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CCCA_V2No3_Dept-CrossBdr-FIN.qxd:CCCA_V1No2_Dept-CrossBdr-V1.qxd 9/18/08 4:58 PM Page 13 Cross Border Decoding the dragon What Canadian companies need to know about doing business in China. hina’s “one billion consumers” in interpreting and applying laws, which First, says Kwauk, understand the Cand its appetite for raw materials often results in different interpretations approval process. “Just about everything in have gotten many Canadian corpora- in different regions, especially if the China, especially if undertaken by a foreign tions to pay attention. But what is the economic conditions and needs are very or foreign-invested enterprise, requires legal and business reality of actually different. “It is important to be not only approval and registration.” You need to going into the Chinese market? familiar with applicable legal provisions, know whether what you want to do can “China is a very big country, with many but also on top of the policies and inter- be approved or registered, and if so, by different regions and sectors, each having ests applicable to the industry and in the which government department, at what its own economies, business cultures, area,” Kwauk advises. level (central, provincial or municipal) and advantages to offer, needs to seek out, Still, there’s been some significant under what criteria. etc.,” says Robert Kwauk, managing part- change in the Chinese business environ- Second is due diligence review. “The ner of the Beijing office of Blake, Cassels ment and regulatory process in recent fact that China may lag behind on trans- & Graydon LLP, the only Canadian law years. “China was a country on its knees at parency in many respects does not mean firm with a full-time office in China. the time of the Cultural Revolution,” says that there is no way of conducting due Kwauk knows whereof he speaks. He Ken Smith, a member of the Australian diligence review,” Kwauk says. has been living and working in China for parliament who has extensive experience North American companies may view the last ten years since transferring there doing business in China. the introduction of government officials from Blakes’ Calgary office in 1998. For “In the past, decisions were difficult to as middlemen to be a seal of approval and the 20 years before that, he had been trav- get from the government, because of the not investigate further. But middlemen elling back and forth to the region to Communist bureaucracy,” Smith notes. and government officials are also motivat- speak and work on business transactions. “Now private and government sector ed to see the deal done and investment business can proceed more quickly made, rather than ensuring that the “ Now private and govern- same as in Australia or Canada.” getting into. on their own initiatives, much the investors are fully aware of what they are ment sector business can “A number of autonomous economic The Chinese government has proceed more quickly on their indicated that it wants to shorten zones in various parts of China can offer and simplify the regulatory various incentives to investors that will own initiatives, much the same approval process; however, this is entice you to be involved in that particu- While there are no shortage of laws and” Not unlike in Canada, the central around China. There are plenty of oppor- as in Australia or Canada. not always possible, says Kwauk. lar zone,” Smith explains, “but look government has a different agenda tunities. Bargain hard for the best deal.” Finally, get your own interpreter. “Do government focuses on macro issues like regulations in China, Kwauk says the than local governments. While the central not rely on the interpreter provided by the Chinese legal system is far from devel- inflation, foreign currency reserve, the other party,” Kwauk warns. “Do not let the oped when compared to that in North environment, and its international image, middlemen or even your own personnel America. “While most of the laws or their local governments are more concerned be the interpreter. Vested interest trumps provisions are inspired or even similar to with economic development — job cre- over precision every time.” The extra cost those of other developed jurisdictions, ation and poverty relief. in hiring a professional business/legal So what specifically should a company ISTOCKPHOTO they tend not to be as complete, well- do or be aware of before venturing interpreter for the job is well worth it. defined and precise.” into China? Regulators have significant flexibility Alison Arnot is a writer based in Ottawa. AUTOMNE 2008 CCCA Canadian Corporate Counsel Association 13