ASIABIZBLOG

Another remarkable drop.

6月1日，湖北宜昌股民在观看股市行情。据交易所公布的最新数据显示，截至周五（6月1日）收盘，沪市总市值为133455亿元，流通市值37590.24亿元，不过平均市盈率由周四的43.44倍上升至周五的44.24倍；深市总市值为40253亿元，流通市值为20533亿元；两市总市值为173708亿元，较周四缩水5610亿元。

Bloomberg takes it calmly.

Chinese media outlets stress instead the need for calm.

国内三大证券报6月4日纷纷刊登评论员文章，告诫投资者冷静、全面、深入认识和理解印花税政策，理性预测未来市场走向。管理层上调印花税出发点是抑制过度投机，以避免更大的系统性风险，阶段性市场调整不会改变牛市之基本面

Those of you who are members of the American Bar Association may wish to check your June issue of the ABA Journal, where your editor, Rich Kuslan, is quoted. See Terry Carter's article, "A Chinese Puzzle," on page 30. Interesting compilation of ideas, focusing on ethics as they appear to apply to foreign firms in China, but touching briefly on marketing. Dan Harris of China Law Blog and Matt Adler of DLA Piper were interviewed as well. Here's the link.

More of the old back and forth.

Only a piddling amount of money is involved -- as yet -- if any. It appears to be a simple statement without any details of the offending shipments. Did it really occur, i.e., is it an agressive tactic or only a mouthful of threat?

But that's not the most important question. Instead: who'll cave when the stakes are truly high? Will the Americans even last that long?

UPDATE (June 28, 2007)

From the New York Times:

The Food and Drug Administration today issued an alert challenging imports of five major types of farm-raised seafood from China, including shrimp and catfish, because testing found recurrent contamination from carcinogens and antibiotics.

The alert means that the fish will be allowed for sale in the United States only if testing proves that it is free of certain antibiotics and carcinogens

UPDATE (June 29, 2007):

American consumer reaction to Chinese food imports has been overwhelmingly negative. See for example this page.

An article worth reading in its entirety, from Bloomberg:

China's benchmark CSI 300 Index would need to fall as much as 54 percent to come in line with the price-to-earnings ratio of Hong Kong's Hang Seng China Enterprises Index, which tracks shares of 41 mainland companies listed in the city. The CSI 300 would have to drop 65 percent to match the average multiple for Chinese shares traded in Singapore, according to calculations by Bloomberg.

Whatever "fair valuation" may be, other than the price people are generally willing to pay, a comparison between the Singapore and China stock indices -- their companies experiencing very dissimilar economic prospects, not to mention the hoopla and ballyhoo for everything Chinese -- does not seem especially relevant. More relevant is this: the ethereal nature of the financial statements issued by the average listed Chinese company and its widespread disregard by tens of millions of investors.

Danone is now sadly forced to wash its dirty linen in public:

"After a long investigation, Danone officials concluded that their closest partner in China, Wahaha’s longtime chairman, Zong Qinghou, was operating a series of secret companies outside the joint venture — companies that were mimicking the joint venture and siphoning off millions of dollars."

This has happened numerous times in the past -- the most famous case being the American paper company which set up a joint venture factory in the early 1990s, only to find that its partner had set up a factory across the street in competition with it, making use of the machinery, workers and expertise the American company injected into the venture.

Who says history doesn't repeat itself?

Not directly related to China, but worth your time:

Martin Wolf, Villains and Victims of Global Capital Flows

Over the years, those who have added their comments directly underneath a post have been in the large part agreeable and positive.

On the other hand, readers with ideas contrary to my own, seem to send email directly to me. Sadly, they do not, for some reason, choose to post directly on the weblog. Without your permission, I will not take the comment you've sent me personally, and tack it onto the blog. The readership in general loses the opportunity to learn from you.

Any comment, whether in agreement or not, made in the positive spirit of debate, is valid. You are encouraged to disagree.

From Xinhua come reports of this case, in which a Guangdong court has, for the first time, decided a commercial leasing dispute by application of Hong Kong law. Thanks to Paul Jones, a barrister, solicitor and trademark agent in Canada, for making note of this article. You will find the original article in Chinese directly below the translation.

Our translation was graciously provided by ZHAO Chen, a patent examiner at the State Intellectual Property Office of the P.R.C. and a certificated translator. Zhao Chen, an M.E. graduate from Tsinghua University, blogs on China's intellectual property system: here (for readers in mainland China) or here. Two of his published commentaries may be read here and here.

