The Shanghai Lawyer
Vol. 1 , No. 07 - June 20, 2002
Shanghai is one of the most dynamic and fastest growing mega-cities in the world. It is quickly establishing itself as the leading financial and economic center of the Far East, on par with the likes of Paris and New York. The Shanghai Lawyer is a bi-weekly publication providing up-to-date newsworthy articles and legal information to professional and business persons around the world. We hope you enjoy the newsletter and welcome your comments and feedback.
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The Shanghai Volkswagen Automotive Corporation announced that its May sales of locally made Santana, Passat and Polo models reached 25,613 units, surpassing its previous record. |
Bankrupt Foreign-funded Company Sold by Auction
Malaysian-funded Coline Cocoa Food Co., Ltd, a Shanghai-based chocolate maker was sold by auction for 95 million Yuan (US$11.5million) in Shanghai.
It was the first time that a bankrupt foreign-funded company was auctioned off successfully in China. Coline, with a book value of 342 million Yuan (US$ 41 million) was bought by the Fengyuan Group, a domestic grain-producer with total assets of four billion Yuan (US$ 482 million).
Four domestic companies joined in the auction, with bids starting at 92 million Yuan (US$ 11 million). Fengyuan won on the second round of bidding. Shanghai Auction Corp. first tried to auction off Coline on March 7, 2002 but failed. At that time, just two companies -Cadbury, a worldwide chocolate producing giant and Guanshengyuan Food Co., Ltd, a traditional Chinese snack company -took part in the auction, which had bidding start at 116 million Yuan (US$ 14 million).
Lin Yiping, general manager of the Shanghai Auction Corp. blamed the failure of the first attempt on lack of timing, saying that they were unable to inform the media until just nine days before the auction. Potential bidders did not have enough time to accurately conduct due diligence on Coline, whose large big production lines had pushed Coline to bankruptcy, Lin said.
A representative of Fengyuan Group said that buying a chocolate production line could help diversify the company's products. Lin quoted a foreign businessman who once visited Coline's factory as saying that even those who knew little about chocolate production, could readily determine that the production line was of high quality.
Shanghai Coline was set up in 1993 as a joint venture with investment from Malaysia and a company in the local Chinese company. It produced and marketed chocolates under two brands, Coline and Cemoi, until it went bankrupt in October last year with debts of 400 million Yuan (US$ 48 million).
Experts said that this successful auction of a foreign-funded bankrupt firm in China, which occurred just before China's new policy on bankruptcy law was enacted, offered valuable experience in dealing with such bankruptcies in the future. Wang Weiguo, a member of the drafting group of the new bankruptcy law said that all companies risk bankruptcy if not run properly. In recent years, more and more foreign-owned companies were registering in China but the old Bankruptcy Laws did not cover instances of a foreign-owned company bankruptcy. He also stressed that the new law would mean that foreign-funded companies would be treated the same as domestic ones applying for bankruptcy.
(Source: Eastday.com)
Shanghai Essentials
Riding the crest of the wave of liberalization in China, Shanghai has recently simplified set up procedures for foreign investors wishing to establish a company in Shanghai. Although Wholly Foreign Owned Enterprises, or WFOEs, have been allowed for several years across China, the set-up requirements are cumbersome and time consuming. The Shanghai government has sampled procedures and cut set up time by taking a number of measures such as simplifying the required projected economic analysis and company feasibility report. These measures are the first of their kind in China cut down the set up time by approximately two weeks and reduce the legal documentation required by the Shanghai Municipal government. Now there is more incentive than ever to choose Shanghai as the place to establish a foreign owned business. |
Authorities Crack Down on Counterfeiters at Luxury Hotels
The army of counterfeit retailers in Shanghai has come up with one new scheme to trick consumers and evade the cops. The brand-name bandits are holding fly-by-night bazaars in the city's five-star-rated hotels, and then hastily moving along to a new location before police or ripped-off customers can track them down.
The system plays off the reputation of the host locations, say police, as some consumers are convinced the Rolex watch on sale for 150 Yuan (US$18) must be real if it is being sold in a five-star hotel. "The illegal traders choose hotels to hold the sale because people tend to trust big hotels and those who go into and out of hotels are relatively richer," said Zhou Shuguang, a spokesman with the Shanghai Industrial and Commercial Administrative Bureau.
Officials with the bureau said they shut down one such operation at the end of April after they discovered it doing business in the conference hall of a star-rated hotel on Caobao Road. While the cops place some of the blame for the new trend on the host locations themselves, they won't reveal the name of the hotel in question so as not to damage its reputation.
A phone number found at the bazaar on Caobao Road led city inspectors to a 504-square-meter storehouse, in which millions of Yuan worth of allegedly fake Chanel, Versace, Polo and Fendi clothes were stored. Three people were arrested, but police don't expect one bust to end the trend. In fact, the firm in question has already been busted three times, but because police only found a small amount of fake goods it was let off with a small fine.
