China Esquire

Well, I said no politics this time.  I apologize.  It was too good to pass up a chance to talk about Joe Biden, the VP pick for Barack Obama and senator from Delaware (D).  On the Issues does a good job summarizing some of his stances by taking quotes from various debates and speeches he gave in the past.  While not a sure-fire indicator, it gives you some ideas into his thought process.

On China economic v. human rights policy:

Q: Many presidential candidates have talked tough about China and its human rights record in the past but, in the end, favor securing our economic interest rather than risk upsetting China. How would you balance human rights and trade with China?

A: I’ve been pushing, on the Foreign Relations Committee for the last seven years, that we hold China accountable at the United Nations. At the UN, we won’t even designate China as a violator of human rights. Now, what’s the deal there? We talk about competition in terms of trade. It’s capitulation, not competition. Name me another country in the world that we would allow to conduct themselves the way China has, and not call them on the carpet at the UN

Q: So you would call them on th[e] carpet?

A: Absolutely.

What does this tell us?  Very little other than that he too thinks human rights is a big issue.  But really, this is quite vague.

On Chinese imports:

If I were president, I’d shut down any imports from China, period, in terms of their toys — flat shut it down. Imagine if this was Morocco selling us these toys, we would have shut it down a year ago. They have mortgage on our house because Bush mortgaged us to a $1 trillion to them. He is responsible for this. This is outrageous.

So is Joe Biden working for Trader Joes?  No.  This has got to be one of either (1) the most pandering to American products safety rhetoric or (2) the most idiotic statements I’ve heard in a while.  Ever checked out Not Made in China Toys website?  Do you really think consumers will buy these toys instead of stuff made in China?  No way.  And any parent will tell you otherwise.  Cooler, more innovative, and cheaper toys?  They will sell any day.   That’s economics.

And if Biden really thinks that he alone can shut down Chinese imported toys, he’s going to have another one coming to him.  It won’t happen.  So I really hope that this is overblown rhetoric.  If not, then perhaps a course in basic macroeconomics would be necessary.

So is George W. really responsible for the national trade deficit?  Some.  But really…  did you expect anything different?  American consumers want cheaper prices.  Guess where we get those products?  If you said Vietnam, I’d say maybe in the future.  But for now, China is our go-to place for sourcing.  Is it really the president?  Or is it also global economic forces, multinational corporations, and consumers who want to save money?  I’d take the latter answer any day.

At least Biden has the rhetoric thing going for him.  Just like Obama…

So how would Joe Biden accomplish such a task?

Q: Would you call for tariffs to protect American consumers from unsafe products from China? Are you willing to go there?

A: I’m not. No, I’m not willing to go there. You don’t need to start a tariff war. All you have to do is enforce the law. Enforce the law.

Well, the guy has a law degree.  So I need to ask: what law are you talking about?  Is this really a China issue?  Or perhaps the US FDA needs to move its tail on those inspections that it never did.  Or perhaps large conglomerates need more QC?  Is this really a legal enforcement issue?  As you can tell, I think the answer is no.  It’s not that simple.

So yes, Joe Biden has been recognized a foreign policy leader.  What sort of leader, that remains to be seen.  But as to his public China stances, I must say: no thank you.  But then again, I’m not surprised Obama chose someone like this…

Got to love the AFL-CIO’s hand in American politics.  Normally, I couldn’t care all that much about what the unions say during the presidential politics season because they don’t say anything interesting.  (around these parts in San Francisco, the unions end up being more of a nuisance because of periodic picketing and because many of my friends in management complain that they have these employees also have the worst work ethic)  So surprise surprise when I saw this CNN blog post today.  Apparently, 50,000 of these things are going out today.

So does anyone really believe that John McCain is sending 2.3 million jobs to China?  That seriously has to be one of the most ignorant views that you can take.  Does any really believe that Barack Obama, rockstar he may be, can bring those jobs back to America?  Sorry, they are gone.  The global village concept may not be in full swing, but multinational corporations know better than to bring jobs back to America.  If not China, there’s always Vietnam, India, etc.  Sourcing is cheaper.  Period.  (okay, not always, but usually)  No president is going to change this trend anytime soon.  Either McCain or Obama.  (sorry folks)  I’ve always said its up to the people in the U.S. to learn value added services and industries.  And that is in fact what has happened over the years as a result of this global sourcing move.  And so I just had to laugh at this ad because I found it so absurd.

What is more disturbing?  Some of the comments that appeared on the post.  Let me quote some:

expose the fruad Mcempty suit for the fool he is.
All for shipping American jobs abroad.
he and his wife have gained millions from selling American jobs.

