Fly the friendly skies
September 9, 2010 by Frank
For those of us who have flown domestically in China, the first time is certainly an unnerving experience. The boarding process can be so unsettling as first time fliers have absolutely no idea what to do and attempt to jam all kinds of fruits and vegetables and oversized luggage (and in the early days live animals) into the overhead compartment. Combine the shouting throughout the cabin, the inevitable delays and the cost saving efforts such as not turning on the a.c. until they are ready to go and it can be a bit uncomfortable. Combine this with the mayhem that occurs once the wheels touch down – and I mean once they touch down – with passengers getting up and scrambling for their belongings in the overhead compartment and trying to rush up the aisle just so that they can wait and it might just discourage the less than patient from travelling domestically. That being said, I have always arrived – eventually – at my intended destination and now learn to get myself in a buddha assisted trance so that i don’t totally blow my top at the farmer sitting next to me attempting to dislodge a loogee from the deep part of his chest. I have also learned to try and only fly Air China, the State owned airline, as their delays are minimal (I presume because they are the SOE that they get priority to take off and land and the SOE owned airports) and their staff, like wily old ranch hands, seem to do a little better job of managing the stampedes.
China has seemingly safe skies and since I have been coming here I have only heard of one fatal accident which was recently with Henan airlines. I would guess that comparatively to other developed and developing nations, their safety record is overall very good. So this below article from the China Daily is not so much about safety and the results of pilots who faked their credentials, it is more about what is possible here in the Jungle. I find it hard to believe that in an industry that must be heavily regulated for obvious safety reasons that this is even remotely possible. But it is. Remember that. But it is and it goes on all of the time, especially in the business world. While the allure of China is tremendous and it is and will be the greatest economy in the world in the next 20 years, it is still developing and at times the regulatory and legal framework hasn’t caught up to the demands for safety, compliance and rule of law. (Note: that’s a nice way of putting it since I do spend a great deal of time here and don’t want to be too critical)
This is why I advise my clients to conduct proper due diligence. China isn’t Texas where you can shake hands with your neighbor and do a business deal and it’s not the movies where you can slice your palm or spit in it and exchange blood or fluids to seal a deal. You must do your homework, know who you are dealing with, do not trust anyone (even pilots can fake their credentials) and have contracts and legal advisement. What about Chinese lawyers who fake their credentials, is this possible too?
On a final note, while it has not been widely reported in the English language media, word on the street has it that many of the pilots were from the fledgling and bankrupt Shenzhen Airlines which was recently purchased by Air China. I don’t fly them and haven’t for a long time as they are always delayed and perpetually terrible.
Hope you do your due diligence before taking to the friendly skies. The article below with my comments for your amusement.
http://www.chinadaily.com.cn/china/2010-09/09/content_11277454.htm
Pilots’ fake records confirmed
(China Daily)
Updated: 2010-09-09 08:20
BEIJING – The Civil Aviation Administration of China (CAAC) said on Wednesday that 192 commercial pilots were found in 2008 to have falsified their flying records. Your kidding? Pilots falsifying records? People who are responsible for our lives? No way!
The investigation into the qualification of pilots was conducted after the CAAC found pilots of one airline, which it did not disclose, had falsified resumes. I wonder which airline that is and I wonder why they are being protected (because they are now owned by the SOE).
Measures taken afterwards included revoking licenses and offering compulsory training classes to pilots who were found to have falsified their resumes. Glad that training was compulsory – after the fact. They probably are already pretty good at flying and don’t even need the training.
Those with faked records returned to work after they made up deficiencies in their flying histories, the statement said. ”The qualification of pilots is always the focus of our work,” it said. That’s good to know.
The statement was made after safety concerns over civil aviation were sparked nationwide, as the Shanghai-based China Business News cited an administration source saying that some 200 commercial pilots have falsified flying histories.
The report said that Shenzhen Airlines had 103 of the pilots with fake work histories on the payroll. Oops, the cat is out of the bag.
