Archive for china

Federal Reserve Approves First US Bank Acquisition in the United States by a Chinese Bank

Posted in China - US Relations, Chinese International Trade, Chinese Purchase of US Assets with tags , , , , , , , on 05/10/2012 by David Griffith

On May 9, 2012, the Board of Governors of the Federal Reserve System (the “FRB”) issued an order (the “Order”) approving the acquisition of 80% of the shares of common stock of The Bank of East Asia (U.S.A.) National Association (“BEAUSA”), by Industrial and Commercial Bank of China Limited (“ICBC”). This Order marks the first occasion on which the FRB approved the acquisition of a U.S. bank by a Chinese bank since the Bank Holding Company Act of 1956 (the “BHC Act”) was amended by the Foreign Bank Supervision Enhancement Act of 1991 (“FBSEA”). The FBSEA, which increased federal supervision of foreign banks operating in the United States, requires the FRB to make a finding that a foreign bank seeking to acquire control of a U.S. bank is subject to comprehensive supervision on a consolidated basis (“CCS”) by its home country supervisor. The Order marks the first time that the FRB has made a full and unqualified CCS determination for a Chinese bank to acquire control of a U.S. bank, although it has previously made a so-called “limited” CCS determination in the context of Chinese banks establishing U.S. branches.

On November 8, 2007, the FRB approved an application by China Merchants Bank Co., Ltd. (“CMB”) to establish a branch in New York, New York, the first such approval for a Chinese bank since the FBSEA. The FRB made a “limited” CCS determination pursuant to a provision that allows the FRB to approve a branch application if the appropriate authorities in the home country of the foreign bank are actively working to establish arrangements for the consolidated supervision of the bank submitting the application, and all other factors are consistent with approval. The FRB’s approval of CMB’s branch application opened the door for other Chinese banks to apply for branches in the United States. Thereafter, branch approvals based on similarly limited findings of CCS were granted by the FRB to ICBC in November of 2008 and to China Construction Bank Corporation in March of 2009. The “limited” CCS determination available for a branch application is not available for an application to acquire a U.S. bank under Section 3 of the BHC Act, which requires the FRB to make a full and unqualified CCS determination.

The FRB’s evaluation of whether ICBC is subject to CCS was foreshadowed in the FRB’s August 31, 2010 determination that CIC, an investment vehicle organized by the Chinese government, qualified under the CCS standard in the context of a Section 3 application for CIC’s non-controlling, but greater than 5%, investment in the shares of common stock of Morgan Stanley. The FRB explicitly noted, however, that that finding was based on both the unique nature and structure of CIC and the noncontrolling nature of the investment under consideration in that application. In addition, the FRB noted that, in evaluating a proposal by a Chinese bank to acquire a U.S. bank, the FRB would evaluate whether that Chinese bank is subject to CCS.

In the Order, the FRB detailed its exhaustive analysis on the CCS of ICBC by the China Banking Regulatory Commission and other regulatory authorities including, among others, the People’s Bank of China, the State Administration of Foreign Exchange, China Securities Regulatory Commission and China Insurance Regulatory Commission. The Order also noted the International Monetary Fund’s most recent determination that China’s overall regulatory and supervisory framework adheres to international standards. In addition, the FRB noted China’s efforts on combating money laundering and terrorism financing and found that the anti-money laundering efforts by ICBC and the Chinese regulators are consistent with approval.

The Order should create the opportunity for other leading Chinese banks to acquire U.S. banks of a relatively modest size. Although the CCS determination is nominally bank-specific, in practice a CCS determination for one bank in a country is typically precedential for all similarly situated banks in that country. In addition, because the FRB takes the position that a CCS determination is required before a foreign banking organization can obtain financial holding company (“FHC”) status, the Order should pave the way for Chinese banks and their holding companies that are subject to the BHC Act to become FHCs.

