I have an article up at Asia Times Online under the pen name Peter Lee entitled Dalai Lama at apex of Sino-Indian tensions.

It’s keyed to a high profile news item–the Dalai Lama’s provocative visit to a border town in territory held by India but disputed by China–and a significant but rather underreported development–the escalating political struggle between pro-Chinese and pro-Indian political forces now reaching its climax in Nepal.

The Chinese themselves have said that the biggest irritant to Sino-Indian relations is the unresolved border dispute. To them, it’s more of an issue than economic competition, India’s growing integration into the U.S. South Asian security regime, or Indian unease at Beijing’s cozying up to Pakistan, Myanmar, Sri Lanka, Bangladesh, and the Maldives at New Delhi’s expense and raising the specter of maritime encirclement.

This would seem counterintuitive, since the remote boondocks that have formed the basis of the border dispute—the desolate wasteland of Aksai Chin (China’s share of the Kashmir dispute) in the west and the multi-tribal mélange of Arunachal Pradesh in the east at the Burmese border—are already occupied by the parties that have the strongest claim. A simple swap—the Indians recognize Chinese jurisdiction over Aksai Chin and the Chinese acknowledge Indian control of Arunachal Pradal—has, indeed, been on the table for a half century.

I make the case that perpetual tensions at the border reflect the destabilizing potential of the “Tibet card”—the possibility that India will abandon its “One China” policy once the current Dalai Lama passes on and overtly or covertly support Tibetan independence activities along the border of the Tibetan Autonomous Region.

China wants to secure its borders and also increase its ability to project power into adjoining areas in order to deter potential shenanigans by the Tibetans with Indian connivance. India, on the other hand, wants border conditions favorable to a possible play of the “Tibet Card”.

The slow-motion collapse of Pakistan, China’s closest ally in the region and India’s major military antagonist, has deprived Beijing of its most important asset. The idea that, if India messed with Tibet, Pakistan would unleash hell in Kashmir with Chinese support, is a vain hope today.

With this geostrategic deterrent out of the picture, the focus has shifted to securing the physical space at the borders. Both China and India are pouring money and troops into the border region and arguing over the status of a little town in Arunachal Pradesh called Tawang.

The map to the right, provided by Andy Proehl, shows the disputed area of AP. In the political map of AP below, Tawang is the district to the west sticking out between Tibet and Bhutan.

Tawang is in the news because the Dalai Lama is visiting there on November 8 to visit old friends and figuratively stick his thumb in the dragon’s eye. The Dalai Lama already made some serious waves last year when he reportedly departed from his usual apolitical stance and said that Tawang—within the contested territory in Arunachal Pradesh—was part of India.

It might be noted that the Dalai Lama looks slightly out of line here.

In 1947, the Tibetan government (the Dalai Lama was at that time a youth of twelve who had been identified as the reincarnation and resided in Lhasa but had not yet been enthroned) tried to renegotiate its border deal with the British (the famous Simla Accord of 1914 between Great Britain and Tibet that generated the McMahon line but was never accepted by China) to get acknowledgment of its de facto control of the town.

In fact, according to an interesting Wikipedia entry, the status of Tawang has been the key factor in the contested Himalayan border for well over one hundred years:

Early British efforts to create a boundary in this sector were triggered by their discovery in the mid-19th century that Tawang, an important trading town, was Tibetan territory. In 1873, the British-run Government of India drew an “Outer Line,” intended as an international boundary … [In 1912-13] the Outer Line was moved north, but Tawang was left as Tibetan territory…. When the British demanded that the Tawang monastery, located south of the McMahon Line, cease paying taxes to Lhasa, Tibet protested. …. In 1944, NEFT [North Eastern Frontier Territory] established direct administrative control for the entire area it was assigned, although Tibet soon regained authority in Tawang. In 1947, the Tibetan government wrote a note presented to the Indian Ministry of External Affairs laying claim to Tibetan districts south of the McMahon Line. In Beijing, the Communist Party came to power in 1949 and declared its intention to “liberate” Tibet. India, which had become independent in 1947, responded by declaring the McMahon Line to be its boundary and by decisively asserting control of the Tawang area (1950-51).