Shenzhen Airlines denied knowing about it, and the CAAC statement did not confirm the report either. This is typical here, when faced with the truth deny so you won’t lose face.
Shenzhen Airlines is the parent company of Henan Airlines, which owned a plane that crashed in Yichun in Heilongjiang province on Aug 24. A total of 42 people were killed and 54 injured. The investigation into the 200 pilots with fake credentials was released at a teleconference held by the CAAC to warn the industry to take lessons from the crash.
A spokesperson with the CAAC said that a safety overhaul is being carried out in the country’s air transport industry, including investigating the qualification of commercial pilots. “But so far this time, we have not found any pilot with a falsified flying record,” the spokesperson said. That’s good, we trust you CAAC and will get right back up there in the air.
Industry insiders said that the rapid expansion of China’s civil aviation requires more commercial pilots, and airline companies turned a blind eye on the fake records since they are happy to see more pilots certified by the administrative agency.
Biz in the Jungle – “pain in the ass”
August 5, 2010 by Frank
This story appeared in the Shenzhen English language newspaper earlier this week and while the story is unbelievable, unless you have lived and worked here, I thought there were parallels that could be drawn to doing business here in the jungle. It doesn’t need an introduction – my comments throughout:
From the Shenzhen Daily August 4th 2010 Page 3
“Derriere-stitching woman goes to police”
LUOHU police began investigating the case of a midwife allegedly stitched up the anus of a new mother after delivery in response to not having received a cash bribe, the Southern Metropolis Daily reported. You gotta be kidding.
The husband of the unidentified woman took the case to police, according to the Daily. Luohu police confirmed they had accepted the case and another hospital had been commissioned to inspect on the woman’s injury. The husband, identified as Chen, also said that the hospital had attempted to silence him. Really, someone with power or a little more money or some guangxi (relationships) tried to silence him, say it aint so.
The woman had claimed that the midwife, Zhang Jirong, had sutured her anus after delivering her baby at Shenzhen Phoenix Hospital after Zhang had asked for a “tip,” or a cash bribe. The case has attracted wide media attention owing to its bizarre nature. This is not bizarre after having lived here for awhile. I see it on a weekly basis with my clients who own and operate factories and businesses here and it can be a real pain in the ass.
Chen told the Daily yesterday that the hospital had asked him to sign a statement refusing media interviews, and that a director of the hospital had tried to bribe him into silence. My clients have been asked to sign confidentiality statements and agree not to talk to the media in exchange for money or supposedly increased relationships with the local government officials who are supposedly relatives of the offending party – usually employee/manager/partner factory etc………….
Chen also told the Daily that he had been harassed by an “unidentified strong man,” who had warned him to “shut his mouth.” My clients have been visited by “strong men” and they are really strong. Not the small people from the south, but, enormous men from the north wielding knifes and other implements.
Zhang denied the extortion claims to media last Thursday and claimed not to have carried out the unauthorized surgical procedure. From the Clinton school of spin – always deny and they always do, even when presented with irrefutable evidence because after they deny, they cannot admit or they will lose face. It’s a crazy place with some crazy rules.
Chen had told media that Zhang entered his wife’s ward without his knowledge to remove sutures from her anus to “destroy evidence” after the incident was exposed. This claim was denied by Zhang last Thursday. I advise all of my clients to not allow access to files, computers, financial information, client records or any other critical company information. Many of them say “but, I trusted Zhang” he was with me for 5 years and didn’t cause any problems until I didn’t give him the bonus so he could help his sick brother in Hunan.
The city’s health authority said the conclusion of an earlier examination by four medical experts was “not final,” and was just an “administrative investigation.” The City will likely stay out of this one. Smart.
Under media pressure, the health authority had sent four senior doctors to the hospital last Thursday to examine the woman.
After a 10-minute check, the director of the anorectal department at Shenzhen No. 1 People’s Hospital, Wang Dong, told reporters there was no sign that the woman’s anus had been stitched up and that she had been suffering from hemorrhoids. This is the best part of the story. Wang Dong says it was hemorrhoids, so it must be hemorrhoids! Okay story’s over, everybody go home now.
