Dispatches from China

Dispatches from China

Thirty Albany Law School students, as well as Associate Dean Patricia Salkin and Professor Danshera Cords, are traveling for 10 days this month to China to learn about commercial and business law issues between the two countries. 

Click here for photos from the trip.

Michael Frascarelli '11
Final thoughts from Shanghai: Saturday, March 19, 2011, at 2:56 a.m. ET

Shanghai is a very different place from Beijing and Xi'an in some notable respects. The main thing that struck me was a more natural-feeling human environment – the streets were laid out better, there were ample green spaces and other public places, and the areas we visited seemed to have more of a Western orderliness overall. On the other hand, one of our hosts (I now forget which one) stated that Shanghai isn't at all real China; that, in fact, it's been described as just another European city.

But it can't be just another European city, because it's unimaginably huge. One block has more tall buildings than Albany, and there must be thousands of such blocks. From the 35th floor conference room window at the Paul Hastings Office, we could see the skyline go on for miles in every direction. As with the other cities we visited, more high-rises and skyscrapers are on the way.

So it was a bit of a relief for me to visit SIFT's new campus in Songjiang on our second full day here.  Songjiang is a small and growing city by China's standards, though it's already much, much more developed than most modest American cities. From my perspective, the city had the seemingly rare virtue of integrating a mix of trees, greenery, and smarter planning.

SIFT itself was a beautiful and well-laid-out campus. Our extremely gracious hosts gave us a walking tour in the morning, had lunch with us on campus, performed traditional Chinese arts (Kung Fu, singing, and a solo on a stringed instrument, the name of which I missed, among other things), had fun with us in a negotiations class, chatted with us for a while and then treated us to a lavish dinner at a local restaurant. I think everyone, American and Chinese, had a great time, and found that we have a lot in common, as well as a lot to offer each other. 

As I write this in the Shanghai-Pudong airport, awaiting departure back to the States, the impression I'm left with is that China's rise in the world – economically and (consequentially) politically – will continue for the foreseeable future. Though well over half of the Chinese population still lives a rural, agricultural lifestyle, I learned that there is an indirect plan to bring them into a more Western, consumerist way of life, adding further fuel to the economic engine. The number of individuals currently qualified as consumers (i.e. the urban-dwellers) already outnumbers the entire population of the United States.  There are approximately 700 million more people here who markets have not yet accessed. It's been said before, but is worth saying again: from a capitalist's perspective, there's enormous potential here.

American business is already well aware of this, though American politicians should start taking this situation more seriously. I don't perceive China as a security threat, in terms of potential for armed conflict. What appears possible in the relatively near future is that China will overtake the U.S. economically, both in terms of gross output/consumption and the quality of things made here. We learned in a course on the Chinese Business Environment that the next five-year plan will emphasize advanced industries: green energy, alternative fuel vehicles, advanced materials, high-technology goods, etc. The government intends to incent both domestic and foreign investment in these areas with preferential tax treatment, and probably other policies.

This country, given its potential and impressive political resolve, might very well become the world's factory for the next generation of technologies to power and run the world within the next few years. Thinking about how ineffective and conservative American governments are these days (both state and federal), it looks like the U.S. stands a very real chance at losing any possible leadership role in the future of commercial development. The incentives and future here are too compelling NOT to want to set up shop here. And the environment – both business and social – appears to be getting more and more hospitable to Americans and other Westerners. With China rising as it is, U.S. leaders should seriously give up trying to preserve our post-WWII greatness and start thinking about a different future, one that cooperates and competes on a more level playing field with powers like China (among other places). 

Back to the States, then – to the unending recession and tepid political pool.

Professor Danshera Cords
Shanghai

After this whirlwind tour of Xi’an, we were off to Shanghai. Shanghai represented a new study in contrasts. Here the contrast was the old ways of China with the new ways of business. Shanghai is in all visible ways a modern city. High-rise buildings, one taller than the next, rise in every direction.

Although we had learned much about the law and regulation in China, in Shanghai we restarted our formal legal studies. The formal part of our program was a mixture of meetings with NGOs, law firms, and classroom experiences. We visited with the American Chamber of Commerce and the Shanghai World Trade Organization Affairs Consultation Center; O’Melveny and Meyers Shanghai Office, Llinks Law Firm, and The Paul Hastings Law Firm; and we had classes at the Shanghai Institute of Foreign Trade.

All of these experiences taught us different things, along with the common thread that as a growing and developing market China provides a market that provides both opportunity and challenge to foreign investment and markets. The business opportunities are accompanied by potential opportunities for western trained – specifically U.S. trained lawyers – to open up the markets to greater access for western business entities. 

We also learned that foreign lawyers are ineligible to practice in China. International firms may not practice law in China; rather, they must register and may only provide consulting services.  However, this is greater market access than is available in some markets. One Chinese firm indicated that there was opportunity for western or U.S. trained lawyers. The U.S. firms indicated that U.S. experience was needed before going abroad. However, that did not seem to be a universal view. 

After listening to all of the lawyers that we met, it seemed that there are a variety of paths that can be taken to work in China. Although fluency in Mandarin Chinese may not be required, it would certainly be a plus. Without the language skills, a strong background in a highly prized specialty would certainly help to get one’s foot in the door. However, the Chinese firms did seem to place a great deal of value on English language and American cultural skills. 

Not only are there barriers to entry for foreign lawyers, but it is also not easy for Chinese lawyers to pass the bar exam. Less than 15 percent of the exam takers pass the exam, according to one of our alums who had just learned of his bar passage. He spent time with us, telling us about the practice of law in a litigation practice in Shanghai. He told us of the challenges of practice in a place where the interpretation of a rule was often made by the agency that promulgated the rule and where ex parte communications was not only permitted but de rigueur. This sounded very different from the practice of law in the United States, but very consistent with what we had learned in the classroom and from the law firms.

During our visit, we learned that the standing committee intends for Shanghai to become a global center for business, finance, and commerce by the year 2020 to compete with Hong Kong and Singapore. Whether that goal will be met by 2020, it seems likely that it will be met at some point.