How ’bout that. This backstory makes the Indo-Tibetan posturing over Tawang appear pretty provocative.

However, in my piece I argue that the true focus of international attention should be Nepal, which is careening into a political crisis as pro-Indian and pro-Chinese factions slug it out for dominance (with the barely concealed political, diplomatic, and financial support of their respective patrons).

At the same time that the Dalai Lama is visiting Arunachal Pradesh, the pro-Chinese Nepalese Maoists are threatening to bring the current, pro-Indian government down through mass action. The Nepalese Maoists, who abandoned their insurgency to participate in the political process, emerged from the 2008 elections as the largest political party in parliament.

This clip of the Maoists’ anti-government rally in Kathmandu on November 1, beyond some Triumph-of-the-Will type thrills, gives an idea of the intensity of the current political scene in Nepal.

In going through old emails this weekend, I came across a rather old email from a long time client/friend, entitled, “You should write about these idiots.” I swear this is his language not mine. Anyway, attached was a link to a 2008 USA Today article, entitled, “The Pitfalls of China’s Rough Capitalism” that is still very much topical today. The article is about a couple of Americans who purchased dolls from a Chinese manufacturer that were in violation of US copyright laws. The two Americans were sued by an American company that owned a copyright on the dolls and they blamed the Chinese company for having told them it was their own original design. One of the owners of the U.S. company poses this question: “When you’re in China, how can you check on copyrights?”

Where do I even begin?

Well, for starters, call or email your US lawyer and simply ask him or her. It is sheer lunacy to rely on a foreign non-lawyer for your US legal advice and that is exactly what these two people did here. Now I am absolutely not absolving the Chinese company of blame for having lied, but if you are going to be doing business in China (or anywhere else for that matter) it is in the end always going to be up to you to protect your own business.

Yet I see this sort of thing all the time. I have “seen” people enter into major deals relying solely on their Chinese counterparts for advice. To wit:

– US company starts manufacturing product in China and then ships it to the US, only to learn that it contains a chemical banned in the US. Wants my law firm to sue the Chinese company over this because the US company “just assumed” the Chinese company would operate legally. My comments that the Chinese company was operating legally, in China and in about half the world, seemed to fall on deaf ears. We turned down the case.

– US company told by their Chinese manager (not a lawyer) that 1) no need to pay employee benefits; 2) no need to have a written employment contract; 3) no need to register the business as a proper WFOE; 4) No need to pay China taxes; 5) no need to register the company’s trade-name in China. This is an amalgamation of what I am constantly seeing and though this sort of thing may work for Chinese domestic companies, it seldom works long for foreign companies. Chinese domestic non-lawyers are not expert in international law.

– US company signs English language agreement with Chinese company saying Chinese language agreement will control. US company trusts Chinese company to do the Chinese translation. US company never checks the Chinese translation until it is thinking of suing and, guess what? Chinese contract and US contract are very different. I have seen this twice. Not kidding.

– US individual believes Chinese girlfriend (sorry, but we have seen about a half dozen of these and all have been girlfriends) that China does not allow foreigners to own property so US individual buys condominium for “the two of them” under the girlfriend’s name. Within months, the Chinese girlfriend breaks it off and claims the condo was a gift. US individual is always surprised to learn that making the argument that this was not a gift is going to be extremely difficult because he actually qualified to buy Chinese property and who is going to stand up in a court and say “I did it this way so as to avoid the law, no please compensate me now that it has gone wrong.”

– US company ordered a part to be made of 20% stainless steel. US company did not perform any QC checking before shipment or sale and only learned that the product was about 5% stainless when customers started complaining of rust. By the time we were called in to try to help this US company recover its money, the Chinese company was no more.

– US company goes “into partnership” with Chinese entity to run a Chinese magazine, but because foreigners are forbidden from doing this, the US company eventually gets pushed out.

– A company that was going into a Chinese joint venture we knew was structured illegally, but because some low level local government official had said it was okay, the company would be going forward against our advice. We told them we had no interest in representing them.

I can go on and on, but all of the above have one thing in common and that is that the US company relied pretty much entirely on the Chinese company side for advise that probably should have come from anywhere other than the Chinese company with all sorts of incentive for brushing potential problems under the carpet.

