I am arriving in Nanchang on a night flight from Shanghai. At night, from the plane, Nanchang reminds me of a big theme park: a great spectacle of coloured lights. The banks of the Ganjiang, the river that crosses the city, are glowing with illuminations. The bridges over the Ganjiang are also lit up. The skyscrapers of Nanchang’s financial centre are framed by red and yellow lights. On the top of these buildings, the names of banks and insurance companies are flashing on and off. The plane, in the meantime, is weaving left and right in search of the landing strip.
A WFOE is a Chinese limited liability company, wholly owned by one or more foreign investors. This is an investment vehicle often favored by foreign investors because it is (or is supposed to be) under their full control as there is no local partner. Furthermore, its preparation and establishment procedure does not involve all the lengthy negotiations that a sino-foreign joint venture usually takes.
The procedure for the setting up of a WFOE involves principally:
The drivers of e-commerce development are, among others:
- its convenience (i.e. the possibility to do online shopping at home or (often) at the office);
Despite a legal framework that has been in existence for more than twenty years, foreign investors still have some difficulty grasping the management control requirements of a sino-foreign joint venture in China.
The main misunderstanding is the assumption that holding the majority of the equity automatically grants control over the joint venture.
Recently I received a phone call from a friend asking how he could fire his office manager who, he discovered, was asking (and probably taking) bribes from the company’s suppliers. The full story goes as follows.
My friend is the general manager of a foreign-invested company in China. Thanks to the expansion of the company’s business, his company was relocating to a bigger office. Several service suppliers were involved in the renovation works of the new office. The problem was that, very strangely, the renovation works were progressing very slowly. The general manager called the suppliers complaining about the delays. The suppliers told him that the company office manager was requesting bribes to allow them to enter the new office premises and conduct the renovation works.
The other day I was discussing with some young European entrepreneurs the regulatory steps for the opening of a restaurant in China. One of the main issues is that the investor has to lease the restaurant premises before commencing the setting up process of the company engaged in the restaurant business.
Therefore, it is crucial that the chosen premises are suitable (in term of regulatory requirements) for a restaurant. Otherwise, the risk for the investor is being trapped (after having paid, for instance, a two months’ deposit and three months’ rent in advance) in the lease agreement of a location that cannot be used for a restaurant.
In April of this year, the Intermediate People’s Court of Wenzhou (Wenzhou is the third biggest city in Zhejiang Province) ordered a French wine producer and trader (namely Castel Freres SAS) as well as its Chinese distributor to pay a RMB 33 million (approximately Euro 4 million) compensation for infringement of a trademark registered in China.
In 1998, a Spanish citizen originally from China, Mr Li Daozhi, applied for the registration of the trademark “Castel” in Chinese (卡斯特, kasite) in class 33 (alcoholic beverages) in China. The registration of this trademark was granted in 2000. Continue reading
The latest catalog on foreign investment in China, the most important policy document in the field of China foreign investments (entered into force on 31 January 2012), removed franchising from the category of investments subject to restrictions. Franchising is now a “permitted” investment.
This new legislation is certainly a further sign of openness to foreign investors in the sector, including multinational companies, as well as small and medium-sized enterprises. Continue reading
Precedents are not binding in China. However, the decisions selected by the Supreme People’s Court (which has occurred since 2007) have great weight and authority.
One of these decisions concerns Taobao.com. This is a very popular website of the Alibaba Group for the on-line sale (B2C) of a wide range of products.
Recently a European company was telling me that (at least) one Chinese company was copying and selling two lines of its products in China and other countries. (Let’s assume that the products in question are furniture.) The question was whether it was possible to take advantage of the remedies provided by the anti-unfair competition legislation against the counterfeiter. (Needless to say this European company had not registered the design of its products in China.)
There is an Anti-Unfair Competition Law in China. The name seems to suggest a law that provides unconditional protection to the victims of their competitors’ illegal unlawful or unfair commercial practices.