 

International Patent Applications in China

Posted in Chinese Legal Issues with tags , , , , , , , , , , , , , , , on 01/16/2012 by David Griffith

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Courtesy of International Business Law Services

China has joined the growing list of countries allowing electronic filing of patent applications; the first day of the service was May 1, 2007.  Sophisticated software enables electronic filing of international patent applications with cooperation of the World Intellectual Property Organization’s (WIPO), Patent Cooperation Treaty (PCT). The WIPO is the “cornerstone of the international patent system” and its dynamic system, offering quick, flexible and economical approach to establishing patents in nearly 140 countries. In regards to China establishing this Intellectual Property (IP) milestone, and also the great interest in Chinese business, these questions will be answered: What Software is used for the Electronic Patent Process? How Does PCT-SAFE Filing Work? What Benefits are gained by Filing with the Electronic System? How Big Have Chinese Patent Applications Become? What IP Legislation does China Have for Patent Protection?
China newly implemented software for the electronic filing of international patent applications is the foundation of their entire patent filing system, which makes a formerly clunky process smooth and risk-free. The software, called “PCT-SAFE” (“Secure Applications Filed Electronically”), has been in use for awhile and working in patent offices across the globe, such as Australia, Denmark, the European Patent Office (EPO), Finland, France, Germany, Japan, Malaysia, Netherlands, Philippines, Poland, Republic of Korea, Romania, Slovakia, Spain, Sweden, United Kingdom and the United States of America.  Since February 2004, the software has added the superb capability of allowing businesses and inventors the ability to seek multiple-country patents by electronically submitting an international application under the PCT. In this instance, the WIPO acts as the receiving office of the patent filed.
How Does PCT-SAFE Filing Work?
According to the WIPO, the PCT-SAFE system has four major components:1)  PCT-SAFE client for preparing the PCT request form: in case of e-filing, it is also used for securely transmitting the entire application to the receiving office;2)  PCT-SAFE Editor: a word processor-like tool that enables users to prepare the text and drawings of a PCT application in electronic format (the application will be saved in Extensible Markup Language (XML)) for e-filing purposes;

3) Security services and a Public Key Infrastructure (PKI);

4) A receiving server for use in receiving Offices that includes a back-end system to print and securely store the received data.

 

What Benefits are Gained by Filing with the Electronic Patent System?
Chinese patent applicants who organize and submit PCT applications via electronic format will help the patent office by ensuring a more orderly, timely and efficient process. This cuts down on paper handling and eliminates traditional mail routines. In return, WIPO will allow the following, (i) fee reductions in some instances; (ii) eliminated or reduced costs for printing, copying and mailing the applications; (iii) Near instantaneous notification when the application is received and processed; and (iv) Easy and secure transmission of international applications.
How Big Have Chinese Patent Applications Become?
China is the 8th largest country for filing PCT applications and this grew by 57% from 2005 to 2006. Beyond this, the WIPO World Patent Report 2006 stated that China is now the 4th largest patent office in the world in terms of total patent applications filed.  While Chinese residents had an individual patent filing increase of greater than five-fold from 1995 to 2004, resulting in 65,786 patents placed; worldwide, a mere five patent offices account for three-quarters of all patents filed across the globe. The five top patent filers nations are the United States, Japan, South Korea, China and the European Patent Office (EPO).
What IP Legislation does China Have for Patent Protection?
China has placed a great deal of importance on patent registration (PR) legislation since the implementation of a legislative reform intending to protect fair market competition, safeguard market economic freedom and order, and promote economic and cultural development.Beginning in 1984, China has toiled to create and implement a reformed Patent Law, which was then amended in 1992. Despite starting late with IPR Legislation, China has used international models of successful patent legislation to draw on for IPR legislation, putting a Chinese slant upon the process. To help the effort, China joined the World Intellectual Property Organization, the Paris Convention for the Protection of Industrial Property, the Strasbourg Agreement Concerning the International Patent Classification, the Locarno Agreement Establishing an International Classification for Industrial Designs, and has also signed reciprocal agreements for IPR protection with the U.S. and other countries.The Chinese Supreme Court has formulated and established almost twenty judicial interpretations and explanatory papers in the last several decades, which were based upon apparent need arising from Patent cases. These include: “the circular on Several Issues concerning Trials of Patent Cases(February 1985), the Circular on the Issues of Geographical Jurisdiction over Patent Dispute Cases( June 1987 ), the Circular on Several Issues concerning Trial of Cases Involving Patent Application Disputes (October 1987 ), the Answers to Several Questions on Trial of Patent Dispute Cases ( December 1992 ), the Circular on Further Strengthening Judicial Protection of IPR  (September 1994 ), and the Opinions on the Correct Handling of Several Issues in Cases Involving Science and Technology Disputes ( April 1995 ).