THANKS AFL-CIO!!!! Keep up the great work and just think you didn’t even have to sink to the repuglicans low and lie, you just simply told the truth. hahahahahah
And john williams san diego, ca. – don’t forget bushy and cheyney and keating 5 (mccainy)

I don’t know why anyone would believe this frankly.  But then again, this is America.  At least many commenters did appear to understand economics:

Haha. Are they serious? One man is to blame for the loss of 2.3 million jobs to China? And that one man is a Republican Senator from Arizona!?! Pfftbahahaha. I wouldn’t expect anyone in the AFL-CIO to understand global economics but come on. If someone is offering to do a service cheaper and more efficient wouldn’t you go to them? It’s why people shop at Wal-mart and not at the cute mom and pop store on the corner. Give me a break. “They took our jobs!”.

And another:

WOW, implementing trade aggreements = job losses. That’s one hell of a conclusion.

DHL maybe chinese, but uh, I don’t see chinese people dropping off packages at my door.

Jobs go overseas because American Unions push them away. That’s right, the truth hurts. Unions might offer some protection to the average worker, but it also keeps the productivity down for employers. 10% of the hardworkers carry the load of the 90% that are slackers. Employers are forced to cater to the lowest demominator and the only person that really gains from it is the slackers and the union bosses.

Well, if American voters look dumb to you in China, perhaps it’s because they may be…  I think I will move back to law and business again tomorrow.

More people are coming to China looking for gold…  and no, I don’t mean the Olympics or gold medals.  (though I am sure Michael Phelps is quite happy with the “Great Haul of China” as I’ve seen it termed)  Nope.  Instead, Philadelphia based lawfirm Dechert LLP is going to start a Beijing office as early as September 1…  in a few weeks basically.  From the Legal Intelligencer:

The Olympic Games aren’t the only thing going on in Beijing.

Just a few months after Dechert opened a Hong Kong office in January, the firm received a license to practice in Beijing and will officially open up shop in the city Sept. 1.

Firm Chairman Barton J. Winokur said the firm received the license to open in Beijing in the first quarter of 2008. A U.S. partner was designated, under the local rules in China, as the managing partner of the office and had made a few trips there.

The partner, who Winokur didn’t name, was serving in an interim capacity while Dechert looked for attorneys on the ground in Beijing.

Winokur said the office would open Sept. 1 with one new partner, whom he said he couldn’t name until that time. He said he anticipates one or two associates joining shortly thereafter.

The Hong Kong office has been adding attorneys pretty much every month since it opened, with the expectation that it will bring a few more on in September.

Unnamed partner.  Very interesting.  It means that Dechert is probably poaching someone from another firm, and its likely that the poaching isn’t quite public yet.  I guess we’ll know in a week or so who that might be. Of course, he will have to be practicing in the following (rather broad) practices:

According to a statement Dechert issued, the Beijing office will represent domestic and international companies, financial institutions and private investors in corporate and transactional matters. Those might include domestic and cross-border mergers and acquisitions or joint ventures, private financings, licensing agreements and contracts and corporate governance issues.

Another interesting part:

Winokur admitted, however, that the Asian markets are tough places to find top talent as so many Western firms are looking to make a name for themselves in the region. There are only so many people who are high-level attorneys, fluent in Chinese but have Western training and able to meld the Eastern and Western cultures, he said.

Sounds like Dechert wants domestic work.  High level attorneys fluent in Chinese?  And with Western training?  And is a culture bridger?  Hmm…  frankly, there aren’t too many of those such people out there.  Dechert is going to have to settle for less or pay a whole lot more than it should for the top local talent.

Anyways, I just had to take a break from the Olympics.

CNN Money ran an article today entitled, “China wholesale prices surge”.  Of course, the news isn’t really all that new to anyone following the effects of inflation in China over the past year or so.  However, the rate of inflation is rather disturbing: its the highest rate in 12 years.

China’s wholesale inflation in July accelerated to its highest rate in 12 years, adding to the government’s headaches as it tries to rein in surging consumer prices, according to data reported Monday.

The producer price index was up 10% in July over the same month last year, the highest rate since 1996, the Xinhua News Agency said, citing the government’s statistics bureau. The index measures the price of goods as they leave the factory.

Analysts have warned that rising costs for energy and raw materials would push up Chinese wholesale prices, squeezing thin profit margins for companies and adding to pressure for retailers to raise consumer prices. The government is due to announce July consumer inflation on Tuesday.

The July rise in the producer price index, or PPI, exceeded analysts’ expectations and was a sharp jump over June’s 8.8% rate.

The cause of such inflation?

Producer prices for raw materials, fuel and power rose 15.4% in July over the same month last year, up from June’s 13.5% rate, Xinhua said.

