Council Activities

Hong Kong Members Discuss Environmental Compliance, Tech Imports

Members of the Council's Hong Kong Legal Committee heard from ERM's James Pearson and GE International's Ellen Procter on environmental compliance and liability in China on November 16. Pearson reviewed the PRC's environmental laws and regulatory framework, noting discrepancies between policy and implementation at the local level. Procter described GE's elaborate system for monitoring environmental compliance and training its environmental, health, and safety staff in China. At a December 14 meeting on China's technology import registration regulations, Elizabeth Bang of Dorsey & Whitney highlighted the significance of complying with the rules in light of the current government campaign tightening control over foreign exchange. Bang detailed the registration procedures and alerted members that the draft Contract Law currently being reviewed by the NPC would double the government's review period of registrations to 60 days. Patricia To of E. I. du Pont de Nemours & Co. reviewed her company's ongoing experience with a registration in Shenzhen.

Recent Forex Regulations, Y2K Top Shanghai Agenda

The Y2K (Year 2000) Working Group of the Council's Shanghai office held its second meeting on November 10. Zhou Ximin and Jin Danhua of the Shanghai Office of the National Economy & Informization Leading Group explained that the Shanghai government has set a deadline of September 1999 for diagnosing and fixing all Y2K problems. The municipal group, which has assembled a 13-member team of experts, will primarily be responsible for managing this effort. The Council's Shanghai office also held a meeting in November to help members understand the spate of PRC regulations related to foreign exchange that have been issued since last August. Matthew Wong of PricewaterhouseCoopers provided an overview of the regulations and their impact on foreign companies operating in China. He Yunlan from the Waigaoqiao Free Trade Zone Development Co. Ltd. commented on the impact of these regulations on companies operating in the zone. Waigaoqiao's He noted that pure trading companies in the zone can no longer freely convert foreign exchange but can still make conversions through a Chinese import-export company. A trading company, for instance, could sell imported goods to the Waigaoqiao Bonded Market or to another import-export company and receive payment in dollars. The bonded market would then sell these goods--considered domestic goods--back to the trading company. The bonded market or import-export company would be acting as an agent and receive a commission of about 0.2 percent. Distribution companies and manufacturing companies registered in the zone may still convert foreign exchange as long as they can provide all the proper documentation to the banks, she said.

Talking M&A in Beijing

Company representatives gathered in Beijing on December 11 to hear E. Anthony Zaloom of Skadden, Arps, Slate, Meagher & Flom speak about acquisitions of state-owned enterprises (SOEs). Zaloom outlined the differences between such deals in the United States and China. Naturally, a principal distinction is the involvement of players usually absent from US business negotiations--central and local government officials, and creditors. Unlike in the United States, the management of the Chinese party tends to negotiate without many lawyers or tax consultants. The basic documents of the asset purchase agreement also differ. For instance, in the United States the seller must disclose all of the company's details, but an SOE in China can withhold certain information, including the identities of its creditors. In essence, an acquisition in China entails buying the assets of the SOE, not long-term liabilities such as employee pensions.