roundtable
know your cash is ring-fenced and under your control.”
However, for UK companies without a legal entity setting up Chinese bank accounts isn’t an option. Wu pointed out: “You can’t do this, unless you have a legal presence in China, such as a limited company or a legal representative”.
Charles Kendall Freight has set up a Chinese-owned company. “It’s important to recognise that there are different ways to do things in China. We did not approach China as a British company, we thought it most logical to start a base from Hong Kong under CEPA. We only employ Chinese staff and pay Chinese taxes and our other Chinese offices branch from our Hong Kong base. To work in China efficiently, you need to be Chinese.” said Sunderland.
Compliance, governance, disputes
Pick your partners with care, advised McLean: “A legal representative is an individual who has power to commit your company to do anything and who can control core decisions. This can be a big issue for European businesses to understand.”
Wu thought managing properly of a legal representative office was critical. “They act on behalf of your company, so how you manage them is a key issue here. You have to treat it very seriously.”
It’s best to do everything possible to avoid problems reaching the point of litigation. “Generally speaking, I don’t think UK companies should rely on the Chinese court system to resolve difficulties. The process can be endless,” said McLean.
Open for business
Wu talked about China’s Greater Bay Area strategy that will see Hong Kong, Macau and Guangdong co-operating more closely, with integrated economic development. “This should be of interest to UK companies. There are similarities in practices and regulations between the UK and Hong Kong which help. The three free-trade zones in Guangzhou, Shenzhen and Zhuhai offer freer and more flexible market policies.” he explained.
Improved rail links between China and Europe will also offer UK and Chinese companies new opportunities. “The continental rail network is now running regular freight trains in a year, especially from western China, which is away from the coast. Rail should be quicker than sea freight by about one third, although it is likely to be slightly more expensive. But It should be cheaper to transport goods from Europe to China than airfreight” said Wu.
Crowe has a major presence and many clients who trade in the ASEAN (Association of South East Asian Nations) market of over 600 million people. “Trading law and practice in countries like Singapore and Malaysia are based on English law, so it can be easier to do business there. However, in practical terms, it can still be very difficult to enforce the law in some jurisdictions and therefore commercial caution and informed local advice is required,” said Stevens.
UK Export Finance receives a growing number of inquiries from businesses about Cambodia, Singapore and Vietnam. “UK companies generally don’t know as much about these ‘frontier’ markets. We are seeing UK companies choosing Australia as a jumping off point for the ASEAN market. The market is growing very quickly and demand is rising for consumer goods, engineering and technology,” said Stoter.
Trade war and Brexit
Volatility in emerging markets, particularly with the imposition of US trade tariffs and threats of trade war, means businesses need to think carefully about currencies. “The timing of getting money out of China and the Far East can be problematic. For example, it can take minutes to transfer US dollars compared with days for the Chinese yuan. The cost of hedging back to sterling has doubled in the past seven weeks due to currency movements,” noted Freeme.
Wuobserved: “China trades with most developed countries under WTO rules, rather than free-trade agreements. If the trade war continues then the US/China rate could become a ‘special’ rate, with the rest of the world operating under WTO rules. A lot of Chinese traders are looking for import/export more with the rest of the world in order to counterbalance the US trade war. I don’t think the situation is as disastrous as the media is putting it. Both the US and China are big enough to deal with it. It is an opportunity for Europe and the rest of the world to work more closely with China. China already has free-trade agreements with ASEAN countries and many more. So the question is what sort of free-trade deal would China want with the UK after Brexit?”
Whatever deal is struck will be crucial, as the pull of the Far East strengthens, emphasised McLean: “The centre of world trade is moving east. Brexit gives the UK an opportunity for a post-Brexit trade tie-up. China is keen to get more business in Europe, so a UK deal could give them a template for other European countries.”
The roundtable ended with McLean summing up the sentiment of the panelists: “China and Britain are both trading nations – we’ll always look for deals that are good for all of us.”
THE BUSINESS MAGAZINE – NOVEMBER/DECEMBER 2018
Yingni Lu
Max Vialou-Clark
David Murray
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