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| 8/1 |
| 2005/11/28-29 [Politics/Foreign/Asia/China] UID:40740 Activity:high |
11/27 Apex, Changhong, and the perils of doing business in China. Good
reading for those MOTDers so bullish about finding their fortune
in China. http://csua.org/u/e39 [nyt]
\_ what is your point again? those MOTDers who are so bullish about
China are as foolish as those who think China is a economic /
military threat. This is one of the reason why I am so pissed
at USA for their constant pressure on China's currency, textiles
and the trade surplus. Using texitile as an example, China may
have 5 years of competitiveness on their texitile products, yet
China was forced to bow to EU and American pressure to impose
quota on their textile product due to the fact that neither EU
nor America has bothered to phase out the texitile quota
incrementally according to the agreement reached a decade ago.
- Just came back from mainland last week
\_ Just a cautionary tale about how business deals can go very
wrong in China. Did you think China is a country governed
by the rule of law? I'm sure stuff like that happens in all
the best corrupt totalitarian states.
\_ I am sorry, if those who doesn't even have that degree
of common sense, then, he/she shouldn't do business in
China at first place. It's a wild wild west out there,
and the real tragic part is that China is not the worse
country in terms of laws, corruptions, and goverance.
If you are trying to do business in the hyper-growth
area (e.g. Vietnam), you will have to play the local rules.
Just put things in perspective, some of stuff in USA
is pretty messed up too, just that you and I have gotten
used to it and accept it as law of the universe.
\_ things are slowly improving, but at this stage, if you
are hoping to depend on the rule of law, you shouldn't
go.
\_ It's pretty hard to predict when you might suddenly
need to rely on the rule of law.
\_ rule 1: don't get into trouble with powerful
people, unless you have someone even more powerful
behind you. instead learn how to identify and
build good relationships with these bad dudes.
This is unfortunately the price of doing business
in the prc. why do you think rupert murdoch and
chris galvin spent so much time schmoozing with
chinese leaders?
\_ Apex guy lesson 1: Eventually you'll piss off
someone big enough to seriously fuck up your life.
\_ That Murdoch are Galvin are protected doesn't mean
schmucks on motd are.
\_ I'm not worried about Murdoch or Galvin. I'm
worried about the average motd schmuck.
\_ The same rule applies, except at a lower
level.
\_ That worked real well for the Apex guy.
\_ didn't apex guy run afoul of rule 1, which
is why he's in trouble?
\_ Your rule 1 is useless, since expectations
for your behavior may be unknown and may
change over time. Also, the perception
of your behavior may be unknown and
unknowable, and that perception may
also change in unknown or unknowable
ways. One the other hand, a written
set of rules agreed to by both sides
and adjuged in an impartial (or at least
predictable) way can stand the test of
time and changes in persons and
perception.
\_ can we agree that china is a location
where you cannot get rules "adjuged"
in an impartial/predictable way which
can stand the test of time and changes
in persons and perception -- if the
other player is allied with powerful
people in china and you don't have an
equivalent ally?
(btw, you could have shortened your
response to: "rule 1 sux, get a
real contract not a 3-page invoice!")
\_ Is any of this worse than, say,
Russia? How many countries in
the world have what someone used
to doing business in the U.S. would
call the "rule of law"?
\_ i don't know if it's as bad in
russia and to what degree it's
the same/different. that's
another very long thread.
but does "rule 1 is useless"
guy agree that china is
a location where [blah blah]?
\_ The World Economic Forum gives
China a corruption ranking of
71, meaning there are 70
countries less corrupt than
China.
\_ There is a difference between
"rule 1 sux" and "rule 1 is
impossible to meet over the long-
term". Rule 1 is impossible to
meet over the long-term.
\_ so what's your long-term
solution ... a detailed,
sensible contract or something
like that?
\_ The rule of law. I think
that's where this discussion
started.
\_ and how does rule 1 figure
in locations where the
rule of law is relatively
weak?
\_ We're going in circles.
Do you think it is
possible to meet rule
1 over the long-term?
\_ first you answer
my question.
how does rule 1
figure in locations
where the rule of
law is relatively
weak?
(The answer to
this question is the
core reason why
rule 1 is relevant
in the first place.)
Let me answer it for
you:
Rule 1 applies where
the rule of law is
relatively weak.
Where the rule of
law is relatively
strong, the
relevance of rule 1
decreases.
\_ now is when you make money,
not when the system matures.
as they say, "go west, young
man".
\_ Right. Because no one
makes fortunes in the
U.S. anymore.
\_ you still do, but it's
harder.
\_ I imagine that's what the
Apex guy thought too.
\_ why do you care about
long term. take your money
and run. that's how taiwanese
do business. constantly change
and adapt.
\_ Ah. I take it this means
you agree that Rule 1 is
impossible over the long-
term. When is it long-
term? Is it possible
to meet Rule 1 over the
medium term? Is it ever
possible to win a game
where the rules are hidden
and invented on the fly for
the benefit of one side?
\_ I am not sure what you
are trying to say. Can
a relationship lasts a
long time? sure. With
rule of law, you have
the law's protection.
With relationships, it
depends on how the
relationship holds. It
could be all back
stabbing and self
interest. It could be
one that lasts while it's
mutually beneficial, and
a happy parting when that
no longer holds, it could
be like you and your
best Harvard roommate
buddy with total trust,
etc.