So again, nothing terribly new.  Steel prices, oil/gasoline prices, etc. have been going out the roof over the past year.

What does this mean?  Watch out for your suppliers wanting to raise rates on you.  In fact, if they aren’t doing it already, don’t be surprised to see it happening in the near future.  Also watch out for future costs of sourcing and production to increase.  What I’m saying isn’t exactly rocket science.  But the warning is still worth making given this news.

Don’t agree with me?  CNN Money also ran a companion article entitled, “In China, outsourcing is no longer cheap” that I will try to get around to talking about tomorrow.

Saw an interesting article in The Recorder, which is an affiliate of the National Law Journal and the American Lawyer. The article is entitled, “ MoFo Got Game(s)” and discusses the legal work that the firm did for the Olympics, which started today:

When the Olympics start tonight, Morrison & Foerster partner Kelly Crabb and some of his colleagues will be able to breathe a little easier.

Over the last six years, Crabb and Steven Toronto, the head of the firm’s Beijing office, have led about 40 lawyers from MoFo offices worldwide in representing the Beijing Organizing Committee for this year’s Games.

The firm, the BOC’s only international counsel, is handling a wide range of issues, including helping protect the intellectual property, a major source of funding for the organization.

Wow, only 40. I am surprised as I thought there would be even more work than that. Still, I am sure that MoFo has made out quite well from its exclusive deal with the BOC.

The firm began representing the committee in 2002 and Crabb, an entertainment lawyer in Los Angeles, estimates that he has spent at least 40 or 50 percent of his time in any of the intervening years on BOC matters. And while it has been good for his practice, it has also been good for his firm.

“It’s been a very helpful calling card for conversations with potential clients,” said firm chairman Keith Wetmore. MoFo will also use the event to entertain clients, he said, and has run its own series of internal Nintendo Wii competitions “to keep the games in the forefront of the minds of our personnel.”

It seems like this could be a boon to the firm. After all, MoFo, while it has had a China presence, has had a hard time trying to distinguish itself against other firms that are out there like Paul Hastings, which is one big fish in China. Even friends who were at MoFo have admitted that MoFo’s China practice, while growing, is not a top tier practice there… yet. Given that the Olympics has been such a big deal, this is great PR for the firm.

And while Olympic IP includes cute cartoon mascots, Crabb says the government took trademark matters very seriously. The city of Beijing and then the national government enacted laws protecting the Olympic symbols and followed up with strong enforcement, Crabb said.

“I listened to my client give a talk, and during his talk he said in 2007 there were 450 cases of enforcement,” Crabb said. “By April of this year, there were already 500 cases.”

Ah yes, it wouldn’t be the Olympics without the Fuwa, or in English, the “Friendlies”. (of which I note that only one of them is even recognizable as a Panda–Jingjing) China takes these little guys and gals very seriously. And while a little annoying at first, they can even grow on you over time. (scary)

I was actually shocked at the lack of piracy of Olympics goods while I was there since I wanted to find some cheap T-shirts for my friends’ children. Nada around where I was in Beijing, Shanghai, Hangzhou. So I applaud MoFo and the Chinese government for their vigilance in protecting the IP regarding the Fuwa. I can only hope that the government will realize that this sort of vigilance toward other IP is just as useful as well.

I don’t know about you, but I will be enjoying the games myself.  Hopefully they won’t interfere with posting too much…

Frivolous lawsuits.  First in America, then in China, and now in Spain.  Interesting indeed.  The AFP is reporting that Spain’s top criminal court will hear a suit “from Tibetan rights groups that accuses Chinese leaders of genocide in connection with the unrest that erupted in the region in March.”  ( h/t China Digital Times…  Stan Abrams made a passing reference to this as well)  Some of the juicy details:

The lawsuit “denounces the new wave of oppression that began in Tibet on 10th March 2008, and just goes to prove that acts of genocide continue to be committed against the Tibetan people,” the Tibet Support Committee said in a statement issued when it filed the complaint last month.

It also “denounces China’s manipulation of the global war against terrorism in its attempt to justify and cover up crimes against humanity committed against the Tibetan people.”

Other Chinese officials named in the suit were Minister for State Security Geng Huichang, Communist Party Secretary in Tibet Zhang Qingli, Politburo member Wang Lequan, Ethnic Affairs Commission head Li Dezhu, People’s Liberation Army Commander in Lhasa General Tong Guishan and Zhang Guihua, political commissar in the Chengdu military command.

The groups filing the suit were ordered to appear before the court on September 4 and 10.

My thought: shouldn’t this lawsuit be in China?  So what is the basis of the lawsuit to proceed in Spain and not in China, you might be asking:

It was admitted under the principle of “universal competence” adopted by the Spanish judiciary in 2005 and under which Spanish courts can hear cases of genocide and crimes against humanity wherever they occur and whatever the nationality of the defendant.

