Majority equity ownership in China does not always equate to majority control
Op-Ed Commentary: Chris Devonshire-Ellis
Nov. 13 – As the proposed Apollo-Cooper Tires M&A deal continues to go south amid accusations and lawsuits, lessons can be learned from this New York-brokered deal about the perils of ignoring even minority-owned assets based in China.
Cooper, who own 65 percent of a joint venture with state-owned Chengshan Group in China, have been the subject of a US$2.5 billion takeover by Apollo Tires of India. Lessons about structuring this deal, and the importance of getting both political and operational due diligence into M&As, are highlighted by the manner in which this particular acquisition has run into problems. Continue reading
Nov. 11 – The Third Plenary Session (“Third Plenum”) of the 18th Central Committee of the Communist Party of China (CPC) is currently being held in Beijing from November 9th to November 12th. To understand the significance of the Third Plenum – the first since President Xi Jinping took office – it is necessary to understand the historical significance of the CPC, the Central Committee, and Third Plenary Sessions. Continue reading
Nov. 8 – Foreign-invested companies in China will see an easing of company registration requirements based on the principle of national treatment, according to Zhang Mao, head of China’s State Administration of Industry and Commerce (SAIC).
Zhang reiterated China’s new policies to ease company registration requirements at a press conference held on Thursday, and further clarified that those policies also apply to foreign businesses.
“Based on the national treatment principle, foreign companies are entitled to the same policies as their Chinese counterparts enjoy, meaning, when the Chinese government eases the setting-up requirements for Chinese companies, foreign investors should receive the same treatment,” said Zhang. Continue reading
Nov. 8 – With the aim to better protect the legitimate interests and rights of consumers, China’s National People’s Congress passed the “Decision on Revising the Consumer Protection Law (Order No.7 of the President, hereinafter referred to as the ‘Decision’)” on October 25, which is the first revision to the country’s Consumer Protection Law since its adoption in 1993. The Decision is scheduled to take effect on March 15, 2014 and has improved the current Consumer Protection Law in the following areas:
- Regulating the e-commerce industry;
- Strengthening the joint liabilities of false advertisement publishers and e-trade platforms;
- Placing the burden of proof on service providers in the event of a dispute;
- Imposing higher compensation;
- Banning unauthorized disclosures of consumers’ personal information;
- Clarifying the role of consumer associations; and
- Establishing a credit file to record illegal acts.
Detailed information can be found below. Continue reading
Op-Ed Commentary: Chris Devonshire-Ellis
Nov. 7 – Over the past three weeks in the United States I have been meeting with many businesspeople, lawyers, VC firms and hedge funds, and when it comes to China, the first questions I’m asked almost always concern reform in China – specifically over the opening up of China’s capital account. Such a move, if it happened, would permit free flow of the RMB into and out of China and introduce a currency fully convertible on the world’s trading floors.
The reason this has become a hot topic recently has been to do with recent announcements concerning the Shanghai Free Trade Zone, and apparent moves by China to “liberalize the currency” and introduce “financial reforms.” Free trading of the RMB in the Shanghai FTZ was also announced. Yet behind the intention, little if any infrastructure has been put in place to see these announcements come to fruition, and no implementing rules have been introduced to explain how these reforms would actually work. Continue reading
Nov. 5 – The Development Research Center (DRC) of China’s State Council, which is known as the official think tank of China, recently released the “383 Scheme” for the Third Plenary Session of the 18th Central Committee of the Communist Party of China (hereinafter referred to the “Third Plenum”). The Third Plenary Session of each round of Communist Party’s Central Committee usually determines the economic theme in the next few years. The Third Plenum will be held on November 9th to November 12th in Beijing.
The so-called “383 Scheme” is a proposed roadmap for the next round of China’s reform after the Third Plenum and is widely expected to serve as a blueprint for the final document of the meeting. It refers to “a three-in-one reform principle in eight key reform areas, with three correlated reform combinations,” which puts an emphasis on an economic structure ruled by the law. Continue reading
Nov. 4 – The new issue of China Briefing Magazine, titled Social Insurance in China, is out now and will be temporarily available as a complimentary PDF download on the Asia Briefing Bookstore throughout the month of November.
For foreigners contemplating setting up in China, one of the key aspects to understand is the costs of sustaining staff in the country. To do so, it is necessary to become familiar with China’s social insurance system. The system is complex because the vastness of the country means that local implementation of the rules and regulations varies greatly, giving rise to differing contribution rates as well as difficulties in transferring social insurance accounts across regions. Continue reading
Nov. 4 – China’s State Council released the “Opinions on Promoting the Stable Growth of Imports and Exports and Adjusting the Structure Thereof (guobanfa  No.83, hereinafter referred to as the ‘Opinions’)” on July 23, which put forward several measures to promote the stable growth of the country’s imports and exports. Detailed information can be found below. Continue reading