November 5, 2008
More on Closing Chinese Factories
Chinese banks, despite State prodding to the contrary, refuse to lend to struggling factories. At least, that is what Bloomberg writes.
``It's wishful thinking for the government to try to talk banks into lending to stimulate the economy,'' says Li Qing, a Shanghai-based analyst at CSC Securities HK Ltd. ``Banks are holding onto their purse not because they are bound by the quota, but because they are expecting mounting defaults and failures.''
Hold on to your 帽子 （hats）!
Posted by Richard at 3:06 PM | Comments (0)November 4, 2008
Off-topic: Electronic Voting Machine Our Next President
I know it has nothing to do with China, but it's just too funny to pass up.
Voting Machines Elect One Of Their Own As President
November 3, 2008
Audio Event: Retail in Vietnam with Giles Cooper
While China occupies center stage for most Western investors, Vietnam's nascent retail sector may provide opportunities, which our guest attorney Giles Cooper, resident in Hanoi, expounds upon, with comments on the legal system as well.
Giles Cooper is Special Counsel to Duane Morris. View his bio here.
Posted by Richard at 7:02 PM | Comments (0)November 1, 2008
Melamine and the Chinese Academy of Sciences?
One of my fav blogs suggests that the Chinese Academy of Sciences (中国科学院) was the prime mover in the introduction of melamine into the Chinese food production industries. The Academy has issued a denial.
Posted by Richard at 1:44 PM | Comments (0)October 29, 2008
Video Event: Robert Adanto's "The Rising Tide" -- Chinese Video Artists
We take a detour today with a clip from Robert Adanto's, "The Rising Tide, a New Documentary on Chinese Contemporary Art." Many thanks to Robert for his kind permission, enabling us to post this clip on Asiabizblog.
Please note as well that Mr. Adanto's film will preview at the The Smithsonian Institution's Hirshhorn Museum on November 13 (details below).
In his beautiful debut film, Robert Adanto explores the work of some of China's most talented emerging video artists and photographers and their personal responses to the country's rise as a global economic, political and cultural force. This is a unique opportunity to see this elegant and thoughtful film, introduced by the director.
Featured artists include: Cao Fei, Wang Qingsong, Xu Zhen, Zhang O, Chen Qiulin, Yang Yong and Birdhead
The Rising Tide was recently part of CHINA NOW in the UK, as it was part of Constant Stream: China 08 at the Royal College of Art in London, where it screened with a film by acclaimed Chinese director Jia Zhangke.
Thursday, 11/13 8:00 PM
Smithsonian Institution’s Hirshhorn Museum and Sculpture Garden
Ring Auditorium
Washington, DC
202-633-1000
To learn more about the film, click this link.
Posted by Richard at 4:43 PM
| Comments (0)
October 27, 2008
More Reports of Chinese Factories Shutting Their Doors
As we've noted in the past, sporadic reports of factory closings in China seem to be tied to a downturn in orders from Western nations, as summed up in this USA Today article.
More than half of all China's toy exporters — 3,631 firms — shut their doors the first half of the year, the official Xinhua news agency reported. "Many toy factories have gone bankrupt this year," says Luo Yunzhang, founder of toy exporter Guangzhou Sixiren Toy, which makes playground equipment for Ohio-based Little Tikes, among other products.
"We saw exports start to dip in May, when the government began restricting businessmen's visits ahead of the (August) Olympic Games. … Now the global crisis is causing problems. When people are in difficulties, they spend less on things like toys," Luo says. Luo predicts that Sixiren's export revenue will drop by half this year, to $500,000.
China's textile industry is also enduring a deep slump. Textile exports have been tumbling since March. More than 10,000 small textile manufacturers went out of business the first half of this year alone, the government says. "The global crisis is seriously affecting the local textile industry," says Yu Xin of the China Chemical Fibers and Textile Consultancy in Hangzhou.
Other reports of factory closings may be found here and here [Many thanks to Sean Hocking in Hong Kong for these links.] I haven't even begun to search Chinese language websites for reports of factory closings.
The popular opinion noted at Asiabizblog several months ago -- that the growth slowdown began well before the global financial meltdown -- has been borne out by Chinese government statistics.
Those statistics, invariably unreliable for reasons we have discussed often before, posit a decrease in the rate of GDP growth in the most recent quarter, compared with the same quarter in 2007. Nevertheless, 9% growth, as claimed by China, remains extraordinary. But is it accurate? Is it even close? (Economists posit that 8% growth is required simply to maintain a satisfactory level of employment growth.) Is the Chinese economy still growing by leaps and bounds, or is it qualitatively as bad as the Washington Post reports, also relying upon government statistics?
The official Xinhua News Agency reported this week that 3,631 toy exporters _ 52.7 percent of the industry's enterprises _ went out of business in 2008.
Perhaps we will know when we see more news reports of massive Chinese companies suddenly filing for bankruptcy, like this.