In the classroom, we were met with information about Chinese general law, business law, and intellectual property law. We were also given an opportunity to learn about Sino-American or Sino-Western negotiations through a series of role playing exercises. One of the professors asked our students and the SIFT students, in varying gender configurations, to address a situation where a foreign person is seeking help from a local Chinese taxi driver who is about to go off shift and needs to return the taxi; the foreign person needs help for a friend who needs to get medical help. After each configuration of the exercise has completed its negotiation, the professor explains what the most common scenarios are and something about each of them. This exercise demonstrated the need to understand cultural issues and individual motivations in negotiations.

One thing I observed, which has also been widely reported, is the desire among Chinese business persons and leaders to develop relationships of trust as part of the development of a business relationship. These relationships of trust help them to obtain the best deals.

In our less formal education, through observation of general behavior, we also had an opportunity to learn about law and business culture. Outside an established relationship, in the marketplace, each consumer is left to fend for him or herself. This means negotiating at length for even the simplest of goods or the most complex of transactions in a society where “willing buyer and willing seller” have a new meaning.

The stated price is simply where negotiation begins. From the start of our travels in Beijing, our students learned that in almost every store the market price was merely an opening offer. Even a hotel gift shop might be willing to change its price.

Cultural sensitivity and strong negotiation skills were very important to successfully navigating the trip. I think we all learned a lot. It should also be useful in the future. I left with a sense that the similarities were probably not as great as the differences, but that we could all learn a lot by trying to better understand a little more about the culture and history of the bigger world in which we live.

I look forward to a return to China soon!

Associate Dean Patricia Salkin
Friday, March 18, 2011

Our morning started at 9 a.m. at the World Trade Organization Affairs Consultation Center located on the SIFT Gubei campus. 

We were greeted by Professor Gong BaiHua, who serves as Associate President of the Center. He is also on the faculty at the Fudan University School of Law in Shanghai, and he earned an LL.M. at Georgetown. 

Professor Gong explained that this WTO Center was organized in 2000 by the local municipal government, but that it is not part of the government. It was the first such center created at the sub-national level. Thirty had been created and now only three remain. Although the Center is financed by the Shanghai government, it is not controlled by the government. The purpose of the Center is to provide advice as to whether certain actions comply with the WTO treaties. They provide legal and policy analysis on trade issues,  they offer information about WTO requirements, they provide data and research functions and they offer a reference center for the public. 

It was even more fitting to visit the Center as this year is the 10th anniversary of China’s accession to the WTO. Students peppered the Professor with great questions relating to the importation of precious metals, differing standards in IP protection, strengthening of the RMB in the market, structural changes required for China to enter the WTO, and the future influence of China as a member of the WTO. 

After the visit, we walked across the campus to a classroom where we were presented with a lecture by Dean and Professor David Guixi Qiu of the SIFT School of International Studies. In discussing the business environment of China, Professor Qiu emphasized that China is a “particular” country. He explained how China is using the law to promote seven new strategic industries: energy savings and environmental protection, new generation of information technology, biotechnology, high-end equipment manufacturing, alternative energy, advanced materials, and alternative fuel cars. He spent a fair amount of time discussing IP law in China and the work still needed in this area.

Focus then shifted to ways of settlement of trade and investment disputes, as well as the governing law and jurisdiction. Professor Qiu pointed out the different cultural environments in China, depending upon which region of the country you are operating in, and he reinforced the importance of Guanxi that we learned about in the negotiation class. Trust is important in business relationships in China. 

Once again, students fired off a series of great questions including nuclear power in China after the Japan earthquake, inflation, control over China’s currency, the need for a consumer credit index, and green energy. At the conclusion of the class, SIFT presented each of our students with a certificate of completion of the spring study tour. The certificate was in both English and Chinese.

We took a three-hour break from lectures and headed to the Shanghai History Museum, where our tour guide provided each of us with a recorded tour of the museum. We split up and paced ourselves with the exhibits that appealed to different interests, and we also had lunch on our own. A number of us headed underground to a food court where we could find pizza.

The afternoon sessions reconvened at the Llinks Law Offices, a mid-size Chinese law firm with 12 partners and 60 attorneys. Partner David Yu provided an overview of the firm, and he introduced founding partner Charles Qin, partner Sandra Lu and foreign law consultant David Zhang (a recent U.S. law school graduate). It was interesting that 50 percent of the firm’s fee owners have overseas backgrounds, again reinforcing the globalization of the practice of law. 

Mr. Yu shared some good information about “law office management” in terms of the structure of the firm, and he discussed some of the firm’s “ground-breaking” cases. We discovered that there is mandatory CLE in China – 48 credits a year, which equates to 36 hours… triple the required number in New York! Students asked a lot of great questions regarding clients, trends in Chinese law firm markets, what kinds of backgrounds Chinese law firms are looking for in foreign trained lawyers, and internship/part-time job opportunities. After the presentation we had a tour of the firm’s beautiful offices. 

Our last visit for the day was at the Paul Hastings law firm. This was a treat, and what a view! Partner Lesli Ligorner met the class in the firm conference room. The students had only heard  Ms. Ligorner’s voice in the past as she participated in one of our classes in Albany via Skype to lend her expertise on Chinese labor law issues.

The Shanghai office of this international U.S. based law firm has 30 fee owners, making it above average in size. We met a number of other  lawyers from the firm’s corporate department, including partner Milton Chou, associates Ananda Martin and Barbara Tsai and China Associate Julian Zhu. Most of the international law firms in China focus on transactional work. Mr. Chou  focused on the type of work that registered foreign lawyers can do, and he talked about the cultural differences in the practice of law in the U.S. office as opposed to the Asia office. Ms. Ligorner noted that immigration is going to be the biggest issue. 

We had a good discussion about the future prospects of U.S. lawyers being able to practice law in China, and the hope that the Chinese government will allow for this.  She offered sage advice to the students about how to prepare themselves if they desire to work in an international overseas office. Throughout the visit, students asked a lot of questions. We ended with a discussion of legal documents that are prepared in Chinese and have to be translated into English for non-Chinese speaking clients, and which document controls should there be a difference in wording/meaning. We learned that documents in the English language are not always enforceable in China as the law there provides that it has to be in Chinese to be binding. It was truly eye-opening.