Mainland Court Applies Hong Kong Law for the First Time
Contracting Parties are Both Hong Kong based Companies

June 13, 2007

By DENG Xinjian, WU Jiao, From Legal Daily

On June 11, Zhongshan Intermediate People's Court of Guangdong Province made the first instance judgment on a Hong Kong-related lease dispute. The case is said to be the first one where Hong Kong law is applied by a mainland court. Plaintiff Diamond Lease Ltd. (hereinafter referred to as “Diamond”) and one defendant Ronghui Technology Ltd. (hereinafter referred to as “Ronghui”) are both Hong Kong based companies. The court ordered the lease contract between the parties to be terminated, and the lessee Ronghui to return rental equipment.

The dispute is reportedly due to defendant Ronghui’s violation of the lease agreement. Plaintiff Diamond claimed that, on November 22, 2002, it entered into a lease contract with Ronghui agreeing that Ronghui leased certain machine equipment from Diamond. Diamond delivered the equipment to Ronghui for use under the agreement, although the actual user was Ronghui Electronics (Zhongshan) Ltd. (hereinafter referred to as “Ronghui II”). However, Ronghui did not fulfill the rental payment requirements set out in the contract, and failed to pay any rental ever since September 2003. Diamond alleged Ronghui’s contractual violation, and requested the court to order the contract dissolution and the return of rental equipment from two defendants.

“This contract shall be governed by, and interpreted and construed in accordance with the Law of Hong Kong. The Lessor and Lessee consent to the jurisdiction of courts in Hong Kong, and the Lessor may turn to courts in any other competent jurisdiction for compulsory enforcement of this contract.” The contracting parties agreed upon the application of law for dispute resolution under Article 16 of the Lease Contract.

Since Diamond and Ronghui concurred the law of Hong Kong as the governing law, Zhongshan Intermediate Court ordered Diamond to proof concerning the application of law. In response, Diamond filed a legal opinion rendered by Deacons Law Firm, Hong Kong, proposing opinions concerning certain provisions of the lease agreement. According to this legal opinion, Diamond may, in the case that Ronghui fails to pay rental timely pursuant to the terms and conditions of the agreement, immediately terminate the contract through written notification under the agreement, and be liable correspondingly for breach of contract.

Zhongshan Intermediate Court found that the legal opinion filed by Diamond was provided by qualified attorney in Hong Kong, attested by appointed attesting officer recognized by the Ministry of Justice, and delivered through China Legal Services (Hong Kong) Ltd. The opinion was thus not only presented via a sound, legal channel, but the legal content within Hong Kong thereof was in accordance with the judicial principles of the Basic Law of Hong Kong, and was neither contrary to basic principles of mainland law nor against social public interest. Therefore, the opinion could be adopted.

Zhongshan Intermediate Court so determined at first instance that 1) the lease contract between the plaintiff and the defendant terminate, 2) Ronghui return all the machine equipment leased from Diamond within three days after the ruling takes effect, 3) the two defendants bear the Case Acceptance Fee, RMB 36,500 Yuan.

CHEN Wei, Judge of No. 4 Civil Division of Zhongshan Intermediate Court, stated that extraterritorial application of law in hearing cases is available under two circumstances. One is where both parities in dispute have clearly agreed upon the application of law provided the agreement is valid, the other happens where the most related law with the dispute is extraterritorial law based upon the most significant relationship principle if the disputing parities fail to identify any governing law.

More Words from the Judge

Concerning the jurisdiction of this case, presiding judge CHEN Wei points out that Diamond and Ronghui have agreed upon the jurisdiction over disputes, i.e., the lessor and lessee consent to the jurisdiction of courts in Hong Kong, and the lessor may turn to courts in any other competent jurisdiction for compulsory enforcement of the contract. This means the lessor can make the contract enforceable in other dispute-related jurisdiction besides the jurisdiction of Hong Kong’s courts. Thus, the jurisdiction of courts in Hong Kong over their dispute set out in the contract is actually a non-exclusive jurisdiction, or in other words, does not preclude the jurisdiction from competent courts of other countries.

This is further clarified in the purchase agreement, an annex to the lease contract, signed by the contracting parties on the same day. The agreed upon jurisdiction set out in the agreement is that both parties consent to the “non-exclusive jurisdiction” of courts in Hong Kong concerning any litigation and legal proceedings of certain agreement. Hence, Diamond has the right to litigate this case before other courts with competent jurisdiction besides courts in Hong Kong. Through financing lease, Ronghui leased machine equipment (commodities) from Diamond in compliance with its purchase requirement for the purpose of Ronghui II’s use. As a result, the place of performance of this contract is mainland China where Ronghui II is located; meanwhile, machine equipment, object in dispute of this case, is also located in mainland China. The litigation brought by Diamond before Zhongshan Intermediate Court, therefore, is in accordance with Article 24 concerning territorial jurisdiction and Article 243 of the Civil Procedure Law of P.R.C, and Zhongshan Intermediate Court has jurisdiction over this case.