For those of you who have been on the receiving end of an anal stitching or similar act, you know the levels some of these people will go in order to extort or simply to receive vindication for some perceived wrong. (It’s not just here in the Jungle – although they seem more brazen) You might also know of the difficulty in recovering from the damage they can do and are capable of causing to your company. Best to be proactive and protect your assets, operate above the law and have clear agreements with employees and partners that define rights and obligations, and most important – don’t trust the Midwife.
Marketing Fear
June 12, 2010 by Frank
I have never liked to use fear as a means of marketing my services. Other lawyers, insurance companies, consultants – they do. I came across this article in the South China Morning Post today and it irks me when I read this or hear about lawyers frightening their clients into retaining them or paying them. While this new law coming out of England is similar to the U.S. Foreign Corrupt Practices Act and should be taken seriously, there is no need to lose sleep or be afraid that you and your company are doing the wrong things in China. Best to consult your legal advisor who will tell you when the final regs and guidance are published and then take a careful and measured approach.
| Britain’s strict bribery law may hit local firms | |||||||
| Irene Jay Liu Jun 13, 2010 |
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Britain is cracking down on corruption among British companies worldwide, and its efforts could have a far-reaching impact on Hong Kong and mainland firms. After years of legislative inaction against corporate corruption, Parliament in April passed the 2010 Bribery Act – the world’s strictest on bribery. The legislation affects not only British firms but any company that conducts any part of its business in the country, as well as those that provide services to British companies. This law is similar to the Foreign Corrupt Practices Act in the United States which not only applies to U.S. Companies but also to companies with ties in the U.S as is mentioned below. “It is a very wide net – particularly when you look at Hong Kong, with the historic British connection,” said Richard Tollan, a partner at law firm Mayer Brown JSM and a former detective inspector in Hong Kong’s commercial crime bureau. It could be a wide net as countries like England, who are broke and are at the same time trying to level the playing field for domestic firms, use laws like this to get a piece of the action without the specter of raising taxes. It also is conveniently referred to “as a very wide net” by lawyers like Mr. Tollan who often use fear to generate additional billings. “It’s a hot topic among professionals and the more astute corporates in Hong Kong,” Tollan said of the new law. “It is not unheralded – it comes in the wake of three or four years of Hong Kong attuning itself to increased answerability to long-arm overseas jurisdictions for domestic bribery.” This is even more reason to move corporate entities and headquarters to Hong Kong where they are out of the “long-arm” reach of nearly bankrupt countries like the U.K. and the U.S. Until the British law was passed, the United States had the strongest anti-corruption legislation in the world in the shape of the Foreign Corrupt Practices Act, or FCPA. It may appear to govern only US companies, but in recent years it has affected a number of non-US firms. German carmaker Daimler-Chrysler, Berlin-based Siemens and Britain’s BAE Systems have all agreed to settlements after being investigated for bribery by authorities in the US and other countries. Look for the US to increase FCPA enforcement and proceedings as another tool to collect revenue and supposedly level the playing field for domestic manufacturers. Britain’s Bribery Act has upped the ante, no longer limiting the definition of bribery to foreign officials. More significantly, the legislation creates a separate offence for a company that fails to prevent a bribe being paid for or on its behalf. “As compliance officers, and counsel, there is a positive obligation on corporates to put in place adequate procedures designed to prevent people from committing bribery,” Tollan said. I’d guess that their firm puts these procedures in place. Firms can defend themselves against bribery charges if they can show that they have “adequate procedures” in place to prevent bribery. “Suddenly, these corporates are taking a look at themselves and their policies. That’s what is causing the interest among the savvier corporates,” Tollan said. “There is [now] a positive obligation on corporates to put in place adequate procedures specifically designed to prevent people being involved in corrupt practices.” Hong Kong and mainland firms should look at their procedures, as they may find themselves subject to the British legislation, Tommy Helsby, chairman of Eurasia at global risk consulting firm Kroll, said. I think