Following dinner, we headed to see a Chinese acrobatic performance. There were contortionists and stunts that could stop the heart! After the show, we headed back to the hotel for one last opportunity to explore Shanghai night-life and to pack for our departure tomorrow.

Michael Frascarelli '11
Shanghai: Wednesday, March 16, through Friday, March 18, 2011

We received a very warm welcome from our colleagues in Shanghai. The Dean of SIFT (Shanghai Institute of Foreign Trade) and one or two students met us at the airport when we landed toward 10:00 p.m. 

Also notable was the fact that this tour guide was openly critical (though only in general terms) of the government here, something we’re all much more comfortable with. After a couple of days in and around the city, this initial impression aptly characterized Shanghai generally: much more welcoming and familiar feeling than the other places we’d been.

The following morning, we received another very warm welcome from SIFT at their older, downtown Shanghai campus. A banner had even been made to announce our appreciated arrival. Looks like we’ll have to step up our game in Albany for next year. 

Anyway, we all sat down and received a lecture on Chinese Business Law from Prof. Liu, who had visited at Albany Law last fall. Though the Chinese only allow a couple of vehicles for foreign investment in commercial enterprises (with further restrictions on the type of businesses allowed), evidently this is enough to both satisfy the WTO and pull in enormous amounts of foreign capital and interest. This has been greatly facilitated since China’s 2001 accession to that international organization, largely because it has become easier to establish a wholly-foreign-owned enterprise (WFOE, pronounced “woofie”).

One of only seven forms of lawful foreign investment vehicle, the WFOE permits a foreign company to establish a new company in China based on Chinese Company Law, either from the ground up or, more likely, by acquiring a Chinese firm. This may not seem like a big deal, but the WFOE has to be compared with the other forms that China permits. The only other vehicles for establishing a full company here are two forms of partnerships with existing Chinese enterprises. Pre-WTO, these joint-venture-type arrangements were the dominant vehicle for foreign investment—generally, the Chinese partner provided the fixed capital (a “rusty factory,” as one person put it), labor supply and raw materials, and the foreign partner provided liquid capital (cash) and the markets for the goods.

Undesirable aspects of these partnerships have included sharing the JV board of directors with the Chinese partner, collusion between the resident management and the Chinese board members, and near-direct control by the Chinese government (especially where the local partner was a state-owned enterprise). The WFOE tends to avoid these headaches.

In that vein, something said during one of our law firm visits made a lot of sense in explaining how China seems to maintain tight government control while the society is generally optimistic and prospering (at least in the urban areas, and especially Shanghai). Qiang Li, from the local office of O’Melveny & Meyers, described the country as a limited partnership, with the Communist Party being the sole GP and every other player, including the public, being limited partners. As long as the Party makes all the managerial decisions subject to limited public oversight and every one prospers, then the system apparently works just fine. There is no major structural problem provided that the Party exercises its managerial powers to further the interests of the public and other stakeholders in this system. Whether or not it is doing that or is guilty of excessive self-dealing depends on who you ask. 

My general impression from Shanghai in particular is that this system is working as well as any other. All you have to do is walk along the Bund and stare in awe at the cluster of skyscrapers across the river—all built within the last 20 years from a rice paddy—to see what I mean.

Associate Dean Patricia Salkin
Shanghai: Thursday, March 17, 2011

We left the hotel at 8 a.m. for a day hosted by the SIFT Law School on their main, Songjiang campus. Depending upon traffic, the campus is about 45 minutes from where we were staying.  Yuijing Feng and Li Lan (Miranda) were our guides for the day.

The Songjiang area houses seven Chinese universities, including two law schools. We toured the beautiful campus with lakes, green space and pedestrian walkways, and certainly noticed many bicycles used by students as a mode of transportation. We took some group photos in front of the lake, a sculpture and the main entrance to the Law School, and then we went into one building that housed a display on the history of SIFT. We then took a tour of the law school building, including the library, a classroom, the moot court room and the clinic space.

Observation: While the SIFT campus grounds may have us beat on aesthetics, Albany Law School facilities – the library, our classrooms, clinics and office space – were far superior.

Our first class of the day was taught by Professor Jeanne Huang. Prof. Huang received her S.J.D. from Duke Law School, and she is an assistant professor and supervisor of the foreign exchange programs for the SIFT law school. She presented a wonderful class on negotiation that combined lecture and role plays. The role play involved a foreign traveler and a taxi driver, and the passenger had to negotiate with the driver to take a sick friend to the hospital that was out of the way for the driver whose shift was ending.

Prof. Huang started the class by distributing a playing card to the American and Chinese students in the class, and then had the students form groups based on the cards they were handed. In addition to providing a brief overview, she put up on the screen a couple of relevant quotes, “He who knows his enemy and himself will not be defeated easily” (Sun Tzu, Art of War) and “The best way I know how to defeat an enemy is to make him a friend” (Abraham Lincoln). After the groups discussed the taxi scenario, she called upon three sets of volunteers to perform the role play negotiation for the whole class.

In each case, the taxi driver was a Chinese student. In one role play it was two men, in one role play it was a male driver and a female passenger, and in the last role play it was two women.  Professor Huang was able to point out cross-cultural conflicts, and helped to develop an awareness by the American students about the importance and meaning of relationships in China. She noted the importance of interpersonal relationships when doing business in China, and the vocabulary used to signify warm vs. arms length relationships, as well as guanxi (in business, it is regarded as a form of long-term social investment in dealing with stakeholders), and moral influence vs. legal practice.

She also noted that Chinese culture emphasizes consultation and mediation before arbitration and litigation. The final role play centered on a waste sorting project and involved a representative of an NGO dedicated to environmental protection and a representative of the municipal government. The teams worked hard on this role play as well. 