Posted by Richard at 2:44 PM | Comments (1)October 24, 2008
Audio Event: an Interview with China Law Scholar and Practitioner, Stanley Lubman
Asiabizblog kicks off a new season of podcasts with an interview of Stanley Lubman, China law scholar and practitioner. Mr. Lubman has, over 40 years, been witness to and participant in China's veritable earthquake of changes.
Whether as student of Chinese law at Columbia University School of Law in the 1960s, as delegate to the earliest Guangzhou trade fairs in the 1970s, as attorney for energy deals in the 70s and 80s, as scholar/practitioner at Harvard, SOAS or Allen & Overy in the 80s and 90s, Stanley Lubman always seems to be one step ahead of the pack.
Such also seems to be the case with his journal article, "Looking for Law in China," available here. While much of the world, including academia, seems to approach China with an "irrational exuberance," a subject upon which I have discoursed a often (see below for links), Stanley Lubman's take on China's development is nuanced, endowed with a subtlety of understanding that comes only with experience. Many thanks to Stanley for his willingness to share his expertise with the Asiabizblog audience.
An in-depth interview with Stanley Lubman, China law scholar and practitioner, on the uncertainties lawyers and businessmen face when dealing with China.
* * *
The Irrational Exuberance Series (from 2005):
Quick links to Rich Kuslan's "Irrational Exuberance, or, Should You Enter the China Market?" series:
* Should You Be Doing Business In China? (Text only)
* What Do You Wish to Accomplish? (Text / Audio)
* Where's the Beef? (Text / Audio)
* A Handsome Bit of Documentation (Text / Audio)
* Says Who? (Text / Audio)
October 23, 2008
CITIC Pacific's Great Big Bet (Bath) -- Who Else Is Next? China Railway!
Details have emerged in the CITIC Pacific forex scandal:
Citic Pacific Ltd.'s attempt to manage currency risk means the Chinese steelmaker and property developer has four times more money riding on the Australian dollar than it earned last year.
The unit of China's largest state-owned investment company has contracts committing it to buy as much as A$9.44 billion ($6.3 billion) of the currency, according to an Oct. 20 statement. That's more than quadruple Citic Pacific's market value yesterday and compares with 2007 net income of HK$10.8 billion ($1.4 billion).
More here.
As worldwide currency traders continued to deleverage risky positions -- with greater volatility and uncertainty than ever done before -- we will certainly see many more Chinese currency investments unwind with significant losses to major overseas investment subsidiaries.
What you know, but the Hong Kong subsidiary of China Railway Group has just announced currency trading losses of $278 million.
Posted by Richard at 2:13 PM | Comments (0)October 21, 2008
China's Economic Growth 9% in Third Quarter And Dropping
Statistics compiled by the Chinese state are unverifiable and unreliable, but Western company representatives seem to agree that the bloom is still there, but wilting somewhat. Indeed, the Chinese economy has slowed drastically, even before the American melt-down. Expect more to come as American and EU retail spending plummets over the course of the next year.
You read intimations that trade was slowing here (and elsewhere on this blog) long before you could read it there.
Posted by Richard at 6:54 PM | Comments (0)October 20, 2008
CITIC Pacific Loses $1.89 Billion in Bad Betting on Currency
CITIC Pacific, whose parent company recently offered to raise its equity stake in Morgan Stanley to 49% from 10%, has announced the loss of US$1.89 billion (and possibly $2 billion) in currency trading. Trading of the shares was suspended for one day (October 20) on the Hong Kong exchange.
``The incident shows the company has problems in its internal control as it's too big a potential forex loss,'' Kenny Tang, a director of Tung Tai Securities Co., said in Hong Kong. ``The company won't get bankrupted because of its state-owned background but the stock may fall at least 10 percent tomorrow.''
Here again we see the general belief that state-owned Chinese financial institutions are invincible. I well remember bankers telling me that no Chinese bank would ever fail in China because ”政府绝对不会让银行倒闭。“ (The government will absolutely never let a bank go under.)
Unless, of course, the loss is great enough. How great? Who knows? We've already seen sleight of hand applied to a bankrupt Chinese financial sector, theoretically taking bad loans off the books and allowing major insolvent institutions to list on world exchanges, as if they were pure as the driven snow. The American house of cards has fallen and the bailout's success is not readily apparent. And the Chinese?
Posted by Richard at 6:48 PM | Comments (0)October 15, 2008
Impact of the Credit Freeze on International Shipments -- Where's the L/C?
Bloomberg reports that the credit freeze is expected to reduce the number of international shipments banks commonly guarantee:
``Letters of credit and the credit lines for trade currently are frozen,'' Khalid Hashim, managing director of Precious Shipping, Thailand's second-largest shipping company, said in Singapore yesterday. ``Nothing is moving because the trader doesn't want to take the risk of putting cargo on the boat and finding that nobody can pay.''
Companies completely dependent upon product purchased overseas by means of letters of credit could be badly affected if L/Cs will not issue. Very few will purchase product from China T/T and who will ship D/P? Primarily self financed manufactured goods (not many of those, one expects) and domestic manufacturers may be somewhat better off.
