The Shanghai Lawyer
Vol. 1 , No. 10 - August 19, 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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Pudong New District, Shanghai's boomtown, generated 56.2bn RMB (6.8bn US$) in gross domestic product (GDP) during the first half of this year, up 15 percent year-on-year. Pudong achieved an industrial output value of 100.1bn RMB (12.2bn US$), up 18 percent over the same period last year. The district is the fastest growing part of Shanghai, China's biggest industrial and business center. Fixed asset investment in the district totaled 23.1bn RMB (2.8bn US$), an increase of 33 percent while the overall export volume grew nearly 13 percent to 6.2bn US$. The district's tourism sector also recorded overall revenue of 1.5bn RMB (nearly 200m US$), up 29 percent. Tourists to the district totaled 7.43 million, including 180, 000 overseas travelers. Total retail sales for the district rose about 10 percent to 12.2bn RMB (1.48bn US$). Pudong approved 462 overseas-funded projects with 1.3bn US$ in contractual value, up 17 percent and 25 percent, respectively. |
Consumer law enforcement urged
Consumer rights advocates are calling for more judicial support to make the law protecting consumers more effective. The law itself is strong, but it is not at present effectively enforced. The law, which was endorsed in October 1993 and took effect in January 1994, offers guidelines, and local regulations supporting the law have provided specifics on how to protect consumers.
All provinces, autonomous regions and municipalities on the Chinese mainland have worked out their own rules on how to implement the law. However, most consumers still find it difficult to solve their disputes with sellers in court, though the law stipulates that the courts should take measures to make it easy for consumers to initiate actions when they feel they have been mistreated.
The normal court proceedings are too lengthy and complicated for ordinary consumers who usually have small claims. Furthermore, most of the cases involving consumers' rights should be heard under summary proceedings, a simplified trial procedure. The courts should also accept group actions, the most effective way in which consumers' rights can be protected in court.
The sellers and producers, especially big businesses, usually do not care about cases raised by individual consumers. But they will have to take an action much more seriously when it is initiated by a group, as it may lead to huge compensation payments. China's Civil Procedure Law has a stipulation on representative action, but it is rarely used in cases involving consumers' rights. Many believe that the courts will have no excuse to dismiss such trials if it is clearly written into the law on the protection of consumers' rights.
Further suggestion is that the law should introduce a recall system, both voluntary and government-imposed, to protect consumers from products that pose potential threats. Some agree that the recall system is good because it will offer consumers more comprehensive protection.
However, the law is now functioning well and will not be revised in the near future. The debate on whether the law should protect buyers who knowingly buy fake products and later sue the sellers for punitive compensation has always been highlighted in discussions on the national consumer-protection law.
A senior national legislative official who spoke on condition of anonymity said the law was not designed to protect these buyers. The law says that buyers of fake goods or services should be compensated at twice the retail value of the goods or services. The official said this stipulation was based on the knowledge that consumers are usually in a disadvantageous position in purchase transactions.
(Source: China Daily)
Shanghai Essentials
Shanghai intends to have almost 2 million skilled workers by 2015, top job officials said yesterday. The city has set itself the target of 1.98 million workers with at least vocational-school educations. The figure represents about a two-thirds increase over last year's statistic. A short-term goal has also been established: 1.37 million skilled workers by 2005. The city will spare no effort to enhance the quality and quantity of its human resources to support its development into a truly international economic center. The director of the Shanghai Personnel Bureau was addressing more than 500 government officials at the Shanghai Technological Professionals Development Working Conference. Participants were told that Shanghai will particularly need professionals in financial services, trade, supply and distribution, car manufacturing, real estate, modern biopharmaceuticals, new materials and international aviation. To reach its goals, the city will continue trying to improve its educational system while seeking to attract professionals from other parts of the country and world, according to officials. In addition, foreign experts will be encouraged to give lectures, provide consulting services and work on contract projects. In Beijing, Premier Zhu Rongji yesterday called for nationwide efforts to restructure and expand the country's vocational education system in a bid to produce a highly skilled workforce of hundreds of millions for sustainable economic and social progress. (Source: Shanghai Daily News) |
Investment in reverse
While Shanghai continues to see an influx of capital from overseas, many local companies believe they can develop and earn money in the same manner - investing abroad. During the first six months of this year, more than 28 local companies piped their investment abroad. The number is close to the whole-year figure of 32 in 2001, according to the Shanghai Economic Relations & Trade Commission.