After class we walked over to the student center, where we were treated to lunch in a private dining room. After lunch, we had a brief opportunity to enjoy a beautiful spring day on the campus green. 

Our next stop was a visit to the People’s Court of Songjiang District. Professor Cheng Wang (Raymond) met us at the Court and served as our escort. After going through security, we entered the public area of the court house where there were many windows with numbers to serve the public. We walked past a number of small courtrooms where we observed that unlike in the U.S. where the plaintiff and defense table face the judge, in China the tables face each other.

Our Court tour was led by Haifei Kong, Vice President of the Court, and also a judge. He took us to the video recording control room where we observed that everything transpiring in every court room was being recorded. He told us that rather than requesting transcripts, the lawyers may request the recording of the proceeding. We were then brought to a large conference room in the court house where we had an opportunity to ask a lot of questions about judicial selection and tenure, the format of proceedings in the courts, court caseload, appeals, the types of proceedings that take place, etc. This discussion was very informative and it pointed to clear differences and similarities in the Chinese and U.S. judicial systems. After the meeting, we continued to walk through the court house and some were able to take a seat on a bench where the judges sit for a “photo opp.”

Following the court tour, we went back to the Law School, where we were hosted to a wonderful social by the Law School administration and students. We were welcomed by Chen Bai Jan, the Chief Director of the Law School. Student Daniel Jin served as “MC” for performances by students Li Zhenzhen who demonstrated Kung Fu and Tai Chi, Lin Rong who played the traditional Chinese violin, and Chen Li who sang traditional Chinese folk songs. Daniel Li then gave a calligraphy demonstration. Each of these students also tempted some of our students to participate with them…and they even got one of our professors to a sing a line of a Chinese song (but I’m not telling who it was). After the formal program, we had free time to network and socialize with the students, and without a doubt, a good time was had by all. Many of the students exchanged email addresses, and it was clear new friendships were formed.

Following the social, Dean Liza Chen hosted our group to a traditional Chinese banquet. We thought we were eating well on the trip, but nothing came close to the meal served at this banquet. This was a special dinner indeed, attended by Vice President Xu, Chief Director Chen, faculty from SIFT Law School and some of our new student friends. After the meal, our students all approached Dean Chen to express gratitude and appreciation for all she has done to welcome us to SIFT and Shanghai and for the outstanding hospitality.

Upon our return to the hotel, we were met by Albany Law School alumnus Song Haohao, who recently passed the Chinese bar. Song earned his JD at Albany Law School and had earlier passed the New York bar. The informal conversation was terrific as Song was able to speak with us about what it is like to run a small private law office in Shanghai and how the practice of law works from his perspective. It was a great ending to another information-packed day. 

Remembering that it was St. Patrick’s Day, many students headed out to experience the Shanghai night life.

Associate Dean Patricia Salkin
Shanghai: Wednesday, March 16, 2011

Incredible. 

I think that it the best word to describe first impressions of Shanghai for our group of travelers.  Today was out first full day in the economic center of China. We started out trip in the government and power center of China (Beijing) and then traveled to the ancient city rich in Chinese history (Xi'An). Now we are the modern City of Shanghai, and the students are experiencing what for many was the unexpected.

Representatives from the SIFT Law School met us at the hotel in the morning and rode with the bus with us to the Gu Bei campus, where we are surprised to see a banner hung across a building welcoming Albany Law School to SIFT. On the bus, students were provided with a “Guide to the Study Tour at the SIFT School of Law,” containing a detailed itinerary for the next three days, a lecture guide for our three formal classes (faculty bio, course description, reading resources, and contact information for each faculty member). 

This morning we were treated to a lecture by Professor Liu Dan on the System of Chinese Business Law. Professor Liu was a visiting scholar at Albany Law School in the fall 2010 semester, and most in our group had met her in Albany, so it was fitting that we would be welcomed by a familiar friendly face. Professor Liu provided a fantastic overview of the business environment in China before and after the country’s accession to the World Trade Organization. She explained the types of Foreign Investment Enterprise structures, including those whose operations involve Chinese partners, as well as those without local partners (Wholly Foreign Owned Enterprises). She discussed economic and legal reforms in China that led to the first foreign investment law in 1979. Prof. Liu used real estate law as an example of a law that has important consequences for foreign investments. She explained that as the land is owned by the government, what people/businesses are really buying is an interest for a period of time in the land. 

For example, commercial housing projects are entitled to use the land for 70 years; industrial use may last for up to 50 years; land used for business, entertainment and traveling is entitled to a 40 year interest; and all other uses may exist for 50 years. Although at last week’s meeting of the National People’s Congress in Beijing the suggestion was made to expand the amount of time land can be used for a specific purpose, no action was taken.

Professor Liu spent a considerable amount of time discussing the laws surrounding Foreign Direct Investment (FDI) in China, noting that in 2010 $105.74 billion of FDI was made in China. She discussed the pros and cons of the various business investment vehicles, and although wholly owned foreign businesses are a popular vehicle, under the Chinese Catalogue of Guidelines issued by the government, Chinese owned businesses still enjoy preferential rights. The Catalogue for the Guidance of Foreign Investment in China, last issued in 2007, sets forth three different categories of businesses: those encouraged, those restricted and those prohibited. The detailed rules for the implementation of the wholly-owned foreign enterprises were approved by the Chinese government in 1990 and revised in 2001. Prof. Liu pointed out that some of these laws have been translated into English, but some have not, indicating a need for a Chinese law partner to make sure the business is operating legally. Our students asked a lot of great questions, demonstrating the preparation they did in advance of our journey,

After the class, we headed to lunch and then to the international law firm of O’Melveney & Myers, LLP. We were greeted by partner Qiang Li, who began his presentation by noting that the whole world is watching as China transitions to democracy, but he noted that China is a partnership country and that the Communist Party of China is the partner. He explained that the external view of China as a one-party country is an overly generalized characterization, preferring instead to have the class consider the relationship more akin to “general partner” and “limited partner.”