I am definitely not telling you never to trust your Chinese partner, but I am saying that you need to verify everything on your own.

And in that spirit, I present you with the second part of the USA Today story, that of Frank Carroll, an Irish “furniture seller,” who was a lot smarter in his due diligence and whose story is more instructive. Carroll “worked with a family-run factory” with whom he got so “he was invited to the matriarch’s birthday party at the family’s luxurious compound with swimming pool and snooker table.” Despite this, Carroll’s quality control worker discovered that the Chinese manufacturer was using foam that did not meet Britain’s flame retardant standards.

The factory owner and his brother at first denied that the contract specified that the product meet the particular British standards and when Carroll showed them that their contract proved otherwise, the Chinese company stalled for time:

Later, the mother, father, three brothers and two of their wives showed up at Carroll’s hotel.”They weren’t willing to fix the problem,” he said. “They said, ‘Can’t you sell these chairs anyway? We won’t tell anyone. Nobody will know.’”

One of the wives began sobbing and urged him to forgive her husband and take the chairs as a face-saving gesture.

Carroll refused: “Had I been found out, my business would be dead. If one person found out, I’d never be able to trade in the U.K. again.”

It wasn’t the last time he saw the chairs. “At a furniture fair six months later,” Carroll said, “they were selling the chairs at a discount price.”

The experience didn’t scare him away. The trick is finding good factories and micromanaging them, said Carroll, who splits his time between Guangzhou and Dublin.

Carroll’s right. It’s your job to micromanage and stay on top of everything.

What do you think?

I am always preaching how foreign companies must register their trademarks in China if they are going to be doing business in or producing product in China (see, for example, “China Trademarks — Do You Feel Lucky? Do You?“). And in most cases, companies should register their trademarks in China now. Right now.

China is a first to file country, which means that, with very few exceptions, whoever files for a particular trademark in a particular category gets it. So if the name of your company is XYZ and you make shoes and you have been manufacturing your shoes in China for the last three years and someone registers the XYZ trademark for shoes, that other company gets the trademark. And then, armed with the trademark, that company has every right to stop your XYZ shoes from leaving China because they violate its trademark.

But saying a company must register its trademark if it is going to do business in China does, at least to a certain extent, beg the question as to when that company should register the trademark. I always tell our clients and potential clients that they should register their trademarks right away. My thinking on this is that if they are going to be doing it anyway, they should do it right away so as to make sure nobody beats them to it.

But what if you are an American company that is thinking of introducing your product into China in a couple of years? What do you do? Well if you are a massive company with a lot of money, you go ahead and register your trademark right now. But if you are a small company, spending the money now may or may not make sense. Where and how do you draw the line? There is no one answer here; it is more a case of knowing it when you see it.

I thought about all this yesterday because I received a call from a small company that was referred to me by a China sourcing company we represent. The China sourcing company had the foresight to tell this other company (let’s call it Company A) that it needed to register its trademark in China before the sourcing company started going out and trying to find manufacturers for Company A’s product. But when I spoke with Company A, it immediately became clear to me that its funds were very limited and that it was very unsure if it would even be able to find a manufacturer at a price that would make sense and if it did find that manufacturer, whether its product would catch on in the US or not. Company A’s not unreasonable plan was to make a limited quantity as a test run and then, if that worked, secure financing to ramp things up.

Company A: Is a trademark really necessary in China?Me: It is necessary if you are going to be sure to protect yourself from someone taking your name from you. How important is your name to you? If someone takes it, could you stamp a different name on your product for the next go round?

Company A: I really like our name, but I could always come up with a new one if that were to happen. Do you really think someone is going to register our trademark right away in China?

Me: The odds certainly favor you, but you just never know. You can consider waiting until after you see if your product will have legs.

Company A: I would prefer to do that. Am I taking a huge risk?

Me: A lot depends on whether the worst case scenario of having to come up with a new name is terrible for you or not.

You will never get me to say anything other than how important it is to register your trademark in China right away (because I do not want anyone to be able to blame me if “their” trademark is registered by someone else), but obviously the decision on when to register is sometimes a bit more complicated than that.