One would expect effects to be seen at American and EU factories dependent upon foreign parts and retail stores within a matter of weeks. What possible effects? fewer imported products? increased difficulty of obtaining product? Higher prices, if demand remained steady? Production ramped up in the US and scaled down in China?
Posted by Richard at 2:30 PM | Comments (0)October 14, 2008
Alabama Company Cuts Production in China, Brings Work Back Home
In the past six months, production in China has, for some foreign manufacturers, become too expensive. At present, I don't hear this as any more than a minor rumbling, but it could be, possibly, a precursor to a trend.
A drop in the dollar, rising transportation and labor costs, and the added difficulties inherent in overseas production have convinced some to pull production out of China and bring it back home. Remember our post on companies shifting production capacity back home to Germany from China?
Read this story on an Alabama sleeping bag manufacturer which has reduced production at its joint venture in Shanghai and now produces more of its products in the US than anywhere else.
To be fair, production has been shifted to the US only on this one product, but note the skeptical attitude towards the value of production in China:
While sleeping bags are three-fourths of its business, Exxel also makes tents and ski vests that are still cheaper to produce in China. Even so, ``every product we make is up for study now,'' {founder and CEO Kazazian} said.
In other words, something has changed.
Posted by Richard at 1:44 PM | Comments (0)October 10, 2008
Another Attorney Scam -- India, China, Japan, This One's Got It All
As we in the U.S. find ourselves inching ever closer to the nationalization of private banks -- despite Treasury denials -- let's take a break in the turmoil for some humor and at least an instance of successful self-preservation. Here is another example of the attorney scam with an Asian, about which I've written many times. Click this link to save it to your desktop and view it large enough to read it clearly.
The URL is linked to a server in Mumbai. Saitama is nowhere near Shanghai. The text is completely unpersuasive. DON'T visit the URL -- might be a malicious website. Many thanks to my colleague who sent it in.
Posted by Richard at 3:51 PM | Comments (0)October 9, 2008
More Chinese-Style Financial Steps Planned for American Banking System?
The Fed has discussed a plan to take ownership stakes in American banks, even healthy ones
"It is the policy of the federal government to use all resources at its disposal to make our financial system stronger,'' Paulson said. ``We will use all of the tools we've been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size.''
Direct infusions of capital into specific banks, taking equity stakes in return. If this doesn't hint of the Chinese system, I don't know what does
"No such moves are imminent, but the fact that the department is engaging in such discussions is an indication of how the crisis is constantly morphing. Such a move was not under consideration just a few days ago but has become more of a possibility in recent days as the stock market has plunged and the credit crunch shows no signs of easing."
Where are these ideas coming from? Apparently from a Republican administration. I must confess to be frightened at the mere contemplation of such ideas at the highest level of American governmental authority. If such invasive activitiy is to be practiced now, what next?
[UPDATE: This article asks: "The End of American Capitalism?"]
Posted by Richard at 2:45 PM | Comments (0)October 8, 2008
ABA Hiring for the Rule of Law Initiative, China Program
The American Bar Association Rule of Law Initiative China Program is currently hiring for the following positions (click each link for a job spec):
- Staff Translator/Interpreter
These positions are available immediately.
Many thanks to Hyeon-Ju Rho (卢炫周), Country Director, China Program, for this information.
October 7, 2008
Fed to Set Up Special Purpose Vehicle to Purchase Bad Debt
Just over the wire: the Fed will set up an SPV (special-purpose vehicle) to purchase bad commercial paper directly from banks and non-banks. Echoes of the Chinese experience...
An extraordinary step, which appears to be authorized by the Federal Reserve Act, Section 13:
3. Discounts for Individuals, Partnerships, and CorporationsIn unusual and exigent circumstances, the Board of Governors of the Federal Reserve System, by the affirmative vote of not less than five members, may authorize any Federal reserve bank, during such periods as the said board may determine, at rates established in accordance with the provisions of section 14, subdivision (d), of this Act, to discount for any individual, partnership, or corporation, notes, drafts, and bills of exchange when such notes, drafts, and bills of exchange are indorsed or otherwise secured to the satisfaction of the Federal Reserve bank: Provided, That before discounting any such note, draft, or bill of exchange for an individual, partnership, or corporation the Federal reserve bank shall obtain evidence that such individual, partnership, or corporation is unable to secure adequate credit accommodations from other banking institutions. All such discounts for individuals, partnerships, or corporations shall be subject to such limitations, restrictions, and regulations as the Board of Governors of the Federal Reserve System may prescribe.
[12 USC 343. As added by act of July 21, 1932 (47 Stat. 715); and amended by acts of Aug. 23, 1935 (49 Stat. 714) and Dec. 19, 1991 (105 Stat. 2386.]
This clause has been invoked very rarely in the past.