Shanghai's outbound investment in the first six months topped US$61.4 million, a jump of 307 percent from a year ago. The commission expects this year's investment abroad to hit US$100 million, exceeding the total investment from 1996 to 2000.
The city's first-half out-bound investment mainly targeted developed countries, while in the past, local firms preferred to set up plants and trading companies in the developing world. According to the commission, investment from Shanghai companies to European countries reached US$20.99 million, while to North America it was US$26.98 million. They accounted for 78 percent of the city's total outbound investment in the first half.
Because of the economic downturn in those countries, many companies there are facing a hard time and badly need funds. The acquisition prices they are offering are much lower than two years ago. Shanghai Haixin Group Co. Ltd., a plush-fabric maker, bought fabric operations from Glenoit Intermediate Holding Inc. in May for US$14 million. The acquisition will help the company develop its sales network in North America as part of our global development strategy.
Shanghai Soap (Group) Co. Ltd. acquired a plant under Moltech Power Sys-tem Co., the biggest charge-able battery developer and producer in the United States, for US$11.6 million last month. They not only bought the assets but also their sales network in North America and their patents. They also acquired the U.S. company's fame, too.
(Source: english.eastday.com)
Areas picked for logistics JV pilot programs
Several Chinese provinces and cities have been chosen for joint-venture logistics pilot programs. The Ministry of Foreign Trade and Economic Co-operation (MOFTEC) recently said that eight trade bureau would be able to start accepting applications for Sino-foreign joint ventures or co-operative firms. They include bureau in Jiangsu, Zhejiang and Guangdong provinces, and in the cities of Beijing, Tianjin, Chongqing, Shanghai, and Shenzhen.
Overseas investors will be limited to a 50 per cent share. The firms are expected to integrate transport, storage, loading, processing, packaging, delivery, information handling, and imports and exports as a complete supply chain with one-stop logistics services. The Chinese mainland partner, or the largest overseas shareholder, will need to have experience in international trade and international cargo or agent services. In addition, the Chinese mainland partner, or the largest overseas shareholder, will need experience in transport or logistics.
The firms are expected to have at least US$5 million in registered capital as well as a fixed location of operations and the necessary facilities. This news could prove to be of great help to overseas logistics firms that have been looking at the Chinese mainland market for a long time, industry insiders have said. Kerry Logistics Network, an affiliate of Hong Kong-based Kerry Group, started a logistics joint venture with Shanghai Caohejing High-Tech Park on Friday to expand its business there.
Shanghai Kerry Caohejing has invested about US$30 million and each side holds a 50 per cent stake. Kerry Logistics already has large logistics centres in Beijing and Shenzhen. The local trade bureau is expected to give their preliminary ideas to MOFTEC for approval at least 10 working days after receiving applications for logistics joint ventures and co-operative firms. MOFTEC then has to make a decision within 30 working days. After approval, a firm can operate for 20 years, before applying for an extension.
(Source: China Daily)
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China to Open 27% of Fuel Import Market in 2003
China, Asia's second-largest oil consumer, will allow non state-controlled companies to import about 27 percent of the country's gasoline, diesel and other fuels in 2003 as part of its pledge to follow World Trade Organization rules.
Four state-owned companies control about 79 percent of the country's total fuel imports. In 2003, that will be reduced to 74 percent or 14.7 million tons of such fuels. China Petroleum & Chemical Corp., or Sinopec, and rival PetroChina Co. control more than 90 percent of the country's fuel production.