What do you think?

A few weeks ago, I received an email from a Chinese-American, fluent in both English and Chinese, asking how he should go about learning Chinese law and Chinese legal terms so as to be better prepared for securing a paralegal job. In his initial email, this person asked me not to name him on the blog, a request I found pretty strange because I saw absolutely nothing in his request that would be “blog-worthy.”

However, upon receiving co-blogger Steve Dickinson’s response to this person, I instantly realized I had a blog post on my hands. So here goes.

Here is my suggestion on how to get familiar with legal Chinese. It is certainly difficult, but this is the method I suggest.1. You have to select a place to start. It is all difficult, so you should just do your best. What you want is a law or regulation that is in Chinese but also has a very good English language translation. For the area you are interested in, I would suggest the Company Law and then the regulations on foreign invested enterprises. There are three sets of regulations: Wholly Foreign Owned Entities, Equity Joint Ventures and Cooperative Joint Ventures. Both Chinese and English versions of these are available on the internet.

2. Read the Chinese from copies of the laws/regulations you get on the net. First, compare the Chinese with the English and try to develop your vocabulary list from the translation comparison. When you come across Chinese terms you don’t know, try using an online dictionary. You can cut the Chinese and paste it into the online dictionary. This is much faster than looking up the words in a dictionary. I use a dictionary called Yellow Bridge. It works very well.

3. You also need a good legal dictionary. There are many available. None are excellent. You can look in the Foreign Language Bookstore on Fuzhou Road in Shanghai. If you use the technique above, you should not need to do a lot of dictionary work.

4. As you move from law to law, you will find that the reading goes easier. It will be very slow at the start, but do not worry. Other laws to look at are the Constitution, the Basic Principles of Civil Law and the Property Law and the Enterprise Income Tax Law.

Piece of cake.

Not sure how relevant this is to China business law, but it sure makes for a fascinating read, at least for law geeks. Law Professor Donald Clarke of Chinese Law Prof Blog fame, has been writing some very interesting posts on Chinese law over at the Conglomerate Blog. The one that really caught my fancy, however, is entitled, “No trespassing in Chinese law? ” The post lays out a pretty convincing argument that Chinese law does not prohibit trespassing, which essentially means that if someone wants to stay in your apartment or house even after you have asked them to leave, they are free to do so:

It’s hard to believe – and to the best of my knowledge it’s not true – that in China you can simply waltz into someone’s living room (provided the door is unlocked) and make yourself comfortable provided you act with restraint and are willing to compensate for any damage you cause. But the legal basis for saying you can’t is surprisingly obscure.

Not sure of the legal ramifications of this, but I do suggest you lock your doors and not let anyone in unless you know you have no problem with their staying. And staying.

CLB’s own Steve Dickinson was on CCTV’s Dialogue program the other day discussing China’s income tax. Steve was on with Kevin Ng, Tax Managing Partner for Deloitte in China. To watch the video of the program, go here.

The show was ostensibly about China’s having just raised its individual income tax threshold from 1600 yuan to 2000 yuan, but it ended up delving into “big policy” issues regarding fairness and equity. Since China’s income tax collections rose 30% year on year from 2006 to 2007, such taxes are becoming increasingly relevant and this show was surprisingly interesting and engaging.

Check it out.

The impact of this blog on environmental policy in China is truly astounding. The ink was barely dry on “. . . and throw away the key” when word reached us that three men were sent to prison in Foshan, Guangdong Province for the illegal disposal of hazardous wastes. The People’s court of the Nanhai district imposed the sentences on March 20 in what was billed as an “historic” ruling.

The court issued a verdict imposing prison terms of one to three years and fines on the defendants convicted of illegally dumping toxic waste from Zhongshan into Danzao Town in Guangdong Province. This is the first major environmental pollution incident in Foshan that has required a judicial settlement. In the past, pollution incidents were dealt with by environmental protection authorities through administrative procedures.

Here are the details of the crime:

Early on the morning of April 18, 2007, students and faculty members at Xinnong Primary School in Danzao began to experience adverse effects from an offensive smell in the air. Two students experienced chest pain and began vomiting after inhaling the noxious air. The school closed the day following the incident.