Posted by Richard at 2:01 PM | Comments (0)IRS Allows Multinationals to Borrow Larger Sums of Cash from Overseas Subsidiaries
As a further response to the credit crisis (crash?), the American Internal Revenue Service issued a temporary guidance last Friday allowing multinationals to borrow cash from overseas subsidiaries for as long as 60 days, three times a year, without incurring corporate tax.
"Recognizing current liquidity constraints, we issued this temporary guidance," said Andrew C. DeSouza, a Treasury Department spokesman. He declined to comment on whether any specific companies or their representatives had pushed for the move. "I think we're recognizing there were companies out there that were having liquidity constraints," he said.
Those of you located outside the United States may find headquarters tapping you on the shoulder for your cash somewhat more often.
Posted by Richard at 1:42 PM | Comments (0)October 3, 2008
North Korea on Google Earth
These brilliant Google Earth maps of North Korea [download here] are unsurpassed by anything I've seen made available to the public. You can't bring one in with you on a laptop, but you can surely prepare for your trip to the DPRK with it. Once again, thanks go to the North Korea Economy Watch Blog.
Posted by Richard at 6:28 PM | Comments (0)October 2, 2008
US Requirement of Cervical Cancer Vaccination for Immigrants Stirs Up Backlash
Part of my law practice includes immigration, primarily for Chinese.
The incidence of cervical cancer among Chinese women, according to a recent study, is relatively low in comparison to world statistics, but is, nevertheless, the fifth most prevalent cancer among women in China.
Section 212(a)(1)(A)(ii) of the Immigration and Naturalization Act requires certain vaccinations -- including polio, rubella, etc. -- of all immigrant visa and adjustment of status applicants. Beginning August 1 of this year, all women aged 11 to 26 who wish to apply for immigrant visas or an adjustment of status must be vaccinated against cervical cancer -- an expensive proposition -- but the decision to make HPV vaccination mandatory has created a good deal of confusion, even among the medical authorities upon which USCIS apparently relied. (Gardasil may cost as much as US$120 for a series of three shots.) Even though the Center for Disease Control (CDC) "routinely recommend[s] the vaccine:"
[...] even some of the CDC physicians and experts who promoted Gardasil [the brand name of the vaccine] in the U.S. say they never intended to make the vaccine mandatory for young female immigrants.
"If we had known about it, we would have said it's not a good idea," said Jon Abramson, who was chairman of the CDC's Advisory Committee for Immunization Practices when the body recommended the vaccine for U.S. citizens last year.
Why?
WSJ answers the question with a snippet from another interviewee:
"We don't want someone coming into the U.S. who hasn't been vaccinated against measles or chickenpox," said Dr. Abramson, who is currently chairman of the department of pediatrics at Wake Forest University School of Medicine in Winston-Salem, N.C. "HPV can only be communicated by sexual contact....This is not something that endangers kids in a school setting or puts your population at risk."
(I find of questionable worth the practice of offering the words of a second interviewee to fill in what the writer should logically have asked of the first interviewee.)
Given the rather surprising storm of controversy -- read the entire WSJ article for the predictable immigrant advocate groups --, it remains to be seen whether and for how long this latest vaccination requirement will remain on the books.
Posted by Richard at 1:56 PM | Comments (0)September 29, 2008
UPDATE: Chinese Regulators Give Green Light to Borrow from Foreign Banks
Further to this Asiabizblog post, WSJ reports:
Chinese regulators said the finances of foreign banks in the country are sound, a message that appeared aimed at reassuring local banks that have been reluctant to lend to their foreign counterparts because of concerns about the U.S. financial crisis.
The China Banking Regulatory Commission said in a statement posted on its Web site late Friday that the Chinese operations of foreign banks it monitors have "healthy fundamentals, good asset quality as well as adequate provisions, liquidity and capital bases."Posted by Richard at 5:10 PM | Comments (0)
Yet Another Email Scam Targeting Lawyers: A Different China Twist
The so-called Nigerian scam turned its attention to attorneys, as we reported in prior posts, at that time purportedly emanating from Hong Kong. Already, in the past year, several attorneys, in California and Georgia, are on the hook for six-figure debts.
This morning, I received another scam e-mail, this time purportedly from the China Luoyang Glass Company. There is such a company, but this e-mail without a doubt does not come from that company. How does one tell that an email business lead is a scam? In this case,
1) The English text appears to be too competent for a Chinese company located in Henan Province. Press releases may be sent out to be translated, but e-mail is generated in-house, and contains errors which are not seen in the e-mail below.
2) My name is nowhere stated. That is because this email was sent out as a mass e-mail to many potential suckers. Chinese who are contacting you personally will address you by name an e-mail.
3) The return e-mail address displays a domain name of aol.com. However, the company uses its own domain name for e-mail. Notice at the company's website that the "contact us" link spawns an e-mail with the company's own domain name as the target, i.e. abc@clfg.com.
4) The properties of the e-mail itself display the e-mail origin: an account called presiden@floyd.nswebhost.com. Hmmm..... Surely doesn't look like it came from the company.