This is another step in China's plan to liberalize its oil market. Sinopec and PetroChina must work harder to lower their oil processing costs to compete with foreign refiners. Refiners in Asia, especially export-oriented ones such as Royal Dutch/Shell Group in Singapore, have seen profit margins from refining oil fall because of an oversupply of fuels. Improved access to China's market may help earnings at the refiners because the country is Asia's fastest growing energy market.
Shell and other refiners in Singapore are running their plants at about 60 percent capacity - the lowest level in 15 years - to trim losses. Beijing will stop setting quotas for oil product imports from Jan. 1, 2004, which will likely lead to more competition for Sinopec and PetroChina. China's refiners are much more efficient than they were two years ago, but are not yet ready to take on foreign competitors.
China National United Oil Corp., known as China Oil, China International United Petroleum & Chemical Corp., known as Unipec, China National Chemicals Import & Export Corp., known as Sinochem, and Zhuhai Zhenrong Corp. are the country's state-backed oil traders. China's biggest oil producer PetroChina controls China Oil while Sinopec controls Unipec.
China will also allow non-state companies to import up to 9.52 million tons (70.9 million barrels) of crude oil in 2003, or 15 percent more than this year. The Ministry didn't say how much crude oil the country plans to import next year.
The rest of the quota will be allocated to China Petrochemical Group, Sinopec's parent, and China National Petroleum Corp., PetroChina's parent. China's crude oil imports in the first six months rose 3.1 percent to 33 million tons. Oil product purchases from abroad fell 24 percent to 7.94 million tons.
(Source:Bloomberg)
New rules cover material on Net
China's first regulation on Internet publishing goes into effect this month. It bans objectionable material in 10 categories and requires all Internet companies already engaged in online publishing to re-register with local press and publication administrations within 60 days.
Issued by the State Press and Publication Administration and the Ministry of Information Industry, the regulation defines Internet publishing as posting "any creative work or edited material" on a Website or delivering it to users through the Internet for viewing or downloading.
Covered are the electronic versions of published books, newspapers, periodicals, and audio and video pro-ducts, as well as original literature, art, and material related to science and technology, social sciences and engineering.
The regulation comes on the heels of specialized ones on Net security and the management of electronic bulletin boards and online pharmaceutical information, headhunting information and news.
(Source: english.eastday.com)
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Draft law on stock funds expected
The national legislature is working on a draft law on stock funds that authorities hope will become a stabilizing force in the nation's sluggish stock market. Stock funds are mainly mutual funds that invest primarily in stocks and are operated by investment companies.
They are attractive because most of the 64 million stockholders in the Chinese mainland's stock market invest individually and are generally weak in shielding off risk and are more vulnerable to market fluctuations. Retail investors pay a fee to invest their pooled money in order to see more stable returns on investments through the use of professional fund managers.
While there are about 50 stock funds in China, they are currently governed by only a temporary regulation. A more sophisticated law would oversee all registration and activities of investment companies that run stock funds and help add a more orderly presence to current immature market sentiments, according to sources with the legislature.
The draft law, which has been studied by the legislature for three years, is most likely to go for a first reading at the bi-monthly session of the National People's Congress (NPC) Standing Committee at the end of this month. The standing committee represents the entire legislature on matters that take place outside the NPC's annual meeting. The proposal was first initiated by the Finance and Economic Committee of the NPC in 1999.
The temporary regulation on the management of stock funds, issued by the State Council in 1997, has contributed greatly to the trial operation and development of stock funds. But the temporary regulation does not suit the fast developing stock fund market, particularly now that China is a member of the World Trade Organization.
The legislation is expected to include stipulations that standardize the operation of investment companies and check for irregularities such as opaque operations and late disclosures of information. Currently most stock funds in China are close-ended, which means there is a fixed number of total shares available.
Close-ended stock funds also cannot be resold to a company for a fixed period of time and shares can only be traded among other investors. In this way, the total investment of the fund remain unchanged. Open-ended funds, on the other hand, are more common in the West and availability is based on demand. In China, investors can only buy and redeem their shares at banks. They cannot sell them in the market during the life of the fund.
China's first pilot open-ended fund management firm debuted last March and there are currently four other open-ended funds on the market.
(Source: China Daily)
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