they used “procedures’, ‘in place’ and ‘adequate procedures’ more times than was necessary. A large Chinese manufacturer with a European marketing office in Britain could fall under the law’s jurisdiction, he said. Hong Kong firms that act as agents for foreign corporations wanting to source manufacturing in China should also be aware of the new law, Helsby said. I don’t believe that Chinese companies that are domiciled in the mainland are subject to foreign judgments in the U.K. “I think they should be expecting to find a lot more concern on the part of their foreign clients about how they do business. And it will become a competitive advantage to show that you have a robust compliance system on bribery. Because if I’m Marks & Spencer or Primark, a big UK purchaser of Chinese manufactured goods, I want to make sure that I’m not caught out by the actions of my agent. In my humble opinion it will be difficult to extend the obligation to the acts of independent agents, especially when there are contractual agreements between the company and agent which outline responsibility and indemnify the company against their illegal acts. “If I’m looking at two intermediaries, and one is talking about the UK anti-bribery, and another one is busy winking about `getting the job done’, I know which one I’m going to choose,” he said. Winking about getting the job done is not acceptable anymore in China and if your employees or agents tell you otherwise than you should replace them. So far, it’s unclear how much outreach has been done to spread the word among local companies in Hong Kong. The British government is expected to publish guidelines for “adequate” anti-bribery procedures. Many companies are waiting for those guidelines before moving ahead, Tollan said. But for many Hong Kong companies, anti-corruption procedures could be an entirely new concept. A survey released in April of top firms in Hong Kong, Singapore and South Korea found nearly half “failed to display any evidence of taking significant steps to counter bribery”. Experts in Responsible Investment Solutions studied anti-bribery policies of nearly 2,000 FTSE All-World Developed Index firms for the survey. A spokesman for the Hong Kong Trade Development Council, the statutory body tasked with connecting companies with opportunities in Hong Kong and on the mainland, said it had not yet issued any guidelines to local companies. “Our London office is monitoring the situation concerning the introduction of the anti-bribery bill in the UK and whether there is any possible impact on Hong Kong companies doing business with the UK,” the spokesman said. The danger of running afoul of this legislation could hurt business not only in Britain, but also in the European Union. The EU has a directive banning companies convicted of bribery from doing business with its governing body. “The potential liability of the senior executive to be sent to jail, it’s like a rifle shot,” Helsby said. “If you’re hit, you’re dead, but you have some chance of dodging the bullet. The EU procurement issue is a like an artillery barrage. The damage is much broader. The breadth of that ban could be catastrophic.” Senior executives going to jail for unknown acts of their agents or employees, not likely and it is irresponsible to use fear as a means for generating revenue, especially when prudent financial decisions and good management are what have always led foreign corporations to success in this part of the world. Is it a good idea to discuss this with your lawyer or advisor when the final regulations and guidance are published – yes, but, I wouldn’t lose any sleep worrying about going to jail. |
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Going to the Factory
May 25, 2010 by Frank
Do you remember your first visit to the factory or to the supplier or joint venture “partner”? I saw this article in the Wall Street Journal this morning and the picture of Hillary Clinton smiling like a school girl made me laugh and remember my first time. Everyone was smiling. In fact, the Chinese are professional smilers (having learned this tactic from the Taiwanese – who are really Chinese). They smiled when they met you, they smiled at that long drawn out lunch with the food that was unrecognizable and not very edible. They smiled in the hot or freezing cold conference room after the long drawn out lunch and during the factory tour. They smiled and shook our hands vigorously on the way out of the factory as they were saying: “China will continue to steadily push forward reform of the renminbi exchange rate formation mechanism in a self-initiated, controllable and gradual manner.”
Oops, I must have remembered incorrectly, because that is a direct quote from the below article. But, it sounds just like the wonderful things that factory owners, suppliers, and “partners” often say to my clients, many of whom need a few more years of disappointment in China before they take off the rose colored glasses and get down to brass tacks.