Just five minutes of due diligence removes doubt. This is not a genuine business lead.
Luoyang Glass Company Limited, No. 9 Tanggong Zhong Lu, Luoyang City, Henan Province, China.Posted by Richard at 1:35 PM | Comments (0)Attention: Counsel
Request for Legal consultation services.
This is an official requisition for your legal consultation services on behalf of Luoyang Glass Company Limited.
We are based in China and our activities are the production and sale of float sheet and flat glass and reprocessing of automobile glass. Other activity includes the exploration of minerals.
We got your contact information from your office site. We looked up your qualification and experience from your profile and we think that you are capable of providing legal services as requested.
Please accept my sincerest appreciation on behalf of Luoyang Glass Company Limited in advance, for your willingness to render your services. We look forward to your prompt response to our request.
Thank you.
From: Liu Yixiong
September 26, 2008
AIG Turns to Asia-interest Blogs In Media Relations Program
I wasn't quite sure how to handle this one. Incredulous that a friendly AIG media relations exec would even send it my way. (If they haven't gotten this out in Chinese, Malay, Thai, etc., they are not getting through to their customers directly.)
The text clearly shows that AIG is seriously concerned about counter-reaction in Asia to its recent, most fortunate bail-out. I note in passing that Manulife may purchase AIG's Asian operations. The run on the Bank of East Asia spooked a great many, sending thousands of Hong Kong residents running through the streets to their local BEA branch to pull out cash. [See this image. Imagine, as I have done for you previously, the effect of a run on a mainland Chinese branch. Yes, they have occurred in the past. But a spreading panic is a fearful thing.]
Frankly, I have no opinion as to the safety or danger facing those in Asia holding an AIG insurance policy. Hence, one must take this message either at face value or not at all and I so post it in its entirety. Further investigation is encouraged in those affected.
Rich:Posted by Richard at 6:57 PM | Comments (0)I hope this email finds you doing well. I know you and Asiabizblog have covered quite closely the unfolding financial market news this past week and I wanted to quickly send you some new information.
I want to share the facts with you and your blog’s readers about AIG’s strong commitment to Asia - and to all of our insurance policy holders globally.
AIG’s Chairman and CEO Ed Liddy made the company’s position clear when he reaffirmed that our insurance assets are “sacrosanct.” Take a look at his CNBC interview here:
In addition, The New York State Insurance Department recently released a statement reassuring policy holders about the security of their AIG policies. According to the State of New York Insurance Department, “AIG’s insurance companies are financially strong and fully able to honor all policyholders' claims.” The link to the press release can be found here:
Yesterday, Joel Ario, the Insurance Commissioner of the Commonwealth of Pennsylvania released a statement declaring that his department’s most recent examination of the AIG Companies that are domiciled in Pennsylvania are financially sound and that policyholders’ insurance policies are safe. The link to that press release can be found here:
Additionally, as you most likely have read, AIG has signed a definitive agreement with the Federal Reserve Bank of New York. This important step allows the company to move forward in implementing our strategic initiatives
Finally, I know your readers are following this story literally minute by minute as it unfolds. I’ll continue to post more information in the days and weeks ahead.
September 25, 2008
Rumor: China Banking Regulators Tell Local Banks Not to Lend to U.S. Banks
The China Banking Regulatory Commission (CBRC) has denied a report that it instructed local banks to halt interbank lending to U.S. banks.
"The CBRC has never, through any channel, issued a statement or told domestic commercial banks not to lend to or borrow from U.S. financial institutions," the China Banking Regulatory Commission said in a statement on its website.
CBRC Vice Chairman Wang Zhaoxing told Reuters that a report in the South China Morning Post, which said the agency had told Chinese banks to stop lending to U.S. banks in the interbank market, was not correct.
"If they are not willing to lend, this is the normal practice of risk control," said Wang, speaking on the sidelines of a major banking conference.
The SCMP report is here (paid subscription required).
Posted by Richard at 2:25 PM | Comments (0)September 22, 2008
Doing Business with North Korea Seminar To Be Held in Beijing
Event: Doing Business with North Korea
Where: Capital Club, Beijing
When, Sept., 29, 18:30 (6.30pm)
For further information, click this.
Posted by Richard at 5:14 PM | Comments (0)September 19, 2008
U.S. to Employ Chinese-style Financial Regulatory Techniques
It wasn't too long ago when American officials excoriated PRC banking authorities for establishing asset management companies to take the nonperforming loans off of the books of technically insolvent banks and to recapitablize them. A ruse, it was shouted to the rooftops, to clean up the books of banks desperately in need of a listing on worldwide stock exchanges, but prevented by numerous "technical" deficiencies. These asset management companies have performed badly: perhaps 20% capital recovery.
With the announcement of a plan involving "sweeping reforms" to "take bad assets off the balance sheets of financial companies," we see basically those same American officials employing -- in essence -- a similar technique. One cannot believe that the cash recovery will be as poor, but who will take the hit? The American treasury. This suggests that the next American President will be forced to raise taxes.
