My name is Mark Goodfield. Welcome to The Blunt Bean Counter ™, a blog that shares my thoughts on income taxes, finance and the psychology of money. I am a Chartered Professional Accountant and a partner with a National Accounting Firm in Toronto. This blog is meant for everyone, but in particular for high net worth individuals and owners of private corporations. The views and opinions expressed in this blog are written solely in my personal capacity and cannot be attributed to the accounting firm with which I am affiliated. My posts are blunt, opinionated and even have a twist of humor/sarcasm. You've been warned.

Thursday, November 18, 2010

Doing Business of Any Kind in China

Whether you are outsourcing, entering into a business venture, or just investigating doing business in China, there are plenty of risks for the uninitiated. However, if you can navigate the Chinese playing field, there are substantial profits to be made.

Cunningham LLP, the firm I work for, has an International Accounting Affiliation with the Alliott Group. I recently attended Alliott’s worldwide conference in Singapore. One of the sessions at the conference was titled “Protecting your clients’ interests when doing business in Singapore, China and Vietnam.” The session was presented by a lawyer, Caroline Berube (cberube@hjmasialaw.com) a transplanted Quebecer now living in China.

Amongst the many discussion points, Caroline pointed out that even if a Canadian business just outsources to a Chinese manufacturer, the Canadian company should register its trademark or risk the trademark being seized by the outsourcing firm in China.

Even business cards require a new understanding in China. Caroline stated that the English name on a Chinese business card has no meaning. So a company can market itself under the English name “Beijing Truss Fabricators Inc.” and in reality, the company’s legal Chinese name could be “Chan Bubble Gum Company.”

Caroline provided an interesting example of why you need advisors on the ground in China who can provide proper due diligence. She cited an example of a Canadian client that was extremely excited abut a Chinese company they met at a trade show that could provide manufacturing for the Canadian company. Caroline stated although the Canadian client was pushing to get her to sign the deal immediately, upon further legal due diligence, it was determined the Chinese company was in fact not a manufacturing company itself, but a trading company who subcontracted to Chinese manufacturing companies.

Caroline also notes that legal signing authority can be an issue in China and without understanding the position of who is signing the contract on behalf of the Chinese company, you may have an invalid contract.

Another potential legality is who is provided legal signing authority for the Chinese company. The legal representative maybe able to access loans for themselves on behalf of the Chinese entity if you do not have proper legal restrictions in place.

The above are but a few of the traps and pitfalls of doing business in China. Doing business in China can open up tremendous opportunities, but it is a very complex place to do business and Canadian companies must ensure they obtain proper professional advice from those who have Chinese experience before entering into any kind of a Chinese business arrangement.

The blogs posted on The Blunt Bean Counter provide information of a general nature. These posts should not be considered specific advice; as each reader's personal financial situation is unique and fact specific. Please contact a professional advisor prior to implementing or acting upon any of the information contained in one of the blogs.

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