Perhaps the most fascinating part of the presentation was Mr. Li’s explanation of the role of the courts in China – he explained that the courts are an organ of the government, but that it is not the role of the courts to interpret the law because they are not supposed to tell the executive and legislative branches what to do, rather, it is the role of the courts to implement what the executive and legislative branches do. He noted that courts won’t risk being overturned by the ministries. This is totally different, of course, than the role of the courts in the U.S., where courts routinely engage in statutory interpretation.

Mr. Li also might have dispelled another myth among the group regarding membership in the Communist Party. He said only about 10 percent of the Chinese people are CPC members. He explained that you don’t just “sign-up” to become a member (like we might register for a political party in the U.S.); rather, you have to apply for membership and be assessed, before being invited to join.

Mr. Li then explained the growing international law practice in China, and used GE as an example, noting that when they came to China 15 years ago, they were forced to find a local partner who had almost nothing to bring to the table. Times have changed, and now Chinese companies have a lot more to offer the partnerships. He explained how now Chinese companies have a vision to dominate the Chinese market, and how foreign companies can help them achieve that vision. He used Club Med as an example, as well as GM/Buick. He noted that a Shanghai auto company has now partnered with GM to enter the market in India. He noted that there is a lot of potential for partnerships in China, but cautioned the law students that the key is how we manage these relationships.

Two other lawyers form the firm then spoke with the class – Xianjun Shen and Carl Heiberg.  Both are partners in the Private Equity, Mergers & Acquisitions group. After offering more details about the size and organization of the law firm, they provided a great checklist of the types of legal considerations that go into foreign investments in China. In addition to many layers of government approvals, other considers for business lawyers include: capitalization, foreign currency controls, tax issues, real estate, employment, intellectual property and technology, and dispute resolution.

We then learned about outbound investments by Chinese companies wishing to do business in other countries and the legal and regulatory climate. A fourth partner, Xiqin Fan, then provided a brief presentation specifically on U.S. capital markets for Chinese companies, discussing why some Chinese companies decide to do an initial public offering in the U.S. and become listed on the stock exchange. There were a number of great follow-up questions by our students. After the formal presentation, we were treated to a tour of the impressive law firm offices.

Our last stop for the day was to the American Chamber of Commerce. What a treat! We learned from David Basmajian that the Chinese State Council issued Circular No. 19 mandating that Shanghai will become a global financial and shipping hub by 2020. We continued to get more detailed about foreign direct investment in China, and learned that with 5,500 companies, U.S, companies are the top investors in China. According to the Chamber’s 2010-2011 business climate survey (of their members) in Shanghai, the top five business challenges are: HR (not enough qualified staff and it is competitive to attract and retain good staff); inconsistent regulatory interpretation; unclear regulations; the bureaucracy (it is hard for businesses to plan when the Chinese government is not transparent); and the lack of protection of intellectual property rights.   

A majority of survey respondents, 68 percent, believe that the Chinese government shows a preference to Chinese companies. After the presentation by Chamber staff, we spoke with a business owner, Phil Branham, who is a past president of the Chamber. He has done business all over the world and shared a lot of examples of the legal challenges companies face doing business in China. He also explained how the state-owned enterprise model is still a problem for some because it includes a cradle to grave policy – meaning, that companies may be carrying hundreds if not thousands of non-working former employees on their monthly payroll. He also noted that the way the Chinese government restricts the currency is also an impediment to business. The students were lively and peppered Phil with more than a dozen thoughtful questions.

After the Chamber visit, our tour guide Henry took the students to dinner and to visit the French Concession and the Bund (which is a spectacular display of corporate neon in the evening). 

Professor Cords and I were invited to a formal dinner hosted by SIFT University Vice President Xu and attended by SIFT Law School Dean Liza Chen, as well as the Dean of the SIFT International School and the Dean of the SIFT International Business School. Remarkably, the dinner was all women! We had a wonderful time getting to know our hosts even better in a less formal setting. Vice President Xu expressed her deep gratitude to Albany Law School for the treatment, programming and hospitality we provided to the SIFT Law students when they visited in January. We of course, returned the praise for Dean Chen for the wonderful treatment we have been receiving in Shanghai. After dinner, Dean Chen arranged for law professor Amy Yin to accompany me and Prof. Cords on a visit to the Bund. This was a wonderful opportunity to get to know the professor Dean Chen selected to next visit Albany Law School as a visiting scholar in the fall 2011 academic semester.

It was a full day packed with information that will certainly takes weeks to fully process and put in appropriate perspective/context.   

Associate Dean Patricia Salkin
Tuesday, March 15, 2011

The special treat today was a 9:00 a.m. start. After a nice breakfast in the hotel, we checked out and got on the bus with Jenny and our driver, Mr. Wu, to make our way to see our second “Wonder of the World” on this trip – the Terra Cotta Warriors and Horses. 

On the way, Jenny provided more history about the Qin dynasty and the belief by the Chinese people in an afterlife, setting the context for why the emperors are buried with all of their treasures, their prized possessions and why Emperor Qin wanted to be buried protected by thousands of terra cotta warriors. Qin became emperor when he was 13, and it is believed that it took about 40 years to make his tomb, although he only lived about another 37 years. It is estimated that more than 700,000 people worked on the tomb, which spread over almost 60 kilometers. 

As our journey began, we drove through the streets of Xi’an. It is an interesting dichotomy to see one part of the City that boasts the same brand name stores found on Fifth Avenue in Manhattan, but then to see the bulk of the people who live and work in the City appearing to be not affluent enough to shop in these types of stores. We drove by many poorer neighborhoods, saw a lot of garbage in front of homes and business and a lot of ruble in alley ways. At one point, it even looked like a make-shift mini-landfill along the side of the road (either that or all of the litter was collected and deposited there).

While the air in Beijing was not so clear, the air seemed to bother people a little more in Xi’an perhaps because in addition to the industrial pollution, there was a tremendous amount of dust. For some, with asthma and sinus difficulties, the dust seemed to settle in the throat in chest. The dust was not just from farmland, but we also noticed a great deal of construction along the way. In addition to new buildings, it also looked like there was a fair amount of demolition. 

