FT on China and the Law:Lessons for NZ
The Lex column in the FT has this item, on China and International Law quoted in full :-
In the run-up to this summer’s Olympic Games, Tibetan protesters at the torch relay have denounced China’s human rights record. But does the Beijing government do any better on international legal issues at the heart of the world economy?
In theory, the Chinese government is a full member of the international legal community. On intellectual property, trade and securities regulation, it has written laws using European and US frameworks. China is part of the World Trade Organisation, has adopted international accounting standards and plans to join the network of international antitrust regulators.
In practice, things are not so clear. Chinese courts heard 668 intellectual property cases last year, up 89 per cent on 2006, and handed down a few big victories to foreigners. But counterfeiting remains rampant and drug and software patents rarely last as long as they should. China adopted international financial reporting standards in 2006 but the government tinkered with the rules. It dropped rules for disclosing related-party transactions because the state has interests in most things, and Chinese companies can book some assets at cost rather than fair value.
China’s new competition law, which comes into effect this summer, requires government clearance for some mergers and allows consumers to sue over anticompetitive behaviour. But the wording leaves open the possibility that the state may be able to protect the many companies in which it has a stake. Some overseas investors address the uncertainty head-on by writing clauses into their contracts that
hold their Chinese partners to international legal conventions and arbitration. They hope the possibility of repeat business will serve as a carrot if state enforcement fails to provide the stick.
What are the lessons here? First, businesses investing in the world’s biggest emerging economy still cannot count on legal certainty. Second, as in foreign affairs, China is keen to join the right clubs but self-confident enough to exempt itself from rules it doesn’t like.
Therefore, Adam recommends that those seeking to benefit from the NZ-China FTA should make sure that they do the following:-
- Understand the provisions of the FTA
- Take competent advice
- Build long-term relationships in China
- Seek input from those who have succeeded in China
- Understand the issues and problems faced by those who failed in China
- Do not expect overnight success
- Invest in an on the ground presence
- Seek to understand Chinese business culture and practice
- Seek to understand the Chinese perspective on the world
As a starting point Adam suggests attending one of the presentation series being organised by MFAT on the FTA. The Wellington Regional Chamber of Commerce is involved in the Wellington one – link
At the end of the day – take care – trader beware!