合同双方为香港企业 内地法院首用香港法律判案
2007年06月13日 08:26:09 　来源：法制日报

昨天（11日），广东省中山市中级人民法院对一宗涉港租赁合同纠纷案作出一审宣判，据了解，这是内地法院首例适用香港法律判决的案件。原告钻石租赁公司和被告之一荣辉科技公司都是香港企业，双方的租赁合同被法院判令解除，承租人荣辉科技公司被判令返还租用设备。

据了解，双方的纠纷因被告荣辉科技公司违反租赁合同约定而起。原告钻石租赁公司诉称， 2002年11月22日，双方签订《租赁合同》，约定由荣辉科技公司向该公司租赁有关机器设备，该公司已依合同约定将租赁物交付被告使用，而实际使用人为荣辉电子(中山)有限公司。但荣辉科技公司却违反合同关于支付租金的约定，自2003年9月开始就未支付任何租金，其行为已构成根本违约。钻石租赁公司向法院请求判令解除合同及两被告交还租赁物。

“本合同在各个方面均受香港法律管辖，并按香港法律诠释。出租人与承租人愿受香港法庭司法管辖权的管辖，而出租人可在任何其他主管的司法管辖区法庭强制执行本合同。”双方在《租赁合同》第16条对解决纠纷适用法律作了约定。

由于钻石租赁公司和荣辉科技公司对双方发生纠纷适用的管辖法律约定为香港法律，中山市中级法院要求钻石租赁公司就法律适用进行举证。钻石租赁公司提供了由香港“的近律师行”出具的《法律意见书》，对租赁协议的相关约定提出了法律意见。对于违约责任，该《法律意见书》认为，根据香港法律，荣辉科技公司没有根据该协议的条款按时支付租金时，钻石可根据该协议的条款以书面通知立即解除该协议，并承担相应的违约责任。

中山中院认为，由钻石租赁公司提供的经香港注册专业律师作出、并由司法部委托公证人见证、法律服务公司转递的《法律意见书》，不仅提供途径规范、合法，其阐述的香港法律内容，也符合香港基本法规定的司法原则，并且没有违反我国法律的基本原则和社会公共利益。由此，可以采信。

中山中院遂作出一审判决，判令解除原、被告签订的《租赁合同》，荣辉科技公司于判决发生法律效力之日起3日内返还向钻石租赁公司租赁的所有机械设备。36500元的案件受理费，由两被告共同承担。

据中山市中级法院民四庭法官陈薇介绍，适用域外法审理案件有两种情形：一是如果争议双方明确约定适用域外法且约定有效的；二是争议双方没有约定，但根据最密切联系原则，与纠纷有最密切联系的法律是域外法的，也可以适用。（记者 邓新建 通讯员 吴娇）

法官说法

关于本案的管辖权，主审法官陈薇指出，钻石租赁公司和荣辉科技公司在《租赁合同》中有关于双方纠纷司法管辖的约定，即出租人与承租人愿受香港法庭司法管辖权的管辖，而出租人可在任何其他主管的司法管辖区法庭 “强制执行”本合同，意思就是双方因《租赁合同》而产生的纠纷，出租人除接受香港法庭的司法管辖外，还有权在其他与纠纷相关的司法管辖区域使合同得以强制履行。由此，该合同约定的香港法庭对其争议享有的管辖权，实际是一种非排他性管辖权，即并没有排除其他国家有管辖权法院的管辖权。

这一点，在双方同日签订的作为《租赁合同》附件的《购买协定》中有更进一步的明确：协定对管辖约定为双方同意接受香港法院对有关协定的任何诉讼及法律程式行使“非专有的司法管辖权”。因此，钻石租赁公司有权向除香港法院以外的其他有管辖权的司法管辖区法庭提起本案诉讼。荣辉科技公司以融资租赁的方式，向钻石租赁公司租赁由其指定购买的机械设备(货品)，以供荣辉电子公司使用。由此，本案合同的履行地在荣辉电子公司所在的中华人民共和国内地；同时本案争议的标的物机械设备也位于我国内地。因此，钻石租赁公司向中山市中级法院起诉，符合《中华人民共和国民事诉讼法》第二十四条关于地域管辖以及该法第二百四十三条的规定，中山市中级法院对本案享有管辖权。

Today's post contains a few questions I'm hoping some of my readers might be able to answer.

