The reasons why and the implications of falling foul of Chinese regulations
By Eunice Ku
Apr. 6 – The State Administration of Industry and Commerce (SAIC) is the national governmental organization directly under the State Council that coordinates local Administrations of Industry and Commerce (AICs).
Among the many SAIC and AIC functions and responsibilities, those highly relevant to the foreign investor include:
The “AIC blacklist” is part of an enterprise “credibility supervision information system” shared between AIC bureaus, but not made available to the public.
Specifically, the list categorizes enterprises into four categories (A, B, C, D) based on their creditability. If your name is listed in a key position of a company in categories B to D of this list, this may inhibit or prevent you from participating in a key position in new FIEs in the future.
Furthermore, while the directly relevant AIC policy does not state consequences for individuals beyond the legal representative, it is worth noting that during company establishment, the names of all people in key positions of an enterprise are registered with the AIC. Many people do not even know that their name is on the blacklist before applying to register a new FIE.
This article was taken from the April issue of China Briefing Magazine, titled “The China Manager’s Handbook.” Stories of expats having their name added to the Administration of Industry and Commerce “blacklist,” or being “trapped in China” for company legal proceedings, encourage a careful consideration of key positions in an FIE. This issue of China Briefing Magazine aims to shed a little light on this topic. “The China Manager’s Handbook” is temporarily available as a complimentary PDF download this month on the Asia Briefing Bookstore.
Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China, Hong Kong, India, Singapore and Vietnam. For further information on the risks and responsibilities you have as a foreign manager in China, please email email@example.com, visit our web site at www.dezshira.com, or download our brochure here.
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It should be noted that blacklisting can be rectified, however investors that have found themselves in such positions need to front up with the various Government departments concerned and engage in discussions to repair the damage. Typically there are usually tax and related financial issues that need to be dealt with; this of course requires additional financial commitment to China and to the specific business. Generally speaking the Chinese governments are pragmatic and will help the business re-establish itself if the investors are willing to play by the rules. Where this becomes a matter of a total write off and a decision to re-invest is a matter for the foreign investor to consider, but generally speaking being blacklisted in China, unless the matters in hand can be resolved, spells the end of an individuals China career.
so the bottom line is: no matter how bad you screw over the little guy, you can weasel your way back in if you give the right bigwigs sophisticated bribes,
Communism at Work
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