The Expansion of China’s Deserts

Posted in Chinese Environment with tags , , , , , , , , , , , on 11/04/2011 by David Griffith

Courtesy of The Asia Society.

The expansion of China’s deserts is taking a heavy toll on the lives and livelihoods of people all over the world’s most populous country. A new video from Asia Society’s China Green project documents attempts by ordinary citizens, NGOs and the government to counter the growing threat of “desertification.”

Watch now

US-China Relations and the Role of Education

Posted in Chinese Foreign Relations with tags , , on 10/14/2011 by David Griffith
The People's Republic of China (green) and its...

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US-China relations will be an important cornerstone for many sectors in the coming decades. A panel representing business, higher education, and public policy sound off on what today’s students ought to know and be able to do.

Watch this panel discussion, courtesy of the Asia Society.(45 min., 58 sec.)

US-China Relations and the Role of Education.

Yang Lan: The generation that’s remaking China

Posted in Chinese Demographics with tags , , , , , on 10/07/2011 by David Griffith

Another great video from Ted.com talking about the new generation of men and women who are radically remaking CHINA, hosted by Yang Lan, a journalist and entrepreneur who’s been called “the Oprah of China”.

China: No Longer a Hidden Gem

Posted in Chinese Economy with tags , , , , , , , , , on 09/25/2011 by David Griffith

by Anthony Noto Mergers & Acquisitions

Long gone are the days where globetrotting bankers could view China as a wide open playing field for doing deals, according to a panel at ACG’s Business Conference in Los Angeles yesterday.

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During PricewaterhouseCoopers LLP’s “Doing Smarter Deals in Emerging Markets” discussion at the Beverly Hilton Hotel Wednesday afternoon, the consensus among the panelists was that even though the middle market has arrived in droves throughout China, and their Eastern counterparts are savvier dealmakers, there are still lingering cultural differences that make M&A in the region difficult.

“It’s no longer a hidden gem,” PwC’s Alan Chu told those in attendance regarding China’s evolution. “Capital is not an issue with many of these companies.”

Fellow panelist Hanson Li of Hina Group agreed.

“Companies in China are much more sophisticated and secure,” he said. “Why should they have a low valuation?”

For that, he pointed to China’s ability to grow its wine and spirits industry, as well as capitalize on the sale of women’s garments, referring to E-commerce lingerie company La Miu as “the Victoria’s Secret of China.”

Chu chimed in, calling aerospace the industry to watch for Chinese dealmakers, adding that M&A is more about “collaboration and globalization” between China and U.S. companies rather than the emerging market stereotype of doing deals quickly.

“What defines success in China is people on the ground,” adds panelist Colin McIntyre, a PwC partner, stressing the importance of cultural adaption as opposed to enforcing the Western way of doing things. “The biggest risk is reputational risk.”

Still, just as the two global economies challenge each other on a broader scale, so do middle market deal pros within the region because of the cultural differences that they face. Between language and dialogue differences, clashing accounting practices and the need for building relationships, wrapping deals up in China generally takes longer than anywhere else, they said.

For example, regulatory issues may differ from city to city, Chu said. Coupled with the growing need for Chinese companies to localize their services, and U.S. partners must make themselves privy to the subtle differences between Shanghai, Beijing and Hong Kong.

Another is structural differences, according to Walt Disney Co. senior vice president of global development Eric Muhlheim, who also spoke on the panel.

Disney looked at numerous acquisition targets in China, Muhlheim said, but in keeping with the integrity of the company’s brand, it “chose to go it alone” and grow organically in the region once it realized the structural differences of those competitors were too steep to integrate.

That differs from its acquisition strategy in another emerging market, Sao Paolo, Brazil, he said, where it is more likely for Disney to do deals because of “specialized assets” that Disney wouldn’t be able to get on its own.

During times like that, challenges are met because emerging markets provide such a wide avenue of opportunity. Even though, as McIntyre puts it, “It’s [never] easy to do business there.”

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Does democracy stifle economic growth?

Posted in Chinese Economy with tags , , on 09/14/2011 by David Griffith

Economist Yasheng Huang compares China to India, and asks how China’s authoritarian rule contributed to its astonishing economic growth — leading to a big question: Is democracy actually holding India back? Huang’s answer may surprise you.