I have an opinion on the yuan revaluation issue and it isn’t favorable to the U.S., but that is for a different post in a different lifetime. The picture below of Hillary and Geithner smiling with their Chinese hosts just reminded me of how clever and resilient the Chinese are in getting their way in business. Hopefully as you read the below article you might see the same rhetoric and realize it is very similar to what they use in their business practices and it will ultimately prevent you from having to call me. My comments are included.
China’s Hu Pledges Exchange-Rate Reform
U.S. Welcomes President’s Reference to Currency Regime as Beijing and Washington Seek Common Ground in Discussions
By ANDREW BATSON – Wall Street Journal 5-25-2010
BEIJING—Chinese President Hu Jintao opened two days of talks between U.S. and Chinese officials in Beijing by repeating a pledge to continue reform of his country’s exchange-rate regime, an assurance that was welcomed by the U.S. as the two sides sought to display common ground on contentious issues from trade and investment to nuclear proliferation.
U.S.-China Talks
Both countries have in recent months worked hard to repair a deterioration in ties, and Mr. Hu said he hoped the U.S.-China Strategic and Economic Dialogue would help “build a foundation of mutual trust” between nations often at odds despite being linked by trade and large global responsibilities.
He appeared to go out of his way to address U.S. concerns about China’s tightly controlled currency, saying toward the end of his speech that “China will continue to steadily push forward reform of the renminbi exchange-rate formation mechanism in a self-initiated, controllable and gradual manner.”
Mr. Hu’s comment repeated word for word China’s standard language on the issue, but his mention of the exchange rate—which many U.S. lawmakers think China keeps unfairly low to support its exports—stood out in a speech that was otherwise long on generalities and short on specifics. Watch out for generalities and non specificity. That’s why we have contracts. For instance, Mr. Hu didn’t mention international tensions with Iran or North Korea, which Secretary of State Hillary Clinton had singled out earlier as areas where the U.S. and China need to cooperate diplomatically.
This is the one I’m talking about.
The U.S. responded positively to Mr. Hu’s comments, continuing its recent efforts to keep the dispute over the currency from poisoning the broader relationship between the two countries. “We welcome the fact that China’s leaders have recognized that reform of the exchange rate is an important part of their broader reform agenda,” Treasury Secretary Timothy Geithner said in a speech after Mr. Hu’s remarks. But what did it get you?
I think you can see in this picture that he knows he didn’t get anything and has to go back on the same plane with Hillary and then explain to the President how he once again was stonewalled by the Chinese, while Hillary is still happy because her and Bill have become incredibly rich since leaving the White House.
Both sides notably refrained from lecturing or sharp demands during their public comments Monday, and were careful to put their disputes in the context of an economic relationship they said has become a crucial anchor of the global economy. “Our two economies have become inseparable,” said Chinese Vice Premier Wang Qishan.
Trade is a main focus of the U.S.-China talks, with each side seeking assurances that the other’s market will remain open. Mr. Wang said China wants to see steps by the U.S. to improve treatment of Chinese companies investing in the U.S., and to treat China as a “market economy” in trade law, which would raise the burden of proof in antidumping cases and other trade remedies sought by U.S. companies.
U.S. companies are also increasingly concerned about the business environment in China. In fact, they are concerned that a revaluation of the yuan will drive prices higher and lower their profit margins because they can’t raise prices in a deflationary economy. In an interview on Monday, Thomas J. Donohue, the president and chief executive of the U.S. Chamber of Commerce, said that the members of his Washington-based organization haven’t been so concerned about China “backtracking” on opening its economy since China joined the World Trade Organization in 2001—a shift that he said had made them less willing to push back against Congressional moves to restrict trade with China.
Many observers think the debt crisis in Europe and the ensuing swings in financial markets have made it less likely that China will move off its de facto peg anytime soon. U.S. officials have said they didn’t plan to publicly push China on the currency at this week’s talks, in part because they feel such pressure would be ineffective. Pressure is effective when you have the upper hand in negotiations. For most of you, that is a purchase order and having other factories or suppliers on hand that can supply the same product. In a research report Monday, analysts at Standard Chartered said they now think China won’t move away from the peg until the third quarter of this year.
