November 2011

That used to be us from -- Forget China and pay attention to your own back yard too...

flaming hoop jump.jpgHow America Fell Behind in the World It Invented and How We Can Come Back

America has a huge problem. It faces four major challenges, on which its future depends, and it is failing to meet them. In That Used to Be Us, Thomas L. Friedman, one of our most influential columnists, and Michael Mandelbaum, one of our leading foreign policy thinkers, analyze those challenges—globalization, the revolution in information technology, the nation’s chronic deficits, and its pattern of energy consumption—and spell out what we need to do now to rediscover America and rise to this moment.

flaming hoop jump.jpg

flaming hoop jump.jpg

"But we have been operating like this in China for many years without a problem..." Michael Sylvester

"But we have been doing this in China for many years without a problem, why should we stop now?..."   says the client sitting across from me in the conference room recently.  And while it is not any fun to be the bearer of bad news, the fact that one has engaged in an illegal course of conduct without getting caught for a decade or more does not make the choices you made correct.  It just makes you lucky because you have not gotten caught...yet.
If you found out your teenager was habitually drinking and driving would you pull them aside and congratulate them for not getting caught?  
Come on folks, grow up... just like we all ask our kids to do.  It is not that hard to follow the rules. If we force people to follow ours in the US, there is nothing unfair about China doing the same.

US Green Card Holders Working in China Michael Sylvester

We are often questioned about green card holders working here in Mainland China for US firms and while there is a lot of misinformation floating about it, the rules are rather simple.  If you have a green card, then you are the same as a US citizen for purposes of US taxation.
From: IRS Publication 4588 on green card holders living abroad
"If you have a US green card, you are a lawful permanent resident of the US even if you live abroad.  This means you are treated as a US residnet for US income tax purposes and you are subject to US tax on your world income from whatever source derived.   Accordingly, you must file a US return unless (a)  there has been a final administrative or judicial determination that your lawful permanent resident status has been revoked or abandoned, (b) your gross income from world wide sources is less than the amounts that require a tax return to be filed or (c) your US residence status is affected by an income tax treaty."

Wallpapering over a bumpy wall or restructuring an existing company in China? Michael Sylvester

About twenty years ago, while living in Amsterdam as a graduate student, I was lucky enough to find an apartment in the Jordaan neighborhood right next to the Westerkerk.  It is the place Rembrandt is buried and is right next to the Anne Frank house.  I often watched the tourists line up for a tour of the Anne Frank house out my kitchen window when having a morning coffee.
Studying international law, great apartment, Europe was turning inside out as the EU was forming and the Russians were just about to shell their own Parliment building.  Occassionally, I would have to pinch myself to be sure it was all real -- for the world was changing so fast -- and my fellow students and I were right in the middle of it and -- well, it could not be cooler if we dreamed it up as a stage play.
And then I called a contractor to paint and fix up the apartment.

Suing someone in Mainland China or Hong Kong Michael Sylvester

Let's say that one of your transactions melts down and you end up losing half a million dollars on an outsourced manufacturing contract and you want to try to find a way to recover funds you advanced as a deposit.
Generally, the first thing that folks from the US do is to hire a litigation team in the United States to file a lawsuit in, let's say Ohio, and then they mail service of process to your supplier in Shanghai saying 'we'll kick their asses down the Columbus courthouse steps, hee hee hee...."  
Then what?  Well, then nothing.
Not only is such a strategy not very pragmatic, it actually violates both the Chinese and US law on international service of process.  Even attempting to collect evidence, or trying to take depositions -- where you try to collect enough information to support your claim -- can actually get your lawyer thrown in jail.  

China: Too different for us to be able to understand? Michael Sylvester

The whole idea behind the name at the top of the page you are reading, Flaming Hoops, has for almost ten years, tried to point out that yes there are some odd twists and turns that we need to remain mindful of here in Mainland China -- but that there is a clean, clear and preditable way to operate here with as much security as you can in any other jurisdiction in the world.   Really.
However, there seems to be a genius of a speical sort among many of the partners, agents, friends and associates here in China that our clients do business with.  Namely, that many Chinese use the fact that things here are differnt to try to convice us that China is too complicated, murky and unknowable -- and that we should just leave it to them to take care of the China side of our business.  For a fee, a percentage, for some amount of equity or control.  Bunk, I say.
Sure, it's hard -- (and if it was easy to make money everybody would be doing it).  

China's Social Insurance Regulations are Unfair?? Michael Sylvester

While I have no desire to pay another USD 5,000 a year for the right to do business here either, I simply can not agree with the wrath and negative reactions coming from our clients that now have to buy social security for their foreign employees in China.  I'm one, and have to pay too folks.
But, the last time I checked all workers in the United States and just about every other Western coutnry are required to pay into the social welfare system of the country in which they are working.  So, if a Chinese National works in New York they, of course, have to pay state and local taxes and all SSI contributions just like we do as US Citizens.
So, why should it be different that we have to do the same while resident in their country?  Just because it has not been like that here before?  Because we, as foreigners, have gotten used to the ex-patriot life and the fact that, historically, the law was applied to us differently to entice our companies into setting up operations here?