The China Venture
The China Venture The China Venture
its assets. The regulations with respect to the formation, the governance structure and dissolution of companies follows civil law tradition. 2.2.9 Conclusion The Chinese legal system has been developing rapidly since the start of its reform. As discussed in this paper it cannot be denied that the system is still full of contradictions and problems. However, it is also true to say that China has achieved a lot in many respects over a relatively short period of time. The most important factor is that the Chinese legal system has embarked on the right path according to international sta ndards. In general, the legal system in China is still in a state of flux. Therefore, Readers are encouraged to frequently check new laws and regulations and their amendments to ensure the accuracy of the legal posit ion on a particular issue of Chinese law. The following websites are highly recommendable for this purpose: http://www.qis.net/chinalaw and http://www.chinatoday.com/law . Reading Dr. Loretan’s exposition on the Chinese legal system helped Paul to appreciate the legal difficulties he felt in China while trying to take over the running of the China venture. The Chinese legal system has to be understood within the context of Chinese history, culture and society. The process of thinking through the business has been extremely difficult for Paul. There are so many things not spelled out in legal terms even though the responsibilities and obligations of all parties involved are clear. For example: What if a party did not carry out its obligations? There seems to be no legal redress. This is troubling, even frightening. Yet to Mr. Zheng, this was never a problem. “We can trust them”, he would always say. Paul realised that the Chinese legal system is based on a culture and history quite different from that of his home country. Indeed, the new western based laws which have been introduced are probably not part of existing social order which defines a set of mutually acceptable rights and obligations for all parties. This mutuality is often assumed. Some of them may be spelled out to ensure clarity for all but certainly not for the purpose of legal enforcement. In other words, the working out of agreements is the result of social cohesion and mutual understanding among parties involved, and not the result of legal enforcement. 18
Things seem have to become a lot clearer and explicable. There is clearly much more to learn and understand about China and the China venture... The next paper focus on Business Financing in China. Cinderella Freiin von Dungern, now a doctoral candidate working on China, wrote: 2.3 Business Finance in China (by Cinderella Freiin von Dungern) For investing in the Asian countries, the range of financing services is of significant importance. Due to the enormous economic growth and increasing welfare in this region, the efficient allocation of capital becomes an essential issue for further economic development. The importance of the financial sector in facilitating the transfer of resources from savers to investors is widely acknowledged. Efficient financial systems facilitate better mobilisation and use of resources, which accelerates the process of economic growth. 22 The emergence of new markets in Asia, South America and Eastern Europe as well as the development of new free trade zones and economic areas have enlarged the arena not only for investments and products but also for client acquisition. Furthermore, the deregulation and liberalisation of financial markets have speedily led to the rapid internationalisation of business. On the supply side the disintermediation of financial and capital markets has created numerous new products, and strategies to capture and serve new clients are emerging. At the same time, the demand side is undergoing structural changes, primarily induced by clients becoming more sophisticated. 23 The People’s Republic of China (hereafter „China“), with the highest population in the world, has the potential to become the biggest economy in the next century. Investing in China does not only depend on the stability of the legal system and on the openness of the market, but also on the financial stability and transparency. The financial crisis in Asia put the focus on the importance of further financial reforms. But due to the reticularly structured Asian economies, the potential spill-over-effects seriously interfere with efficient reforms. The big discrepancies between theory and reality became quite obvious. In spite of the financial crisis in Asia, foreign direct investment (FDI) continues to pour into China. The proportion of investments made by US and Europe-based multinationals is increasing, while the nature of the investment deals being struck is beginning to mature. The 22 Zahid, 1995 b. 23 Ehlern, 1997, p. 3. 19
- Page 1 and 2: The China Venture: Business Environ
- Page 3 and 4: Table of Contents List of Figures .
- Page 5 and 6: 3.2.3.2 Special Funds for Setting U
- Page 7 and 8: 3.4.1.1 National Culture ..........