John McCain has just announced his belief that treasury has gone too far in its rescue operations. I'll provide a link as soon as I get one.
US University Researcher Convicted of Export Violations -- with a China Connection
[Editor's note: Doug Jacobson has graciously provided the text of today's post. I recommend readers visit his International Trade Law News blog, well-written, informative and worth your time. Doug Jacobson is a partner in the Washington, DC office of the law firm of Strasburger & Price (www.strasburger.com) and serves as chairperson of the firm’s international trade compliance practice. Doug has extensive experience representing companies in a wide range of international trade regulatory and enforcement matters, including dual-use and defense-related export controls, trade sanctions, customs, Foreign Corrupt Practices Act and and antiboycott issues. Doug is also the founder and editor of the International Trade Law News blog (www.tradelawnews.com).
In April, I discussed the stunning connection between American export law and sensitive university research that could lead to criminal liability and even possible jail time. No, it is not a hypothetical. A professor and researcher at an American academic institution, in this case, the University of Tennessee, assigned sensitive military technology research to a Chinese graduate student, with disastrous consequences for the professor.
The Air Force did not like the idea of a Chinese national working on top-secret unmanned drone technology. The Department of Justice prosecuted the research student's professor, who had assigned him his work. The professor was convicted this month. What next? Our guest author today takes up the story from there.]
Attorneys for Convicted Professor File Motions for Judgment of Acquittal and New Trial
The attorneys for former University of Tennessee Professor J. Reece Roth, who was recently convicted of violating the Arms Export Control Act (AECA) and wire fraud, have filed motions for a judgment of acquittal and a new trial under Rules 29 and 33 of the Federal Rules of Criminal Procedure. Such motions are routinely filed by defendants who have been convicted in order to set up the legal issues for appeal, but are rarely granted.
Summary of Arguments for Judgment of Acquittal
Roth's Motion for Judgment of Acquittal is based on two grounds. First, defense counsel claims that the data generated by the contracts that Roth and his graduate students were working on was neither a “defense article” or “technical data” relating to a “defense article” as those terms are defined in Category VIII of the United States Munitions List (USML). Second, defense counsel contends that the evidence presented in this case was not sufficient to convict Roth for willfully violating the AECA.
The crux of the defense argument is that the certifications made by the Directorate of Defense Trade Controls (DDTC) regarding the classification of the data and other items that Roth was working on and exported to China were incorrect. For example, the Memorandum of Law in Support of the Motion for Judgment of Acquittal notes that the DDTC staff member that made the certifications initially determined that "none of the items which were subject to the Indictment were included on the USML and thus were not defense articles or technical data relating thereto." Specifically, counsel stated that the defense articles and technical data at issue in this case were not "directly related to an aircraft specifically designed, modified, or equipped for military purposes," the test for determining whether an item is subject to the jurisdiction of the ITAR or not.
Defense counsel noted that it "is fair to say there was less than unanimity in the proof regarding the particular defense article that the data and [defense article] fell within, although the jury was charged and returned a verdict premised solely on Category VIII."
In addition, Roth's counsel contends that the provision in the AECA that precludes judicial review of the "designation of items as defense articles or services" (22 USC 2278) does not exempt certifications from the State Department that particular articles or technical data are within USML Category VIII. In addition to discussing a few cases where the courts appeared to exercise judicial review of State Department certifications, counsel also noted that a "construction of section 2778(h) that would preclude judicial review of the adequacy of the evidence that an item constitutes a defense article would violate the Constitutional due process requirement that criminal statutes provide 'fair warning.'"
Finally, Roth's attorneys stated that the evidence presented in this case was insufficient to establish that Professor Roth acted willfully and with specific intent, the requirement for a conviction under the AECA and wire fraud statutes. For example, it was noted that in addition to there being considerable uncertainty as to whether the defense articles and technical data were defense articles or not, Roth's "efforts to comply with his inaccurate understanding of this complex regulatory scheme demonstrate a lack of understanding of the law that persisted throughout the time period in question."
Summary of Arguments for New Trial
In arguing for a new trial, Roth's counsel claimed that a new trial should be granted because the trial judge did not include in the jury instructions a proposed instruction on ignorance of the law and the file to include such an instruction "resulted in prejudice to the Defendant." The proposed jury instruction read as follows:
In order for the government to show that Defendant violated the Arms Export Control Act, it must prove beyond a reasonable doubt that Defendant knowingly and willfully violated the Arms Export Control Act. Defendant acted knowingly and willfully if he knew he was unlawfully exporting technical data on the United States Munitions List. An innocent or negligent mistake by the Defendant is insufficient to support a finding of a knowing and willful export. So if Defendant was ignorant of the requirements of the Arms Export Control Act or was aware of the requirements of the Act but believed that he was complying with those requirements, he did not act knowingly or willfully, and you must find him not guilty.