This WSJ article on American labor union officials and labor activism in China is an interesting read.

The All-China Federation of Trade Unions (ACFTU) is a government department. Its management does not take its cue to any degree from laborer members, who, by the way, must, without exception, join. There are no benefits to speak of - except perhaps for the annual ticket to see a movie (forget a first run) and perhaps a box lunch.

[Here is a video interview with Andy Stern, President of the Service Employees International Union, speaking on his union's involvement with Chinese unions. Thanks to Bob Kapp for the onpass.]

It strikes me as incredible that American union officials have any sway without explicit approval and active participation of the Chinese Communist Party (CCP) at the highest levels – and certainly the encouragement of labor activism in general is not at the top of the Party's “to do” list.

So here are a few questions to my readers:

1) Can anyone point me to research on CCP control and oversight of the ACFTU? Is anyone working on AFL-CIO involvement in the Walmart “unionization?” The WSJ story does not refer to sources other than foreign union spokesmen, and I wonder if scholarship has been done on the subject.

2) This may be well out in left field, but it strikes me that there exists some American legal stricture upon union mobilization in connection with Communist controlled labor unions. Am I mixing something up? Call this a junior moment, if you will, but some legal thread somehow perhaps related to COCOM of years ago is telling me some federal prohibition exists.

The smoggy, foggy and utterly disheveled metropolis of Wuhan, on the Yangtse River in Hubei Province, bears the historical distinction of locus of the river trade. [See photo I took in Wuhan that gives you an idea of the Wuhan version of a sunny day.]

Prior to the establishment of the P.R.C., the river trade consisted primarily of opium, bibles, more opium, tea, automobiles shipped up from Shanghai, coal, bibles, weapons and opium.

Aside from its typical central-China, second-tier lack of aesthetic appeal, Wuhan natives are delightfully spirited – indeed, noted within China for their revolutionary fervor – and, in my experience, fast friends. But fighters to a man.

So when, at a public forum, Citibank announced its intention to set up a bank -- based in Wuhan but spanning the central region -- in which it would hold a 20% interest, the less-than-a-mile-away thunderclap of response was heard all the way to Shanghai.

Complicating matters somewhat was the fact that, in the early years of the last century, Citibank’s predecessor built a magnificent branch, lording over the docks, as a testament to its preeminence in Wuhan business circles. That building remains. I touched it myself, inducing a frisson of electricity as it grounded my historiographically-charged body. [See photo.]

That predecessor, the National City Bank of New York, subject of at least one recent book of national significance and numerous articles, is accused of the theft of imperial and nationalist China’s asset reserves. Among other financially rapacious crimes. Alleged criminal activity, of course. [I am a lawyer, after all.] Demand was made upon Citibank to pay up for the alleged [I repeat] acts of an institution that was not only dissolved decades ago, but its assets nationalized.

Nationalized. Don’t you just love the subtle fragrance of that perfumed euphemism?

Of far greater significance is the state of Chinese banking institutions, such as the unalterably poor condition of the so-called “city banks （城市商业银行）,” rogue kin to the disastrous city cooperatives（城市合作社）and credit collectives （信用社）, mismanaged by the municipal governments that own and barely run them. [Shanghai being an exception, but only by a hare’s tail.]

Fearing the competition Citibank presents as it moves inland by virtue of the timetable specified by the WTO accords – well, intending to move inland and encountering resistance every step of the way -- Hubei provincial banking administrators have spoken out. They don’t like the idea of a new bank, preferring a reorganization of their existing decrepit and debt-ridden system. Perhaps with the aide of a white knight like Citibank, although this remains unsaid.

But Hubei banking administrators are getting scant support, it appears from their own admission, from national banking regulators in Beijing, who haven’t even responded to their reorganization proposal. And Citibank looks to be favoring an end run up to Beijing for additional leverage on the province.

Read all about it! My rough translation of this recent article from 21世纪经济报 follows.

Prelude to a Yangtse River Bank: Citibank’s Ten Billion Yuan Trick
Relevant Applications Not Received by Hubei Banking Administration

People in the Hubei Provincial Banking Administration have disclosed that the reorganization of existing city business banks would be more practical than the establishment of a new bank.

June 23, a.m, on site at the “China Creates” display at the Wuhan Science and Technology Event Center, Citibank’s rather bland display board attracts the attention of event goers.