its New York office opening September 9th, 2008. As a firm with an extensive client list in the banking industry, our location on Madison Avenue will serve as serve as a local presence for many of our American clients and also provide international support for our clients at home. Since 2001, King & Wood has made a series of international moves such as San Francisco, Hong Kong, Tokyo and most recently with our Sydney Strategic Alliance at the end of 2007.
For years we have seen U.S. and European law firms expand into China. As the global clout of Chinese companies grows, we will see continue to see Chinese law firms expand with them.
Shanghai Encourages Regional Headquarters
A few years ago, it seemed that
By Mark Schaub, Partner Shanghai Office of King & Wood，FDI
Continue Reading...Renewable Projects in Hong Kong may Lead to Additional Reward?
1.Introduction
On 6 June 2008, the Government of the Hong Kong Special Administrative Region (the “HKSAR”) announced the “Arrangements for the Implementation of Clean Development Mechanism (“CDM”) Projects in the Hong Kong Special Administrative Region” (the “Implementation Arrangements”). The Implementation Arrangements have been developed following consultations between the National Development and Reform Commission (“NDRC”) of
By Andrew Tan
Partner Arculli Fong & Ng (in association with King & Wood, PRC Lawyers)
Anti-ambush Marketing Measures for the Beijing 2008 Olympic Games
As consideration for obtaining Olympic marketing rights, the official sponsors have contributed considerable funds and goods to the Olympic Games. The strong support of sponsors is crucial to the successful staging of every edition of the Olympic Games. As such, the International Olympic Committee (“IOC”) views the protection of the sponsors’ rights as an important aspect in the preparation and organization of the Olympic Games. The Government of the Beijing Municipality and Beijing Organizing Committee for the Games of the XXIX Olympiad (“BOCOG”) also solemnly have covenanted in the Host City Contract and the Marketing Plan that they will take all necessary measures to prevent and combat ambush marketing in any form...
By
Chinese Law on Product Recalls- A Work in Progress
Recent issues regarding Chinese products have focused on the gaps remaining in the law. However, the gaps are quickly closing. Product safety has become a top priority for China. Chinese authorities have streamlined the legislative process for product recalls at all levels...
By Li Yongmei King & Wood’s Domestic Litigation & Arbitration Practice
Continue Reading...Why No Poison Pill in China?
Last month, Mr. Martin Lipton, of Wachtell, Lipton, Rosen & Katz, honored King & Wood with a speech on the implications of the “poison pill” in legal practice. Mr. Lipton is noted for his innovative "rights plan", a series of defensive measures taken by the board of a target company in a hostile takeover. The “rights plan” is meant to ward off hostile offers that substantially underestimate the value of the target's shares. The rights plan was later referred to as the "poison pill" by Wall Street bankers whose attempts at hostile takeover below fair value were frequently frustrated by the "rights plan."
Mr. Lipton's speech inspired me to ponder the question of how defensive measures work in China's corporate governance. I then googled the word "poison pill" and "company" in Chinese, but found no instances of companies utilizing the poison pill within China. So why is there no poison pill in China?
By Li Wenbo King & Wood’s International Trade Group
Statute of Limitations Extended for Commencing Arbitration in Labor Disputes
By Xu Xiaodan, King & Wood's International Litigation & Arbitration Group. Continue Reading...
Tax Relief Policy in Post-Disaster Areas
The massive May 12, 2008 Wenchuan earthquake caused heavy property damage and saddening losses of life in the Chinese Providences of Sichuan, Shanxi, and Gansu. In order to support the earthquake relief and reconstruction effort, the Ministry of Finance and State Administration of Taxation has implemented post disaster tax deductions and exemptions. These relief measures impact affected individuals or enterprises, and also donations toward the relief effort. The most significant tax relief measures were announced in the “Notice on Implementing the Earthquake Relief and Reconstruction Tax Policies”(Notice 62). The taxes covered in the Notice included: enterprise income tax, individual income tax, house property tax, resource tax, stamp tax, urban land use tax, vehicle and vessel use tax, import tax.
By Zhang Yu, Wang Xiujuan, Chengdu Office of King & Wood, FDI
Continue Reading...New Technology Import Regulations May Cause Headaches for the Unprepared
The measures are a mix of devolution (i.e. the regulations delegate responsibility down to regional Bureaux of Commerce); increased regulation and supervision on the one hand but relaxation in other regards.
By Mark Schaub, Partner Shanghai Office of King & Wood，FDI
Continue Reading...
Calculating Late Payment Breach Damages
Unclear provisions have frequently caused liability disputes for late payment damages. Clearly a non-breaching party may claim damages for late payment. Yet, opposing parties have often advanced differing methods for calculating damages depending on which method provides a more favorable outcome. In the past, courts also proposed differing principles for deciding cases. This lack of uniformity often led to confusion.
By Cheng Shigang, Associate in King & Wood's Domestic Litigation and Arbitration Group.
New Technology Import Regulations May Cause Headaches for the Unprepared
Two sets of new measures have been issued in June 2008 (namely Measures for the Administration of Prohibited and Restricted Technology Import and Measures for the Administration of Import and Export Contracts Registration) which are likely to have a material, practical affect upon technology licenses and transfers to and from
The measures are a mix of devolution (i.e. the regulations delegate responsibility down to regional Bureaux of Commerce); increased regulation and supervision on the one hand but relaxation in other regards.
By Mark Schaub, Partner
Continue Reading...Reading the Tea Leaves: Changes to Foreign Investment Catalogue
Despite 30 years of opening up, actual Chinese government policy remains opaque. Although not as incomprehensible to the outsider as Kremlin watching was in the Cold War there are still few opportunities to really grasp what type of foreign investment is actually in favor at any given time. Circular 57, also known as Catalogue for the Guidance of Foreign Investment Industries (“Catalogue”) was overhauled late last year and does provide some hints in this regard.
More than anything else the Catalogue shows increased regulation as the number of industries subject to specific restrictions or encouragement has been increased since the 2004 version (i.e. encouraged category now has 351 subjects compared to
Naturally there are winners and losers.
Some winners include 1) environmentally friendly industries; 2) some forms of media (restrictions on foreign investment in sports, entertainment, radio and television program production have been loosened from prohibited to restricted); 3) telecommunications (maximum foreign share raised from 35% to 49%).
Some losers include: 1) heavily polluting manufacturing (in particular batteries have been hit hard); 2) internet news and services are prohibited (although this may have been more a clarification than a change of existing policy); 3) foreign activities in real estate (due to, a possibly misguided, assumption that foreign investment is driving real estate prices ever higher).
Naturally the Catalogue is only one part of the picture. Investors will also need to examine what operational licenses and approvals are required and different localities also have different local policies. Despite this the Catalogue remains a useful initial tool for investors to gauge the likely attitude of the approval authorities to their project.
By Mark Schaub, Partner Shanghai Office of King & Wood，FDI