Officials who were sent to the site to investigate found that someone had discharged a dark liquid waste from a nearby village.

Records show that three men surnamed Su, Jiang, and Guo had illegally dumped an oil dreg containing hydroxybenzene inside Danzao six times from January to April 2007. The waste has caused grave pollution in Danzao which has resulted in direct economic losses of about 1.1 million yuan [approx. $155,000].

Su, lacking a permit to dispose toxic waste, reached an oral agreement with Ti[an] Yi Company in Dongfeng Town to dispose of the company’s waste by November 2006. He later employed Jiang and Guo as his drivers, and they later joined him in dumping the waste.

If the facts are as stated, thae the three defendants deserved their fate; indeed, the sentences seem to be on the light side.  Given the stated losses, this would be a case with “especially serious” consequences requiring imposition of sentences of “not less than three years” (Article 338 of China’s Criminal Code).

One is left to speculate as to why Tian Yi officials were not also criminally charged.  The three defendants lacked a permit to dispose of toxic wastes and the contract between them and Tian Yi was an oral one.  If I were a prosecutor I think I could have made a fairly convincing case for liability on the part of Tian Yi.

The defendants were also fined and another article notes that “the court has  suggested the victims sue the three defendants and the company they represented for compensation.” Establishing civil liability on the part of Tian Yi should be a slam dunk. Article 86 of the Solid Waste Law (see sidebar to right) places a heavy proof burden upon civil defendants:

The defendant of a lawsuit for damage compensation due to environmental pollution caused by solid waste shall bear the burden of proof on identification as prescribed by law and no cause between the defendant’s acts and the consequence of damage.

Although SEPA’s translation is a little rough, what this provision provides is that Tian Yi, as defendant, if it wishes to escape liability has the initial burden of proving that the wastes in question were not its wastes and that those wastes did not cause the damage claimed by the plaintiff.

I made a rule for myself many years ago that whenever I was too in love with something I wrote, I needed to run it by someone else. I made this rule because usually when I fall in love with my own writing, it is because I think it is just SO clever. Yet, one person’s clever so easily be another person’s smarminess or cruel biting sarcasm. I would have that same rule for this blog, but since blogging waits for no man (or woman), and since having someone else read my blog posts is not billable, I do not.

But, in doing a post today on crime, I came across an old post I truly love. I think (but what do I know?) it is my best post and, due in large measure to the words “sex” and “prostitutes” it certainly has been one of our most viewed. I have never re-run a post, but in the hope nobody finds it smarmy, and in the hope it is not too late to grab some residual readers still interested in Spitzergate, here goes:

I usually avoid writing on the really big China issues, figuring they get enough coverage elsewhere.  I am veering from this now because there is still more to be said about the recent Shenzhen prostitute “shaming” incident.

When I first saw the pictures of the prostitutes with their heads bowed, I instantly thought of Bull Connor:

One of the most enduring images of the Civil Rights Movement is that of Birmingham firemen and policemen using water hoses and police dogs against African-American demonstrators in 1963 Birmingham. The episode came during the first week of May, following a month of peaceful demonstrations by Birmingham’s African-American community against their city’s segregation ordinances. Civil rights leader Martin Luther King, Jr., who described Birmingham as “the most segregated city in America,” organized the demonstrations with the help of local civil rights leader Fred L. Shuttlesworth and others. “Bull” Connor tried to stop the growing demonstrations, and gained lasting infamy when he resorted to using the water hoses and dogs. Televised reports of police dogs lunging at African-American citizens and people being washed down the streets by water from powerful fire hoses dramatized the plight of African-Americans in segregated areas. The events in Birmingham helped mobilize the administration of President John Kennedy to begin efforts leading to the most far-reaching civil rights legislation in history, the Civil Rights Act of 1964. The name “Bull” Connor thus came to symbolize hard-line Southern racism. Ironically, Connor’s heavy-handed defense of segregation in 1963 Birmingham actually hastened the passage of America’s Civil Rights Act.

Those pictures of Bull Connor and his henchmen spurred America to live up to its laws and its ideals.