The road transportation system in Xi’an is shared by cars and buses, bicycles and motorized scooters and tricycles that carry goods. It seemed as though driving was a bit dangerous in the City, and some of us experienced more than a few close calls with our driver backing up across three or four lanes, nearly avoiding hitting a dog, and driving close to pedestrians and cyclists. 

Out first stop was the Terra Cotta Warrior factory where they make “official” replicas of the warriors we were waiting to see. I must admit, at first I thought it was a bit hokey to stop – yet another tourist shopping event sponsored by the government. However, the group seemed to really enjoy watching the people make the clay into molds, the drying process, learning about how the models are put into the kilns (which we also saw) and may then be painted. After the demonstration, there was time to shop for models and many other local crafts and to take pictures with headless models so we could place our heads on the bodies of terra cotta warriors.

We then headed to lunch a few minutes further down the road and closer to the warriors. Everyone enjoyed the meal, which had our four tables in adjoining private rooms. Apparently the restaurant and chef were known for fresh noodles, and we were offered the opportunity to purchase small bowls of noodles for an additional 20 Yuan. About 2/3 of the group tried the noodles and the dish was enjoyed by all in a broth with beef at the bottom. 

It was finally time - we drove a short distance to the parking lot for the Terra Cotta Warriors. On the way, we saw the mound of dirt indicating the location of Emperor Qin’s tomb (where his body is believed to be buried). When we arrived at the entrance to the warriors, I questioned the guide immediately because I did not recognize this entrance from my previous visit, and she informed us that it would be about a 30 minute walk through a market to get to the Warriors. Jenny told me that now the government requires all of the tours to start from this location unless maybe we get special permission not to. She said to use the entrance we did the last time, it is an extra cost of 5 Yuan per person to ride an electric car to the gate. I gave up the argument because it wasn’t going to help and we had been waiting all day to see the warriors. The group made the trek (it only took about 20 minutes) through the open air market, and through the gates to see the Warriors.

Our first stop was the museum gift shop to see a short movie about Emperor Qin and the warriors. On the way, the farmer who accidentally discovered the soldiers when he was digging a well was present in the gift shop to autograph books about the Warriors. A number of people bought the book and had him sign it. At the time the farmer discovered the warriors, he received very little compensation from the government. Jenny said maybe it was around $3. Today, he makes a lot more money signing books at the gift shop! 

The group went in to the surround movie – which probably could use a little technological updating. Jenny then led us to Plait #1, where we saw this amazing discovery. Jenny explained that when the warriors were found, they were in pieces, and that archeologists have been working to put them back together. The museum was actually built on the exact site where the warriors were discovered, and we were also able to see the archeologists working at this site still putting together pieces of more warriors found under the ground. Another building housed a chariot, and a third building was focused more like a museum about the warriors. 

After the warriors, we headed to the airport where we had dinner at an airport restaurant and then went to the gate to wait for our flight to Shanghai. At the airport, the group started to discuss in more detail what is happening in Japan with the nuclear disaster. There has been some concern and questioning as to whether the winds are blowing in the direction of China. Right now, it does not appear to be the case.    

When we arrived in Shanghai we were greeted at the airport by our local tour guide, Henry, as well as the Dean of the Law School of the Shanghai Institute of Foreign Trade – Liza Chen; Miranda Lee, one of the students who visited Albany Law School in January; and Jing, the SIFT staff member who arranged our itinerary in Shanghai. We took a group photo in the airport and finally made it to the hotel after 11 p.m.  The Dean, Miranda, and Jing rode the bus with our group from the airport to the hotel. First impressions are a “two thumbs up” for our hotel. We have a very packed three days in Shanghai and start at 9 a.m. tomorrow on the Gu Bie campus of the SIFT University.

Michael Frascarelli '11
Reflections on Xi'an: Monday, March 14, through Tuesday, March 15, 2011

So far, no direct business education (that’ll occur soon in Shanghai). However, the impacts of explosive economic growth on Chinese culture were made especially clear in Xi’an, our second stop on the tour.

Xi’an was a dynastic capital of China up until the Ming Dynasty in the 14th century C.E. Not far from the city is the famous site of the terra cotta army, which we visited during our travels. It is also the former beginning of the Silk Road. Long story short, the city has an incredibly rich cultural heritage. 

While this heritage is still evident, the signs of “Westernization” are overwhelming. In more modern times, Xi’an has been a major manufacturing center, famous especially for industrial equipment. Large factories lined the highway on our way in from the airport. Toward the city center, high-rises and office towers took over the landscape. The extent of new construction in Beijing was impressive, but around Xi’an it was unbelievable. Towers are going up everywhere, land is being cleared and developed in all the outskirts we drove by, and high-tension power lines crisscross the landscape along with the highways. 

In the city center—which is still ringed by beautiful, 600-year-old fortifications—old development has given way to new. The main streets are lined with luxury shops, clubs, American chain restaurants (I noted McDonalds, Subway, Starbucks, Dunkin Donuts, and Dairy Queen), and other upscale consumer amenities. Though this city has done a much better job preserving its architectural and aesthetic heritage than Beijing while undergoing significant changes, the feel of the place was much more like the glitzy part of an American or European city than was the case in the fairly conservative capital. 

On the other hand, the comments made in my last post regarding smart growth and sustainability apply with extra emphasis to Xi’an…

At some point not too long ago, I had heard that “the real story” of China these days is entirely its incredible economic growth and overnight change to a culture of capitalist consumption. But thus far, our tour guides have been talking about ancient Chinese culture, describing the roots of the civilization, and escorting us to representative places. This is all well and good (and educational, of course). There is, however, a severe disconnect between the presentation and the experience, and I finally think I know what it is: the story we’re being told about China is antithetical to the overt materialism that pervades the contemporary urban life we see all around us. I mentioned such a disconnect in my last entry—that traditionally, the Chinese lived a life incorporated with and respectful of nature, but these days that aspiration hardly seems an afterthought. It makes me think of how we were taught that once upon a time there was a man named Benjamin Franklin, who was very wise and diligent and helped found the United States of America on a set of values that included, among other things, prudent handling of money. Yet our culture recently has been one of living beyond our means, racking up more debt than we can possibly pay off (borrowed, incidentally, from the Chinese), and consuming immodestly as a sign of status. We see where that has gotten us. 

