China
Trump versus Huawei: right target, disastrous strategy
Author: William H Overholt, Harvard Kennedy School
The United States has valid complaints about Huawei, but US President Donald Trump is botching the negotiation. The principal issue with Huawei is the lack of reciprocal market access. As long as Huawei has access to all three major markets — the United States, European Union and China — and foreign tech companies are prevented from having full access to the Chinese market, it will soon dominate the global 5G market. With access to all markets, Huawei can sustain research and development budgets larger than its major competitors — Ericsson and Nokia — combined; they cannot compete with Huawei’s superior technological advance. Their imminent unfair destruction is unacceptable.
This happens in many areas. Take credit cards — China UnionPay’s global market share dwarfs that of Mastercard or Visa, not because it’s a better company but because UnionPay has fuller access to all three major markets.
This also happened earlier with pork. US food processing company Hormel Foods was an outstanding company when Chinese companies were smaller and less efficient, but in China it was prominent only in Shanghai. It agreed to buy one of the biggest Chinese pork producers, with the consent of the Chinese company. But the local Chinese Communist Party secretary blocked the deal. Despite being less competitive, over time some Chinese companies grew huge because they had largely exclusive access to the biggest and fastest growing market, China, as well as Western markets. For example, the Chinese food processing company WH Group grew so big that it was able to buy US meat processing company Smithfield Foods. It is now the biggest force in the US market, towering over Hormel Foods. If this trend continues, it will be fatal for many major Western companies. Major US and EU businesses therefore support a decisive challenge to China’s misbehaviour.
The right strategy to counter this is to restrict or deny market access to Chinese companies in sectors where China formally or informally restricts foreign companies’ access. And Western governments should help domestic companies develop technology superior to Huawei’s. They should make it clear that Huawei — and other Chinese companies — will get access when Chinese policy offers commensurate market access and meets their security concerns. Denying Huawei market access now is appropriate, but the door must be open for a future solution. Since Huawei’s major foreign competitors are European, this is the perfect opportunity to build US–EU cooperation.
The United States and European Union are wide open in the sectors where China has a comparative advantage, namely manufacturing, while China remains largely closed in the sectors where the West has a comparative advantage, mainly services. So in addition to restricting China’s access in services, Western countries need targeted restrictions in manufacturing too.
Similar market reciprocity issues existed between the United States and Japan when the latter became a major global economy. This included security issues, with Toshiba selling the Soviet Union technology that impaired US security. Then US president Richard Nixon responded by imposing a 10 per cent tariff on all Japanese exports while making it clear that the United States wanted to solve the problems, not bring Japan down. The United States was largely successful against a competitor that was more sophisticated than today’s China. Past US negotiations with China have been easier than with Japan but this changed when Chinese President Xi Jinping and Trump took power.
Trump focusses on security concerns — which many key international allies do not buy into — and attacks EU allies rather than emphasizing cooperation. He proposes to deny vital exports to Huawei in order to threaten its existence. He deliberately creates a cold war atmosphere designed to mobilize his domestic voter base rather than to solve international problems. He has convinced China’s leaders that his goal is to bring China down. In so doing, he alienates much of the US and EU business community, who want the problems solved, not rendered impossible. Unsurprisingly, China responds with threats to cripple or kill US companies like Boeing.
When Xi came to power, Chinese and foreign elites expected, based on the book China 2030 and other extensive planning efforts, that China was about to move decisively ahead to liberalise its obsolete infant industry protectionism. Instead, Xi has moved backward, with more policies to secure a…
China
New Publication: A Guide for Foreign Investors on Navigating China’s New Company Law
The sixth revision of China’s Company Law is the most extensive amendment in history, impacting foreign invested enterprises with stricter rules on capital injection and corporate governance. Most FIEs must align with the New Company Law by July 1, 2024, with a deadline of December 31, 2024 for adjustments. Contact Dezan Shira & Associates for assistance.
The sixth revision of China’s Company Law represents the most extensive amendment in its history. From stricter capital injection rules to enhanced corporate governance, the changes introduced in the New Company Law have far-reaching implications for businesses, including foreign invested enterprises (FIEs) operating in or entering the China market.
Since January 1, 2020, the Company Law has governed both wholly foreign-owned enterprises (WFOEs) and joint ventures (JVs), following the enactment of the Foreign Investment Law (FIL). Most FIEs must align with the provisions of the New Company Law from July 1, 2024, while those established before January 1, 2020 have bit more time for adjustments due to the five-year grace period provided by the FIL. The final deadline for their alignment is December 31, 2024.