Citing several cases as precedent, defense counsel argued that because ignorance of the law is a defense to the AECA, the issue should have been put before the jury and failure to do so is grounds for a new trial.
Needless to say, the U.S. Government will present a different version of the law in their responses to Roth's motions. Assuming that these motions are not granted and the convictions are appealed by Professor Roth, the appellate decisions could lead to important legal precedent and clarification on these issues for companies and academic institutions subject to export controls.
Author's Note: Thanks to a loyal reader for providing copies of the motions filed by Roth's counsel.
September 18, 2008
China Investment Corp. Offers to Raise Stake in Morgan Stanley to 49%
Bloomberg TV has just announced Morgan Stanley refused CIC's offer to raise its stake in the bank to 49% from 10%, preferring to remain "independent." More on this as the day goes by.
[Update: 10.14am EST -- Bloomberg. This article maintains that talks continue, in contradiction to the report on Bloomberg TV.].
[10.18 am -- Bank of China has just announced in Paris (for this event) that it is not in talks and will not buy a foreign bank. No text available at this time.]
[10.22 am -- Report: "Morgan CEO John Mack told Citigroup chief Vikram Pandit that "'we need a merger partner or we're not going to make it.'"
[10.26 am -- China Investment Corp. thruogh Central Huijin Investment Co to buy stakes in major Chinese banks to support the financial sector.]
[10.34 am -- Bloomberg TV reports that CIC / Morgan talks are still in process. The substance of the issue: CIC's offer will substantially dilute equity. A purchase by Wachovia will pair the Morgan with an entity that doesn't offer the stability of a Bank of America.]
Comment: Morgan Stanley's independence in China will be severely constrained if the Chinese government controls such a substantial stake.
September 17, 2008
3 Chinese Banks Hold US$297.4M in Lehman Debt
Following up to yesterday's post, the International Herald Tribune reports:
Three Chinese banks hold a total of US$297.4 million in Lehman Brothers bonds, two of the banks and a state news agency said Wednesday, but analysts said China's total exposure to the failed U.S. investment house should be limited.
Industrial & Commercial Bank of China Ltd., the country's biggest state-owned commercial lender, holds US$151.8 million in Lehman bonds, the Xinhua News Agency said.
Bank of China Ltd., the country's No. 3 commercial lender, said on its Web site it owns Lehman bonds valued at US$75.6 million. It said that includes holdings by its Hong Kong and foreign branches.Posted by Richard at 7:52 PM | Comments (0)
September 16, 2008
Lehman Brothers -- Many Asian Banks Among the Top 30 Creditors
A respectable showing of Chinese and Japanese creditors, along with the amount claimed, now vying for the assets of bankrupt Lehman Brothers.
Totals (in US million) by institutional location:
Japanese 1,521
Hong Kong 275
Taiwan 110
Singapore 93
China 59
Korea 46
Here's the original bankruptcy filing.
Posted by Richard at 9:11 PM | Comments (0)Prestigious Sponsorships and Exhibition Opportunities at the ABA Section of International Law Conference, Spring 2009
[Editor’s Note: I’m pleased to be a member of this year’s ABA Planning Subcommittee for this event .]
One of the most prestigious legal sponsorship and exhibition opportunities awaits your law firm or corporation: the ABA Section of International Law Spring Meeting. Download this file now to learn more.
The 2009 Spring Meeting is a “Must-Attend” meeting for international lawyers to be held at the Fairmont Washington, DC. Over 1,000 international law practitioners will gather at this 5-day event to take advantage of a unique opportunity to network and more than 70 cutting-edge CLE programs.
The meeting is a superb opportunity to increase your name recognition among the crème of the international bar over the course of a week. Here are only two of the many sponsorship opportunities:
As DIAMOND Celebration Sponsor
(subject to availability)
• Your firm will be the primary sponsor of the Wednesday Breakfast, the official opening of the Spring Meeting, and;
• A USB drive with name and logo recognition and a “Save the Date” postcard will be sent on your firm’s behalf to over 22,000 ABA International members.
Sponsor a CLE program track such as
• Dispute Resolution/Litigation
• International Trade/Customs
• Corporate/Transactional
• Public International Law
• Regional
• Rule of Law
• Taxation
• Regulatory
…and, other benefits, receive recognition on a variety of Spring Meeting promotional materials used for marketing programs to over 30,000 ABA International members and other interested individuals.
Download this file now to learn more.
As we celebrate the 130th anniversary of the Section, we also acknowledge over 22,000 members which include over 5,400 private practitioners, 1,200 in-house counsels, over 800 U.S. lawyers living abroad, and more than 1,000 non-U.S. lawyers in 88 countries.
American Bar Association, Section of International Law
2009 Spring Meeting, Washington DC
April 14-19, 2009
September 14, 2008
Thank you, Ladies and Gentlemen, I'll be here until Doomsday -- Jokes from Pyongyang
For a good laugh, read these jokes collected in the DPRK, courtesy of Radio Free Asia and North Korean Economy Watch. I've added two in the comment area.