I’m not prophesying that China is setting itself up for an economic trauma and disappointment similar to ours, but I do feel that something important of the Chinese story has already been packaged up and sold off at a vastly inadequate price. It pains me to admit that my experiences at some of the world’s greatest cultural relics—the Forbidden City, the Great Wall, the terra cotta army of Emperor Qin—were often embittering due to the seemingly constant interruption of gift shops, pushy vendors, masses of other tourists, and sometimes circus-like atmosphere (to avoid sounding accusatory, I’ve heard that Niagara Falls was subject to this type of treatment not too long ago). So although the story we’re being told is one of culture, emotional richness, and something touching upon the divine, the boots-on-the-ground experience sometimes has had all the majesty of being in a Wal-Mart on a Saturday afternoon. 

Still, these places are incredible, and I’m grateful to have experiences, memories, and carefully-chosen photographs to take home with me.  If at some point I really feel like I need a terra cotta warrior replica, I can use the internet, thanks.

Professor Danshera Cords
Xi'an

The visit to Beijing seemed fast and action packed, but the visit to Xi’an was more so. With only a day and a half to learn about the capital of the early dynasty of China, the class once again had its work cut out for it. Once again, we were ready. Our tour guide in Xi’an, Jenny, helped us to explore the city, learn the history, and discover the culture.

Xi’an offered many contrasts. The city gates that were built many centuries ago remain in place, surrounding the bell tower and drum tower that called the morning and evening, respectively. At the same time, everywhere we went new construction was underway. 

During our hour-long bus ride from the airport to the small wild goose pagoda Jenny talked with us about the area and the history, and she told us more about Chinese culture. While we learned about the culture and history, Jenny also told us about some Chinese laws and that there were regulations that required that the two remain in harmony. This explanation of the intertwining of the old and new, of policy and law, seemed fitting for our class. Jenny talked much of the harmony between the old and the new. 

On our trip to the pagoda, our guide Jenny also told us about how important family was in her culture, using her own family as an example. This led to her explanation of the one family one child policy. She was very forthcoming about her views of government policy, in relation to family planning. She elaborated on the ethnic differences that Professor Bromley from the University at Albany mentioned before we departed, explaining the differences between the Han majority and some of the minority groups.

It turned out the law regarding family planning was more complex than I realized, allowing couples who were both only children and first had girls to have second children and minority groups to have multiple children. The differentiations provided a fascinating backdrop of cultural, population, legal, and humanistic study that provided an interesting overlay for the culture and recent history we were observing. Jenny viewed the law as providing a number of benefits, even though families who disregarded the policies were fined and subject to sanction.   

We then went to the city gate. This was the entry to the city in the early days. The moat and well wall both still exist. Our guide Jenny told us that all buildings inside the wall had to be built in a style that matched the design of the historic structures. This is also in keeping with the respect for tradition that is so highly prized.

The history of the city gate in this old city (even by Chinese standards) was breathtaking. I know I’ve said that before, but the sights in China are such that each out does the last.

In addition to learning about the history of the moat and the city gate, Jenny explained to us the legal regulations relating to the building within the city gate area, as well as near the city gate area. To maintain the cultural and historic integrity of the area, new buildings in the area must be constructed in the style of the older buildings. This information added a depth to what we were learning that completed the picture of the research and presentations that the students had completed prior to coming on the trip.

In the morning in Xi’an, we were off to see the UNESCO site for the terra cotta soldiers and horses. These figures were discovered in the early 1970s by a farmer digging a well. Jenny explained that the Chinese rules regarding property resulted in little payment for the discovery to the farmer. He did the right thing under the system and turned the discovery in; this did not result in any fame until Hillary and Bill Clinton visited the site and asked to meet the farmer and take a photo with him. This was an interesting opportunity to think about how U.S. property law would treat a similar situation. 

More than 6,000 warriors and horses were excavated before excavation was halted because the oxidation was damaging the artifacts. One more chance to think about what kind of environmental and conservation rules would be applied elsewhere. Now it was time to head to Shanghai, where the scheduled lessons in law would begin.

Associate Dean Patricia Salkin
Monday, March 14, 2011

Another early start to the day today as we had to get the airport for our flight to Xi’an. Luggage had to be in the lobby by 7 a.m. as the travel company transports checked luggage in a separate van and checks it in for the group. Johnny met us at the hotel, and we boarded the bus at 8 a.m. for the drive to the airport. On the way, Johnny reviewed with the group the things we had seen and learned during our stay in Beijing. Everyone signed a thank you card for Johnny and in addition to a gratuity we gave Johnny and the bus driver USA flag pins and bumper stickers.

Perhaps there are some lessons from the Chinese in terms of efficiency in getting people through security. When we arrived at the security check-in, the lines were short; there were a series of desks where passports and tickets were checked and a photo was snapped of each passenger. Personnel helped get bags through screening, no need to take off shoes and belts. Our China East airline flight to Xi’an was about 1 hour and 40 minutes (which would have been 15 hours by car/bus). We collected our luggage and met our tour guide, Jenny.

Jenny told us we would not get to the hotel until the evening as we had several stops to make today. On the way to the City from the airport, Jenny explained that Xi’an is the ancient capital of China, having served as the Capital City for more than 1,000 years before the seat of government was moved to Beijing. Xi’an is often referred to as the birthplace of Chinese civilization, with a 4,000 year history. There are eight million people who live in the City of Xi’an and about 36 million people who live in the province or region. Jenny said that Xi’an is in a good location with access to water and mountains, another example, she said, of Feng Shui. Xi’an has three ring roads around the City, as compared to the six in Beijing. Like Johnny told us in Beijing, Jenny emphasized that education is very important in China, and that in Xi’an there are more than 100 colleges and universities.