\_ I read somewhere
that Hitler was
psychologically
incapable of hav-
ing a loving rel-
ationship!
\_ china currently is like the wild west combined with 19th century
capitalism. an uncle of mine has spent a decade and a half
there. some of the things he had to do include:
* after a plan to start a business school fell through, they had
to sneak in at night to truck out all the computers and other
invested equipment, which would otherwise not be returned to
them. people from the other side were literally chasing after
them. people from the other side were literally running after
the trucks when they left.
* because property rights laws were vague, land acquired where
their factory was to be built was problematic when beijing
their factory was to be built was problematic when it was
decided that a lot of farmlands were improperly taken away
from farmers. To avoid inspections, they had to
replant the land with a big rice padi field for a while to fool
people, until the proper permits can be worked out. Lots of
ethical questions, but the factories did eventually provide jobs
for hundreds of workers from poor inland provinces.
\_ The New York Times is biased liberal trash.
\_ except when they say Saddam has WMDs. Go Dubya!
\_ I wonder who's going to import those TVs now? |
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| csua.org/u/e39 -> www.nytimes.com/2005/11/01/international/asia/01kidnap.ready.html?ex=1133326800&en=e473915d3ecc8257&ei=5070 Middle East Rule by Law | Commercial Hardball Dispute Leaves US Executive in Chinese Legal Netherworld Du Bin for The New York Times Employees heading to work at Sichuan Changhong Electric in Mianyang. The company, once a defense contractor, is publicly traded and majority owne d by the city of Mianyang and the province of Sichuan. Skip to next paragraph RULE BY LAW Commercial Hardball Articles in this series will periodically examine the struggle in China o ver the creation of a modern legal system. Map David Ji, left, shown last year during his stay under guard in a residenc e in Shanghai that is owned by Sichuan Changhong Electric. So in late December last year, according to a person who compiled a recor d of the encounter, guards emptied his pockets, removed his shoes and so cks, and ripped the buttons off his oxford shirt. He was ushered disheve led and barefoot into the office of Zhao Yong, the chief executive of Si chuan Changhong Electric, Mr Ji's onetime business partner and, more re cently, his warden. "Your only way out is to do what Changhong tells you to do," Mr Zhao tol d him. "If I decide today I want you to die, you will be dead tomorrow." China as a pawn - Mr Ji's colleagues say a hostage - in a commercial dispute that pits Changhong, China's largest television man ufacturer, against Apex Digital, Mr Ji's electronics trading company ba sed in Los Angeles. Changhong, which declined repeated requests for comment over several week s, claims that Apex owes it $470 million. Apex, which recruited Changhon g to supply Wal-Mart, Best Buy and Circuit City with inexpensive televis ion sets and DVD players, says it owes less than $150 million. The sums involved are large, but what is more significant about the case is the w ay Changhong, a major state-owned company in Sichuan Province, deployed the police, prosecutors and judges in a campaign to collect its debt. China has attracted hundreds of billions of dollars in foreign investment and has become the world's third largest trading power. But its legal s ystem, even when handling nonpolitical business cases, has progressed fa r more haltingly and still rarely backs investors or ordinary citizens a gainst the state. Difficulty enforcing contracts, rampant violations of copyrights and trad emarks and protection of domestic industry champions have heightened tra de tensions at a time when China is struggling to convince the outside w orld that its growing economic might poses no threat. Beijing is under h eavy pressure to embrace global legal norms with the same fervor with wh ich it has pursued foreign trade. Courts and arbitration panels do resolve many business conflicts that ari se from China's thriving market-oriented economy, and they can rule prof essionally and impartially. But when the fate of powerful companies like Changhong, which has 36,000 employees, lies in the balance, the judicia l system does not act independently and offers no recourse for outsiders like Mr Ji. Ultimately, some legal scholars argue, China's legal system may not impro ve markedly until central and local government officials relinquish some control and stop putting short-term political goals, like protecting in fluential companies and suppressing dissent, above the law. Mr Ji and his Los Angeles-based partner, Ancle Hsu, are ethnic Chinese w ho became American citizens. They helped Changhong break into the Americ an market, and its products outsold Sony and Panasonic, heralding China' s arrival as an electronics powerhouse. Relations with Changhong soured, however, over quality control problems a nd unpaid debts. And when they did, Changhong's first response was not t o file a lawsuit, but to dispatch the police. The police from Mianyang, the city in southwestern Sichuan province where Changhong has its headquarters, apprehended Mr Ji in Shenzhen, near Ho ng Kong, on Oct. He entered a legal netherworld in which Chang hong decided where he would be held in custody, when to interrogate him, and how he could help Changhong take over Apex, according to court docu ments, video recordings, and taped witness accounts compiled by people s ympathetic to Mr Ji. The records, which were also submitted to the Stat e Department, were obtained independently by The New York Times. The legal ambiguity partly reflects the tight bond between local corporate and government officials. It also reflects a risk of doing business in China that applies mainly to ethnic Chinese , dozens of whom have faced criminal charges after falling out with gove rnment-backed business partners. Overseas Chinese are often treated as s ubject to local authority regardless of their country of citizenship. |