The Wall Street Journal talked of China’s views on the shaming incident:

The prostitutes’ parade through Shenzhen was unusual for another aspect: It has touched off a lively public debate. A Shanghai-based lawyer wrote an open letter to the National People’s Congress claiming the march was illegal. Bloggers weighed in in cyberspace. On a Sina.net online survey conducted a few days after the incident, more than 69% of those logged in disapproved of the public condemnation, compared to 25% who supported it.

The majority see the shaming incident for what it was: a feeble attempt by the government to exercise moral authority. The sex trade is one of the blots on modern China, but it will take more than public humiliation to curtail it.

The Pandagon Blog, in its post, entitled, “Panty Sniffing Moral Scolds,” had this to say about the incident:

You’d be hard-pressed to find a better image of prurience that motivates moral scolds. The police of Shenzhen are trying to conduct a vice crackdown, and this is their brilliant idea on how to handle prostitution�march suspected prostitutes and johns into the street and read their names out loud so everyone can get a sick thrill out of shaming them. Regardless of how you feel about prostitution, this is unacceptable. The problem associated with prostitution that should concern people is the way that most women involved are being mistreated and exploited, not the dirty but oh-so-tantalizing sexy sexness of it all. The little stunt is just an extension of the same mistreatment and abuse that prostitutes get on the job, only this time the dogpile of abuse has a stamp of social approval on it.

Feministing, in its post entitled, “Sex Workers Publicly Shamed in China,” noted the uproar the incident is causing:

This is pretty frigging horrifying. But thankfully, it didn’t go unnoticed–it sparked a furor led by Chinese bloggers.

…But the event has prompted an angry nationwide backlash, with many people making common cause with the prostitutes over the violation of their human rights and expressing outrage in one online forum after another.

Sentencing Law and Policy Blog, in its post, entitled, “A Chinese shaming stirs controversy and debate,” also noted the uproar:

Whatever one might think about the specifics of this punishment in China, it is notable that a public shaming sanction has prompted a national and international debate about Chinese crime and punishment.  I doubt that the Chinese (or NY Times) buzz would have been as great if all these defendants were simply locked up or fined.

China Rises, in its post, entitled, “‘Public Shaming’ in Shenzhen, linked the Shenzhen shaming to “rule-of-law issues in China:”

It might seem a stretch to link this event with rule-of-law issues in China. But there is a link. The story didn’t just fade away. A variety of people are seeking legal redress, and Shenzhen is feeling the heat. The South China Morning Post reports this morning that some police who carried out the raid “may face disciplinary punishment” amid an outcry that the vice parade was a human rights violation.

The Washington Post, in its article, entitled, “Public Shaming of Prostitutes Misfires in China,” talked extensively on the public outcry:

But times have changed, the Futian Public Security Bureau discovered. Instead of being praised for cracking down on vice, the Futian police came under a hail of criticism for violating the right to privacy of those who were paraded about in public.

The swift outcry, in newspaper interviews and on the Internet, provided a dramatic illustration of the distance this vast country has traveled since the Cultural Revolution, when many people embraced such tactics and even those who opposed them were afraid to speak up for fear of retribution

This shows that the public has a stronger sense of human rights and privacy protection,” said Kang Xiaoguang, a sociologist with the Rural Development Institute at the People’s University of China.

“Twenty years ago, this kind of parade would have been greeted with unanimous applause,” he said. “But now it gets more criticism than support because more people realize their rights should be protected. And of course, they have more channels to voice their criticism, like the Internet.”

But nobody has seen fit to speculate on its long term impact, so I will.

Something like this has to have an impact, however small.  China’s government is obviously not a democracy, yet it still both wants and needs its people to view it as legitimate.  Its people generally viewed the Shenzhen shaming as illegitimate.  Because of this, the power to parade prostitutes has probably been taken from the government and that means new power lines have been drawn.  Whether this line will extend beyond just this one thing remains to be seen.  But this incident ought to at least give the Chinese government a little more pause before trampling on the rights of its people.

A morally vapid redneck racist helped advance civil rights in the United States and some dumb power-hungry bureaucrats in Shenzhen may very well end up doing the same thing for China.

What do you think?