In IT, personnel and execution, not infrastructure, are the main challenges for small and medium companies in China, speakers say

------By James Roy

IT sometimes has the image of throwing money away," said Karsjen Tamminga of information technology services provider W¨¹rth Phoenix at the Shanghai Hilton Hotel on May 18. "It should help improve your business, but with the wrong strategy or execution it can become more of a burden." As part of a Chamber-organized series of seminars focused on small and medium enterprises, Tamminga and Ali Toure of IT consultancy Strata Nova presented strategies to help SMEs in China deal with the headaches that come along with the increased complexity in the field.

While many SMEs tend to see costs and infrastructure as the most pressing IT-related issues, Toure said, choosing reliable providers is underrated. A wide array of IT services - with equally varied costs and quality - are available from providers ranging from large global firms like SAP and Oracle to Chinese companies of all sizes and scopes to outsourced support in India. Toure cautioned against the natural temptation to go the low-end route. "In the end, you will end up switching providers at least two or three times a year," he said. "You're better off going with someone a little more expensive, but more accountable."

Both speakers stressed the importance of hiring experienced and professional internal IT staff, whose supply in China continues to lag behind demand. Individual IT areas can quickly become specialized, Tamminga said, and it is increasingly hard to find (and harder to retain) "know-all" people with experience in every domain area. There are also security concerns involved with IT employees, Toure pointed out. While data security can be mastered from the technology side with electronic keys and certificates, he said, there are still risks with employees who hold second jobs or switch companies. "Most security breaches come from the human side."


What is to be done?

Anti-counterfeiting legal experts advise Chamber luncheon on the best ways to go after intellectual property infringers

------By James Roy

The recent court decision in favour of the five luxury goods companies who jointly sued vendors of knock-off versions of their products in Beijing's infamous Silk Market, as well as their landlords, has paved a new way for intellectual property rights holders to tackle piracy in China. James Luo, who worked on the case as a lawyer for Baker & McKenzie, broke down the lessons learned from the case for the attendees of an EU Chamber-sponsored lunch seminar on IPR tips for luxury brands at the Shanghai Hilton Hotel on June 1st. "The objective of the action was to have the Beijing courts confirm that both tenants and landlords of shops where counterfeit goods are sold are jointly and severally liable," said Luo, who is also the vice-chair of the Quality Brands Protection Committee.

The landmark case, examined in more detail in the March 2006 issue of EuroBiz, essentially vindicated and popularized the so-called "landlord liability" strategy. Thanks to the interpretation in Beijing IPR holders pressure owners of stores to include clauses in their leasing agreements allowing them to penalize tenants who sell fakes by suspending their licenses for 30 days on the first instance and evicting them on the second. Since the decision, 22 luxury brands have joined together in a "Four-City Project" aimed at cooperating with local administrations of industry and commerce (AICs) and landlords to shut down market booths selling fakes in Beijing, Shanghai, Guangzhou and Shenzhen.

Joint action such as that in the Silk Market case and the Four-City Project is a good option for groups of companies with common IPR problems, advised Daniel Plane, an in-house lawyer for Louis Vuitton Mo?t Hennessy (LVMH) who specializes in anti-counterfeiting. While retailers and wholesalers often make fruitful targets, he cautioned that they are just "one part of the equation" of piracy. "We try to focus on the entire stream," gathering evidence from factories to warehouses to overseas buyers who buy fake goods in large quantities.

For smaller companies with limited budgets, Plane recommended hiring Chinese investigators and PRC law firms to represent them, provided that language barriers are not too high and that there is trust. Finally, Plane told the audience to prepare for the inevitable influence of official corruption when going after counterfeiters, which he said was a problem the world over. "In some cases, you will just have to walk away."


A lost cause for SMEs?

Breakfast seminar advises small and medium enterprises on how to better protect IPR in China

-----By Kimberley Cox

At a well-attended SME working group breakfast seminar held at the Capital Club in Beijing on May 23, the topic of discussion was intellectual property protection and the situation for foreign SMEs in China.

Enrico Perlo, Chairman of Guala Closures, speaking first, introduced IPR issues from his company's own experiences and focused on the various ways in which IPR could be violated in China. He listed aesthetic copying of products, as well as specific technological aspects of products as two such ways. He also said that photographs of products and company logos could be reproduced without permission and could appear on websites and in magazines and manuals.

The second speaker, Wolfgang Saueressig, business development manager at Bosch Trading in Shanghai, carried on where Perlo left off and offered some possible solutions for overcoming the problems of IP infringement, again from the experiences of his company. Bosch formed an alliance with other companies in order to work together to tackle Chinese companies who were copying their products. He indicated that it is a challenging process trying to track down the perpetrators and bring them to justice, so working together with others in a similar position increases the chances of success. But he warned that the terms of the alliance should be worked out carefully, regarding costs and expenses.