- Page 9 and 10: List of Tables TABLE 2-1: THE AREAS
- Page 11 and 12: GBP Pounds Sterling GDB Guangdong D
- Page 13 and 14: 1. Introduction: The China Venture
- Page 15 and 16: After a short discussion with the p
- Page 17 and 18: co-operate with other firms, especi
- Page 19 and 20: The Chinese operating legal system
- Page 21 and 22: First of all, Britain’s predomina
- Page 23 and 24: democratic centralism, all governme
- Page 25 and 26: The courts are the state organs exe
- Page 27 and 28: more than three hundred intermedia
- Page 29: 2.2.8 Company Law China’s first n
- Page 33 and 34: 2.3.1.1 Financial sector developmen
- Page 35 and 36: securities, trading, initial public
- Page 37 and 38: underdeveloped compared with market
- Page 39 and 40: established in January 1996 by 59 p
- Page 41 and 42: Chinese Banks Foreign Banks Financi
- Page 43 and 44: system formulation has been put on
- Page 45 and 46: The separation of production and co
- Page 47 and 48: swap centres (see also above). From
- Page 49 and 50: investors with little experience an
- Page 51 and 52: them, while a branch with a shortag
- Page 53 and 54: Loans, public offerings of shares,
- Page 55 and 56: is often to acquire foreign capital
- Page 57 and 58: 2.3.3.2 Debt financing As getting t
- Page 59 and 60: the approval of special authorities
- Page 61 and 62: control compared to national enterp
- Page 63 and 64: usiness in China and related issues
- Page 65 and 66: 3. Pre-Entry Strategic Consideratio
- Page 67 and 68: While the testing for the general r
- Page 69 and 70: of relevant contacts to suppliers a
- Page 71 and 72: partner companies with free servici
- Page 73 and 74: strengths which his own company lac
- Page 75 and 76: Central Committee of the Communist
- Page 77 and 78: environment for foreign investment
- Page 79 and 80: legal and regulatory environment of
its assets. <strong>The</strong> regulations with respect to the formation, the governance structure and<br />
dissolution of companies follows civil law tradition.<br />
2.2.9 Conclusion<br />
<strong>The</strong> Chinese legal system has been developing rapidly since the start of its reform. As<br />
discussed in this paper it cannot be denied that the system is still full of contradictions and<br />
problems. However, it is also true to say that <strong>China</strong> has achieved a lot in many respects over a<br />
relatively short period of time. <strong>The</strong> most important factor is that the Chinese legal system has<br />
embarked on the right path according to international sta ndards.<br />
In general, the legal system in <strong>China</strong> is still in a state of flux. <strong>The</strong>refore, Readers are<br />
encouraged to frequently check new laws and regulations and their amendments to ensure the<br />
accuracy of the legal posit ion on a particular issue of Chinese law. <strong>The</strong> following websites are<br />
highly recommendable for this purpose: http://www.qis.net/chinalaw and<br />
http://www.chinatoday.com/law .<br />
Reading Dr. Loretan’s exposition on the Chinese legal system helped Paul to appreciate the<br />
legal difficulties he felt in <strong>China</strong> while trying to take over the running of the <strong>China</strong> venture.<br />
<strong>The</strong> Chinese legal system has to be understood within the context of Chinese history, culture<br />
and society. <strong>The</strong> process of thinking through the business has been extremely difficult for<br />
Paul. <strong>The</strong>re are so many things not spelled out in legal terms even though the responsibilities<br />
and obligations of all parties involved are clear. For example: What if a party did not carry out<br />
its obligations? <strong>The</strong>re seems to be no legal redress. This is troubling, even frightening. Yet to<br />
Mr. Zheng, this was never a problem. “We can trust them”, he would always say.<br />
Paul realised that the Chinese legal system is based on a culture and history quite different<br />
from that of his home country. Indeed, the new western based laws which have been<br />
introduced are probably not part of existing social order which defines a set of mutually<br />
acceptable rights and obligations for all parties. This mutuality is often assumed. Some of<br />
them may be spelled out to ensure clarity for all but certainly not for the purpose of legal<br />
enforcement. In other words, the working out of agreements is the result of social cohesion<br />
and mutual understanding among parties involved, and not the result of legal enforcement.<br />
18
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