The ride away from the airport revealed a lot of farmland. The farmers grow winter wheat and sweet corn. Since there is not a lot of rain in Xi’an, Jenny pointed out that many of the farmers have flat roofs on their homes, where they can dry the crops. The cuisine in Xi’an consists of flour based foods. Jenny spoke about noodles, and said that before they added the Western custom of birthday cakes, the Chinese tradition is to serve birthday noodles, which are long, uncut noodles to represent long life.

Another reason that there is a vast amount of farmland going from the airport to the City is that there are 72 tombs located along the way. These are identified by large mounds of dirt that appear on the landscape. Ancient emperors, their officials and concubines are buried in tombs under these mounds of dirt. Jenny said that the reason the airport is far from the City is that no building is allowed near the tombs. She said that there are no plans open the tombs because it is believed that everything is preserved underground now, and that once exposed to the air/oxidation, preservation will be more difficult.

Our first stop was the small Wild Goose Pagoda, which used to be a Buddhist Temple. The pagoda has been preserved and is now a park. In the morning, Jenny said that many older people can be seen doing exercises, or Tai Chi. Jenny explained how the monks hid their books inside the pagoda. There was a large bell that people could ring by swinging a log into it for 5 Yuan.  Ringing the bell is supposed to bring good luck, and many in our group took a swing. Inside one of the courtyards, the commercial aspect of the tourist industry was evident. Jenny brought us into a room to show us a traditional Chinese bed called a “Kang” that is made of cement blocks. She explained how the bed was heated, and said that these beds can still be found in use.  Around the bed in the room were a number of tables with people selling wares. One woman offered to calligraphy each person’s name on rice paper. Many students took her up on her offer.

After the pagoda, we headed to the City Wall. In ancient times, walls were erected to protect the cities. This wall has been preserved around the City, and our hotel is located inside the City Wall. We went to the East gate and entered the Wall, climbed a set of steps, and found ourselves on top of the wall with a fantastic view of the City of Xi’an. Some in the group opted to rent bicycles and ride around the top of the wall to get a full view of the entire City. 

After the Wall, we headed to a famous dumpling restaurant for a special dinner with course after course of dumplings filled with different types of meats and vegetables. We arrived at the hotel at about 7 p.m. for a one night stay. Many in the group ventured out to see the City at night, from the Bell and Drum Tower, to the lights on the City Wall, to the Muslim market (where good photos were taken of all kinds of food and students negotiated the price of more souvenirs), to the local bars and dance clubs. We have been actively on the go for days, so a slightly later start time in the morning enable most to have a good night sleep before we head out to see the Terra Cotta Warriors in the morning.

Professor Danshera Cords
Monday, March 14, 2011

Our visit to Beijing was action packed. We had law, culture and history from start to finish. 

As was appropriate to our trip, we began with an opportunity to learn about the practice of law in China. After an early morning departure on Thursday, we arrived Friday afternoon, checked in to our hotel, went for dinner and returned to the hotel to meet with two lawyers practicing in Beijing.

These two lawyers were both U.S. trained. One was an Albany Law School alumna. They came to our hotel and talked with us about their experience practicing in China and how they got here. Each provided a different perspective, as one worked in private practice and the other for the government. It was interesting to learn about the possible routes to practice in China and that although foreign lawyers register neither of our guests was licensed in China, requiring the hiring of local legal counsel in the event of litigation.

Early the next morning we began our cultural education in earnest. With only two nights and three days in Beijing, seeing the majority of the most important sites of cultural and historical significance presented quite a challenge because China's extraordinary history. 

The group and our guide John or Johnny, along with his tour guide's flag from which he draped a small stuffed tiger, were up to the challenge. We began our first full day in Beijing with a city tour. From Tianamen Square to Chairman Mao's mausoleum, from the Imperial City to the Hutong with a pedicab ride to see how the common person lived in 600 BC, the day was a study in contrasts. These contrasts seemed fitting in light of the emphasis our tour guide placed on the ideas of yin and yang.

The day was not just education, there was shopping too; our lunch stop was at a fresh water pearl factory, where we learned about fresh water pearl cultivation. We learned throughout our tour that commercial enterprise, creating profit, and success are important components of modern Chinese life.

On the second day we headed to the Great Wall. Our visit was to the furthest of five sites in the area that are open to the area. Our guide told us that this site is the best preserved and restored. The determination and ingenuity required to have built the wall 2000 years ago is incredible. Pictures, however breath taking, do not do this scene justice. I think most felt this way. It was also interesting to see the reaction of Chinese who traveled to see this piece of their history and culture. No proper analog came to mind as our history is so much shorter.

The rest of the day we continued to see other sites, including the silk market where budding negotiating skills were at a premium and the jade factory. At the jade factory we learned about soft jade and hard jade, as well as the market for jade, which the shop girl likened to gambling.

In some respects security was heightened because the National People's Congress was in session. Our tour guide explained that this meant increased police as well as volunteers. Dean Salkin indicated that we were subject to less security at Tianamen square than she experienced last year. Another contrast that was interesting.

Our guide talked of his desire to get a certificate in law. He said he wanted to study law because it would let him get ahead and would allow him to change his life. Johnny talked about wanting to be like his friend, who had started a business and become very successful. At the same time, he also talked of the tradition and history of his culture and people with respect, honor, and awe. Johnny seemed to embody a desire to work hard, to move forward into the future, but at the same time to embrace the past and the lessons it had to teach him. This blending of old and new, of yin and yang, the contrast of past and present, present and future seemed to be the mystique that Beijing had to offer. 

As we head off to Xi'an, I look forward to the next chapter.

Associate Dean Patricia Salkin
Sunday, March 13, 2011
 

A 6:45 a.m. wake-up call began our last full day in Beijing. After breakfast we boarded the bus to head towards The Great Wall of China. On the bus, our tour guide Johnny taught the group some Chinese. He explained the significance of Chinese numbers, showing us examples and testing our knowledge of Chinese culture. He showed us the symbols for one, two and three and how they represented the heaven, the earth and a person. He then showed us the symbol for the emperor and for the City of Beijing.