Plus ça change, plus c’est la même selected, that means “the extra that modifications, the extra it’s the identical factor,” is a phrase coined by Jean-Baptiste Alphonse Karr, a French novelist and editor, usually shortened to plus ça change. On the subject of doing enterprise in China, it positive appears to be that approach, with companies tripping over rocks which were there for many years. Listed below are three perils of which we’ve been warning for a very long time, that proceed to bedevil these doing enterprise in China.
Contracting with the Fallacious Producer
We see this on a regular basis. A shopper will ask us to draft a contract with a Hong Kong firm, establishing the phrases beneath which sure manufacturing actions will happen. The factor is, for fairly a while now, little or no has been manufactured in Hong Kong. Even the tailors in Tsim Sha Tsui will ship your measurements throughout the border to Mainland for the stitching work; it isn’t unusual to see the handovers of completed fits and different clothes at border crossings.
This implies the Hong Kong firm is probably going only a intermediary. In some instances, it might be nothing greater than a shell firm utilized by a Chinese language producer to conduct enterprise, particularly banking, in Hong Kong. Or it might be that the Hong Kong firm owns a China subsidiary that carries out manufacturing actions. Both approach, the Hong Kong firm in all probability can’t guarantee compliance with the contract phrases, nor does it doubtless have belongings to fulfill a judgment if issues go poorly.
It’s also attainable to enter right into a contract with the incorrect Chinese language firm. Once more, you would be coping with a intermediary that in flip offers with the producer, or with a associated firm that doesn’t have authorized management over the manufacturing facility.
Not Having a Contract
Whereas having a contract supplies no assure of easy operations or favorable dispute decision, a well-drafted settlement can mitigate many dangers. What is sort of assured, although, is that if a dispute arises and also you don’t have a contract, you should have no likelihood of authorized recourse in China.
As well as, not having a contract makes it extra doubtless that issues will come up within the first place. Think about that your producer produces a batch of subpar items that it needs to pawn off on one in every of its purchasers. And say that the producer has signed contracts with some purchasers however not with you. It figures it has a 50% likelihood of getting away with stiffing these purchasers with whom it signed contracts, however, say, 100% of getting away with it in your case. It’s simple to foretell who they’ll goal.
Consider your trademark as a motorbike. Not locking it when visiting a high-crime space doesn’t imply that it will likely be stolen for positive. But when it did get stolen, you’d have nobody guilty however your self.
Trademark squatters are the bike thieves, and trademark registration is the lock. Squatters monitor overseas trademark filings and enterprise exercise to determine doubtlessly useful marks. They register these marks to extort cash from official model house owners. We have now lengthy warned about this difficulty, so China Regulation Weblog readers must be well-prepared towards trademark squatting.
From manufacturing partnerships, to contracts, to IP safety, corporations should keep vigilant towards China’s enduring pitfalls. The realities of doing enterprise in China could appear stubbornly persistent, however with the appropriate consciousness, preparation, and advisors, corporations can adapt and thrive. Do your homework, vet your companions, shield your IP, and seek the advice of certified authorized counsel – don’t grow to be one other cautionary story. China’s development story is way from over. Place your organization for achievement by studying from the missteps of others. Take management of your China technique now earlier than pitfalls take management of you.
Are there some other China enterprise realities that make you say plus ça change …?