Top 10 China Business Trends for 2016

At the end of every year I do a post on China trends and what we should expect for the upcoming year. My starting point is always to go back and look at my predictions from the previous year and my ending point is usually to re-use a large chunk of those year earlier predictions for the next year. This year though will be very different, in that China changed a lot more than usual in 2015 and that bodes for a lot of new things happening in 2016 as well.

So without any further ado, the below are the key trends my firm’s China lawyers see gaining ground in China in 2016.

1. China will increasingly crack down on foreign companies doing business in China (under China’s definition) without paying China taxes. China has especially stepped up enforcement against American and European companies that operate in China solely via a Hong Kong entity and this push will accelerate in 2016. See China’s Tax Authorities Want You.

3. The idea that Chinese companies and employees do not sue was never true and it is becoming less true every year. Chinese companies are getting aggressive in suing their foreign counterparts both within and outside China. If you walk away from your deal with a Chinese company or your Chinese supplier, you should expect to get sued. The same holds true if you fire or lay off a Chinese employee without first getting them to signa settlement and release agreement that actually works.

5. China’s crackdown on corruption, particularly as against foreigners, is real and it will not be going away. The same holds true of US and EU enforcement of anti-corruption laws. We personally know plenty of Chinese lawyers who are actively looking for whistleblowers so they can profit from such cases. Chinese employees (like employees everywhere else) will not hesitate to turn in their employers for multi-million dollar rewards.

6. Scams against foreign companies will continue to get more sophisticated. Your defense is to conduct due diligence before doing your China deals. Our personal “favorite” is the fake law firm scam, which came back with gusto in 2015, but the most prevalent has to be the China bank switch scam. See The China Bank Scam. It’s Every Week Now.

7. Foreign companies will increasingly choose not to “go into China” via WFOE formations; they instead will choose to sell their products into China via distribution agreements, reseller agreements, and via e-commerce. See How to Form a WFOE in China, Part 12: Do You Really Even Need One?

8. There has been an increase in encouraging signs regarding China’s enforcement of IP rights and we expect this trend to continue in 2016. China’s new Trademark Law not only has increased statutory damages, but it also has a provision that makes it easier for IP rights holder to prove damages against notorious counterfeiters. Design patents will continue to become an increasingly important part of foreign companies’ Chinese IP portfolios as they have become relatively cheap and fast to secure and they can provide substantial protections. See China Design Patents. Because They Work.

9. Chinese e-commerce will continue its meteoric rise. This means foreign companies seeking to protect their IP from China will need to have in place an anti-infringement strategy that involves registering IP in China (particularly trademarks and copyrights and design patents), monitoring Chinese websites, and ongoing interaction with Chinese e-commerce sites like Alibaba, JD.com, and DHgate.com.

10. China will step up its One Belt, One Road policy. This policy emphasizes China using overland routes to increase trade with Central Asia and Europe and it seems designed to be an end run around the United States and the TPP. We see this as part of an overall trend of China encouraging more inbound and outbound trade with non-U.S. companies.

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We will be discussing the practical aspects of Chinese law and how it impacts business there. We will be telling you what works and what does not and what you as a businessperson can do to use the law to your advantage. Our aim is to assist businesses already in China or planning to go into China, not to break new ground in legal theory or policy.