Mr. Wang, the vice premier, said the European debt crisis had “brought many uncertainties to the slowly recovering world economy.” Central-bank Gov. Zhou Xiaochuan briefed reporters Monday about financial issues raised in the dialogue, but didn’t directly answer a question about whether the events in Europe would affect China’s plans on its currency the yuan. “Some issues were not discussed in detail,” Mr. Zhou said.
—James T. Areddy, Aaron Back and Ian Talley contributed to this article.
Hornblowers
April 19, 2010 by Chinatex
China must have the loudest horns in the world. Now, I don’t know much about noise levels and decibals and other technical things like that, but, I do know what i hear – when I can hear. I’ve been thinking about a topic for my next blawg post for quite awhile and while I have had a couple of great ideas, I just couldn’t figure it out. You know that Old Chinatex likes to write about the law in China and other interesting stuff like that, but, if you read my blawg you also know that I like to write about China and the customs and habits which can help us all understand or tolerate the way things work over here. If you want to go to a blog site everyday and read about changes to the law in China and other intellectual stuff, I recommend you check out the award winning China Law Blog at http://www.chinalawblog.com/ which is written by Dan Harris and his associates. If you want to read interesting stories and anecdotes that should be useful and might be funny, check out my blawg at http://chntxlaw.com/blog/
So, I was thinking about horns in China and for those of you who have been here, you know that horns are not used in the same way as they are in the West. In fact, if someone beeped their horn in the same angry, prolonged, and aggressive way as they do here in China, in Los Angles, they would most certainly be shot. They don’t just give you a friendly toot to remind you that the light is now green, they lay on the mother like their life depended upon it which then starts a chain reaction of angry beepers all laying on the loudest horns on the planet.
I’m sure that when they design and build cars in China for sale on the Domestic market, whether it’s Ford, or Mercedes, or BMW, or Geely, they have a meeting to discuss horns and there is a typical Chinese automotive engineer type with the short sleeve white shirt, black pants with white socks and overly shiny black shoes that says: ”we gotta make these horns extra loud so that they Chinese will hear them.” The response inevitably is “how much louder” and the engineer says “what about 100% louder, because we are China and the Middle Kingdom and the biggest and best country in the world and we should have the loudest horns.” The decision makers obviously not wanting to lose their jobs by allowing wimpy horns or lose face to the rest of the automotive industry all agree and the horn blowing torture on Old Chinatex begins.
So I was thinking, as they create their own traffic jams by all trying to jump ahead of each other on the roads, why the Chinese don’t just wait for the light to change, or the person rudely stopped in the middle of the road talking on their cell phone to move on, or the taxi letting off it’s passengers to complete their transaction (which usually only takes about 10 seconds), or any of the million other reasons why they beep their horns, “why do they really lay on the horn”. It doesn’t seem that it works or the person whom is the brunt of the horn blowing cares, it only annoys the hell out of me. I am sitting in my office on the 12th floor of a premier office building in the Shenzhen CBD and I hear a cacophony of the loudest horns ever invented and the same goes for my apartment on the 32nd floor. Mosquitoes don’t even make it up to the 32nd floor, how the hell can the horns sound so loud and reach my ears while I am trying to sleep. I guess the simple answer is they just don’t give a hoot about anything else other than what is impacting their little world at that time and I wholeheartedly believe that this mentality is prevalent in everything they do. Now I am not talking about everyone, of course there are considerate and inconsiderate people all over the world, it just seems like with one and a half billion people that there are plenty here that just don’t give a hoot.
So just remember, when you are dealing with a factory owner or looking to invest in or acquire an existing business or conducting any other transaction and you believe that the person(s) you are dealing with “likes you” and “I can trust them” (Old Chinatex has heard it all) the way they lay on that horn.
As always, Yeeha!! Chinatex