Spain’s National Court, which handles crimes against humanity and genocide, said it “accepts the competence of Spanish jurisdiction to investigate the reported events.”

Wow, universal standing and/or justiability.  You’ve got to be kidding me.  I mean, really…  what does Spain have to do with alleged Chinese oppression?  Nothing.  So what if the Chinese government decides not to show?  And the Spanish court makes some sort of legal remedies?  Good look enforcing that one.

That has got to be one of the lamer PR stunts I’ve seen before the Olympics comes around.  But it makes for fun news I suppose.  My prediction?  This one is going nowhere…  like other frivolous lawsuits.

But this time around, Blackstone Group isn’t causing a huge rupture on the internet about China taking a stake in Blackstone.  In fact, you would barely even have noticed it in CNN Money’s recent article about Blackstone beating expectations.  The article reads:

The company is also increasing its international focus. Blackstone announced the opening of a new office in China yesterday

Nonetheless, James noted that Blackstone could soon shift to making investments in the U.S. financial services sector, particularly regional banks that are desperate for capital as a result of rising loan losses.

Do you note something here?  The author (or the editor) didn’t even bother to finish the sentence here about  Blackstone’s “increased” international focus.  Why?  Perhaps because (1) this is probably pretty old news ever since China took a stake in Blackstone and (2) because all that they could write about was Blackstone opening a new office in China.  With not much else in the way of details.

Here is an excerpt from Blackstone’s press release about its new Beijing office:

Commenting on the office opening and the appointment of Mr. Fu, Mr. Stephen A. Schwarzman, Chairman, CEO and Co- Founder, of Blackstone, said: “The opening of our Beijing office and the appointment of Shan further underlines our deep commitment to China and the Chinese market. We welcome Shan to the firm and we look forward to working together.”

Mr. Antony Leung, Blackstone’s Chairman for Greater China, added: “We see tremendous opportunities both in China and to partner with Chinese companies outside of China. The opening of our Beijing office and the appointment of Shan gives us another great resource to take advantage of those opportunities.”

In other words, we don’t have anything concrete to really write home about.  Yet.  Don’t get me wrong…  I see Blackstone doing a lot with China in the future.  Just not yet…  and that’s the agonizing thing.  You put out a press release.  It even gets mentioned by CNN Money.  No details.   We’ll see what the future holds…  just don’t hold your breath for too long.  Hopefully something dramatic would happen soon to make me eat my words.

I wanted to do a quick plug (and yes, I know that China Law Blog did one last month) for TRACE International’s BRIBEline.  Both because I was asked by the folks at TRACE International and because I find the idea of an online watchdog site to be very intriguing.

Here is how TRACE is plugging their services:

TRACE launched a website that allows anonymous and secure reporting of bribe demands.  BRIBEline, available at www.bribeline.org, is a secure, multi-lingual website through which companies and individuals can anonymously report the bribe demands they receive. Making a report on BRIBEline is quick and easy. The online survey is available in Chinese and 20 other languages. Completing the survey involves answering no more than ten multiple-choice questions. No names are requested or collected, the individual is not asked if the bribe was paid, and reports made to BRIBEline are not used for investigations or prosecutions.

So what’s the point of such a service?

we hope to get a grip on what groups are demanding bribes, where they are demanding them, and under what circumstances.  Astonishingly, there is no other source collecting this data, and the World Bank (which has endorsed BRIBELine and has a link to the site on their web site) stresses the importance of such data.

Sounds like a cool concept to me.  Especially since I had a string of posts covering some topics on the FCPA (Foreign Corrupt Practices Act) which makes bribery to a foreign government official illegal.  Remember: people who work at Chinese SOE’s may very well count as government officials, and so bribes to them are illegal.

Because I am for straight and honest business, I think what TRACE is doing also serves as a deterrence for Chinese businesses to engage in taking bribes.  Sure, it won’t end the practice, but at this point, anything helps.  Really.

With the 2008 Olympics only days away, Beijing’s air quality is under close international scrutiny. But despite efforts to clean it up, air pollution still poses a serious issue for both China and the world.

Got an email from Asia Society Online about their new collaboration between the Center on US-China Relations.  Asia Society’s project is entitled “ Clearing the Air: China’s Environmental Challenge” and covers:

the overall causes of the problem and what can be done about it.  The multimedia project includes Longing for Blue Skies, a video narrated by Asia Society’sOrville Schell which features the work of 12 leading photojournalists, a daily Beijing photo diary documenting “blue sky days,” as well as statistics and other resources.

Looks very interesting, and it has an online comment/forum section as well.