In an effort to stop the new counterfeiting trick in its tracks, the Industrial and Commercial Administrative Bureau said yesterday that it would begin a series of inspections on the city's star-rated hotels to stamp out illegal bazaars. "We will strengthen spot checks of such bazaars," said Gu Renda, deputy director of the bureau. "Meanwhile, we will also guide hotels to strictly check the qualifications of those renting space."
Several hotels around the city now say they will require companies to show their business license and legal documents and sign an agreement before renting rooms. "Now we are especially cautious to rent places because it will harm the hotel's reputation if any counterfeits are seized," said Angela Feng, a public relation executive with the Crowne Plaza Shanghai.
(Source: Shanghai Daily)
Intel to make Pentium IV in Shanghai
Intel's CEO Craig R. Barrett announced an investment of US$100 million to upgrade its Shanghai facility to assemble and test the Pentium IV processors starting early next year, he said at Waigaoqiao, Shanghai's Free Trade Zone.
Starting next year the Intel plant in Waigaoqiao will be able to cut Pentium IV wafers, assemble the chips, test the results and package the finished product Barrett said. The core technology of CPU production, design and wafer production will remain in the Northern U.S. More than 70 Chinese engineers will be sent to the Intel facilities for training in assembly and testing technology.
The Pudong factory will become Intel's fourth international manufacturing base for Pentium IV. The remaining factories are located in Malaysia, the Philippines and Costa Rica. "It is very exciting to see the development of the integrated circuit industry here in China and in this area," Barrett said. The U.S. company has invested US$500 million in research and testing facilities in China and Barrett said the company aims to employ 3,000 people in Shanghai by 2004 compared to the current 1324.
Construction of Intel's current Shanghai 56,000 square meter facility started in 1995 and production got on track in February 1998. It is used to assemble and test flash memory products and computer chipsets.
(Source: ChinaBiz.org)
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Taiwan Investors Flood into Jiangsu
Following in the footsteps of Fujian and Guangdong provinces, East China's Jiangsu Province has become a new centre for Taiwanese investment. Taiwan factories and companies have dotted the landscape in cities in Jiangsu such as Suzhou, Kunshan and Wuxi. Jiangsu Province is located directly north of Shanghai city limits and the major centers are within 1.5 hours drive from Shanghai.
In the first quarter of this year, the government of Kunshan approved 95 new projects with Taiwanese investment, a rise of 137 per cent compared to the same period last year. In Zhangjiagang, a county-level city under Suzhou, the number of Taiwanese-invested enterprises increased 48.6 per cent in the first quarter of this year.
"None of the enterprises here are losing," said Chen Jinlong, vice-president of the association for Taiwan business people in Suzhou, who came to Zhangjiagang in 1989 to build factories. The local governments have also worked diligently to provide a safe and sound investment environment and satisfactory living conditions. Taiwanese businesses are attracted to the good and convenient environment of the city where 50 to 60 families from Taiwan will be moving to Zhangjiagang this year, said Chen.
(Source: China Daily)
Biggest Compensation Case Ever Begins in Shanghai
The first hearing on Shanghai's biggest compensation case -- involving 430 million Yuan (US$52 million) recently began. The plaintiff, Shanghai Shengfan Real Estate Development Company, is demanding money from Korean Airlines, because one of its cargo flights crashed onto the plaintiff's construction site on April 15, 1999.
The MD-11 plane flying from Shanghai to Seoul plummeted to the site in Minhang District minutes after it took off from Hongqiao International Airport. Eight people were killed, including three crewmembers, and 42 were injured.
The crash site was being developed by the plaintiff. "All of the preparation work, such as relocating former residents there had been completed, which cost about 250 million Yuan (US$30.2 million)," said Yan Jiazhu, a lawyer for the company. The plane crashed into four partially constructed apartment buildings. The plane crash was equivalent to an earthquake, the plaintiff said in its appeal. To make matters worse, the accident affected the sale of housing on the site, according to the plaintiff. "People are frightened, and many cancelled their orders on the houses," said Min Manjun, another lawyer representing the plaintiff. "The relatives of the crew members came to commemorate the dead a year later, which again made sales worse."
Statistics from the district's real estate trade center show the price of houses in general has kept rising, while the price of houses on the crash site has slumped. "In the area, the price for each square meter is around 3,000 Yuan (US$360), but the alleges that it can't get buyers at their price of 2,500 Yuan (US$300)". Some residents sold their houses at a price of 1,700 Yuan (US$205) per square meter.
Korean Air raised insists that the plaintiff provide detailed information on the loss. "I should know what was damaged, and how much damage, which constitutes the basis of the compensation," said Jiang Xian, from the city's United Law Firm, representing Korean Air. Immediately after the crash, through negotiations and lawsuits, Korean Air offered compensation to the injured, five of the dead and 37 families from the quarters.
(Source: China Daily)
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