In this publication, we guide foreign investors through the implications of the New Company Law for existing and new FIEs and relevant stakeholders. We begin with an overview of the revision’s background and objectives, followed by a summary of key changes. Our in-depth analysis, from a foreign stakeholder perspective, illuminates the practical implications. Lastly, we explore tax impacts alongside the revisions, demonstrating how the New Company Law may shape future business transactions and arrangements.
If you or your company require assistance with Company Law adjustments in China, please do not hesitate to contact Dezan Shira & Associates. For more information, feel free to reach us via email at china@dezshira.com.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
China
Lingang New Area in Shanghai Opens First Cross-Border Data Service Center to Streamline Data Export Process
The Lingang New Area in Shanghai has launched China’s first Cross-Border Data Service Center to facilitate data export for companies in Shanghai. The center will help with applications, data catalogs, and management, aiming to provide legal and safe cross-border data transfer mechanisms.
The Lingang New Area in Shanghai’s Pilot Free Trade Zone has launched a new cross-border data service center to provide administrative and consulting services to companies in Shanghai that need to export data out of China. The service center will help facilitate data export by accepting applications from companies for data export projects and is tasked with formulating and implementing data catalogs to facilitate data export in the area. The Shanghai cross-border data service center will provide services to companies across the whole city.
The Lingang New Area in the Shanghai Pilot Free Trade Zone has launched China’s first Cross-Border Data Service Center (the “service center”). The service center, which is jointly operated by the Cybersecurity Administration of China (CAC) and the local government, aims to further facilitate legal, safe, and convenient cross-border data transfer (CBDT) mechanisms for companies.
The service center will not only serve companies in the Lingang New Area but is also open to companies across Shanghai, and will act as an administrative service center specializing in CBDT.
In January 2024, the local government showcased a set of trial measures for the “classified and hierarchical” management of CBDT in the Lingang New Area. The measures, which have not yet been released to the public, seek to facilitate CBDT from the area by dividing data for cross-border transfer into three different risk categories: core, important, and general data.
The local government also pledged to release two data catalogs: a “general data” catalog, which will include types of data that can be transferred freely out of the Lingang New Area, and an “important data” catalog, which will be subject to restrictions. According to Zong Liang, an evaluation expert at the service center, the first draft of the general data catalog has been completed and is being submitted to the relevant superior departments for review.
In March 2024, the CAC released the final version of a set of regulations significantly facilitating CBDT for companies in the country. The new regulations increase the limits on the volume of PI that a company can handle before it is required to undergo additional compliance procedures, provide exemptions from the compliance procedures, and clarify the handling of important data.
Also in March, China released a new set of technical standards stipulating the rules for classifying three different types of data – core, important, and general data. Importantly, the standards provide guidelines for regulators and companies to identify what is considered “important” data. This means they will act as a reference for companies and regulators when assessing the types of data that can be exported, including FTZs such as the Lingang New Area.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
China
A Concise Guide to the Verification Letter of Invitation Requirement in the China Visa Process
The application procedures for business visas to China have been simplified, with most foreigners now able to apply for an M/F visa using only an invitation letter from a Chinese company. Some countries are eligible for visa-free entry. However, a Verification Letter of Invitation may still be needed in certain cases. Consult the local Chinese embassy for confirmation.
In light of recent developments, the application procedures for business visas to China have undergone substantial simplification. Most foreigners can now apply for an M/F visa using only the invitation letter issued by a Chinese company. Additionally, citizens of certain countries are eligible to enter China without a visa and stay for up to 144 hours or even 15 days.
However, it’s important to note that some applicants may still need to apply for a “Verification Letter of Invitation (邀请核实单)” when applying for an M/F visa to China. In this article, we will introduce what a Verification Letter of Invitation is, who needs to apply for it, and the potential risks.
It’s important to note that in most cases, the invitation letter provided by the inviting unit (whether a public entity or a company) is sufficient for M/F visa applications. The Verification Letter for Invitation is only required when the Chinese embassies or consulates in certain countries specifically ask for the document.
Meanwhile, it is also essential to note that obtaining a Verification Letter for Invitation does not guarantee visa approval. The final decision on granting a visa rests with the Chinese embassy abroad, based on the specific circumstances of the applicant.
Based on current information, foreign applicants in Sri Lanka and most Middle East countries – such as Turkey, Iran, Afghanistan, Syria, Pakistan, and so on – need to submit a Verification Letter for Invitation when they apply for a visa to China.
That said, a Verification Letter for Invitation might not be required in a few Middle East countries, such as Saudi Arabia. Therefore, we suggest that foreign applicants consult with their the local Chinese embassy or consulate to confirm in advance.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
- New Publication: A Guide for Foreign Investors on Navigating China’s New Company Law
- Lingang New Area in Shanghai Opens First Cross-Border Data Service Center to Streamline Data Export Process
- A Concise Guide to the Verification Letter of Invitation Requirement in the China Visa Process
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