Posted by Richard at 7:40 PM | Comments (0)September 10, 2008
Making Money in Pyongyang -- This is No Hallucination
On the subject of North Korea, it isn't widely known that some Westerners are actually in residence in Pyongyang doing business there -- profitably.
Well, not many. Nick Bonner, whom I met in Shanghai several years ago, may be in the black by now. One remembers, if one read this weblog several years ago, of the well-paid Milanese winner of an Italian national pizza competition, swept off his feet and brought to Pyongyang for an excellent salary to work as Kim Jong-il's pizza chef.
But here, courtesy of North Korean Economy Watch, we read a fascinating interview with Felix Abt, formerly Asea Brown Boveri (ABB) rep in the DPRK, who now represents in his own agency European multinationals with a claimed annual sales of several USD millions:
Klaus-Martin Meyer: Felix Abt, you came as country director for the ABB group to North Korea in 2002 where you have been resident since. ABB closed its representation just about 2 years after your arrival but you have successfully been involved in a number of other businesses since then. What happened?
Felix Abt: At the time the Swiss-Swedish ABB, a global leader in power and automation technologies, not only faced huge asbesto claims in the United States but also large debts versus a tiny equity that culminated then into a matter of life or death for the group. To survive it decided to immediately save 800 million USD cash expenses, making the closure of a number of factories and offices around the globe unavoidable.
Though we at ABB Pyongyang fully covered our cost through sufficient sales with a good margin the funds and other resources necessary to set up the planned joint ventures I had been negotiating, however promising they may have become, were definitely not available any longer. In addition the pre-contracts I secured for ABB – including one for a 9-digit USD infrastructure project I signed at the dismay of the competitors in presence of the Swiss foreign minister, the Swedish ambassador and the North Korean minister of power and coal industries – would have required even more substantial funding. Given ABB’s critical financial condition...
ABB Pyongyang? Already I am green with envy. What an adventure!
To continue reading click this.
Posted by Richard at 7:26 PM | Comments (0)September 8, 2008
Is Kim Jong-il Dead?
No one is surprised by the use of look-alikes in tyrannies (Saddam Hussein, Mao, Stalin, et al). But would a look-alike continue to operate five years after the death of the tyrant?
Such is the claim of Toshimitsu Shigemura (重村智計), veteran Korea-watcher at Waseda University. His claim is that Kim Jong-Il died of diabetes in 2003. Read it for yourself. His book (in Japanese) in which he makes the claim may be found here.
An interesting comment here from In From the Cold.
This, from the days when there was (perhaps) some food to be processed in North Korean factories, from the valuable repository of such videos, the Songunblog:
Lending credence to the illness/imminent death/already deceased rumors, let's not forget that just a year ago, Kim Jong-Nam, one of Jong-il's sons, returned to Pyongyang and a relatively executive Intelligence position, after apparent disfavor and father-imposed "exile." In other words, in preparation for the struggle for power to come?
Posted by Richard at 1:36 PM | Comments (1)September 6, 2008
Event: Chinese Investment in Europe
EU Magnets for Chinese Companies: Refuting the Myths, A Research Workshop
Wednesday 17 September 2008, 10.00 – 16.00
Chatham House, 10 St James's Square, London SW1Y 4LE
Programme
09.30-10.00 Registration
10.00-10.05 Welcome and introduction
Paola Subacchi, Chatham House
10.05-11.35 Session 1
The Rise of Chinese Firms in Europe: Motives, Strategies and Implications
Presenters: Stephen Thomsen, Chatham House
Françoise Nicolas, Ifri
Discussants: Eric Thun, Saïd Business School, University of Oxford
Chair: Paola Subacchi, Chatham House
11.35-11.45 Coffee Break
11.45-13.15 Session 2
Mapping Chinese FDI in Italy: A European perspective
Presenter: Roberta Rabellotti, University of Piemonte Orientale
Discussants: Lawrence Saez, SOAS and Chatham House
Simona Iammarino, University of Sussex Brighton
Chair: Vanessa Rossi, Chatham House
13.15-14.15 Lunch
14.15-15.45 Session 3
Chinese investments towards Europe: Decision-makers, strategies and decision-making processes
Presenters: Axel Berkofsky, University of Milan
Bernt Berger, University of Hamburg
Discussants: Kerry Brown, Chatham House
Xiaotong Zhang, MOFCOM
Chair: Guy de Jonquières, Chatham House
15.45-15.50 Concluding Remarks
Paola Subacchi, Chatham House
Gianmaria Ajani, CASCC and University of Turin
RSVP: Amalia Khachatryan
International Economics Programme Administrator
Chatham House
10 St James's Square
London SW1Y 4LE
Tel: +44 (0) 20 7314 3648
Fax: +44 (0) 20 7957 5710
E-mail: akhachatryan at chathamhouse.org.uk
www.chathamhouse.org.uk/internationaleconomics
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