The final speaker, Raymond Moroney, a solicitor with Rouse and Co International, spoke about the need for companies to protect their rights in order to then protect themselves as much as possible. He said that taking the time to research, make investigations into potential partners and business contacts and to complete registration procedures is very important. He advised that effective due diligence from the start could avoid future problems.


Members Spotlight

Gide appoints partner to Beijing office

Guillaume Rougier-Brierre will move to Gide Loyrette Nouel's Beijing office from Istanbul in August 2006. Guillaume is an experienced mergers and acquisitions lawyer with particular expertise in real estate, most notably in emerging markets. His appointment is a direct reaction to a marked growth in activity levels from the firm's international clients in China. French law firm Gide has a staff of 70 in Beijing and 40 in Shanghai and was amongst the earliest foreign law firms to be granted a license to practice law in China and offers its clients access to the full range of Chinese business law.

Air France offers additional Hong Kong-Paris flights

Air France launched three new weekly flights on its Hong Kong-Paris route from May 30, taking the total number of flights between Hong Kong and Paris from seven to 10 each week. "The additional flights are further proof of our commitment to Hong Kong and our determination to offer a better service to our customers," said Frank Legr¨¦, Air France's general manager for greater China. The new flights will depart from Hong Kong every Tuesday, Thursday and Sunday at 10:15 am and arrive in Paris-CDG Terminal 2C at 5:30 pm on the same day. Return flights leave from Paris-CDG Terminal 2C every Monday, Wednesday and Saturday at 1:35 pm, arriving in Hong Kong at 7:40 am the following day.

O'Melveny & Myers expands Disputes Group in China

O'Melveny & Myers LLP announced the expansion of its Dispute Resolution Practice in China. Michael Moser has joined the firm as a partner and serves as co-head of the China practice along with Howard Chao. As the vice-chairman of the Hong Kong International Arbitration Centre and Co-Chair of the China Arbitration Forum, Moser frequently acts as arbitrator or counsel in Chinese-foreign business disputes in Asia, Europe and the US. The China practice has been further strengthened by three additional lateral hires. Friven Yeoh joined the firm as Counsel in Hong Kong. Nadia Darwazeh, formerly of Shearman & Sterling, joined the firm as Counsel in Shanghai. PRC lawyer Fu Yu will join the firm and reside in both Hong Kong and Beijing.

ThyssenKrupp Services launches new company in Shanghai

ThyssenKrupp's new joint venture, ThyssenKrupp Materials (Shanghai), has officially started business in Shanghai. The new company, which specializes in stocking and value-added processing of chiefly nonferrous metals and plastics, is aiming at annual sales of US$120 million in the medium term. ThyssenKrupp Services holds a 70 percent stake in the new JV. Its partner, Leong Jin Corp Pte Ltd, holds the remaining 30 percent. "Nowhere in the world is demand for materials and industrial products growing as rapidly as in China. Given this dynamic scenario, we intend to increase our commitment," said Joachim Limberg, Executive Board member of ThyssenKrupp Services.

Danfoss opens Chongqing sales office

Danfoss has announced the opening of its new sales office in Chongqing. The new office will initially focus on HVAC business, and later, Danfoss refrigeration, air-conditioning, water valves and motion control businesses will also enter the market through the office. The establishment of the Chongqing sales office was intended to illustrate Danfoss's long-term strategy to "make China a second home market". With the new office, Danfoss made another step forward in its expansion in China.

Randstad acquires stake in Talent Shanghai

Randstad Holding announced that it has agreed with shareholders of the Chinese human resources services company Talent Shanghai to purchase 47 percent of the company's shares, in order to acquire additional ownership in accordance with Chinese laws and policies in the near future. Netherlands-based HR company Randstad said it expects the transaction to provide it with enhanced access to the Chinese market, which has major opportunities within its own dynamic business environment and fits with its overall growth strategy to establish a presence in Asia. Talent Shanghai is one of the few licensed companies to offer staffing and HR services in China, and the third player in the Shanghai region.

Deutsche Bank purchases 9.9 percent stake in Hua Xia Bank

Deutsche Bank announced that it has completed the acquisition of a total of 416 million shares, or 9.9 percent, of the issued capital of Hua Xia Bank in China. Deutsche Bank AG purchased 295 million shares (7.02 percent) and Deutsche Bank Luxembourg SA bought 121 million shares (2.88 percent) in Hua Xia, which is listed on the Shanghai Stock Exchange. Deutsche Bank and Hua Xia have signed a wide-ranging cooperation agreement which includes Deutsche Bank exclusively developing credit cards, while partnering with Hua Xia in customer business, the distribution of investment products, and cash management services. Deutsche Bank will also provide extensive technical support and assistance to Hua Xia to further strengthen its existing franchise in risk management, retail and corporate banking. Deutsche Bank has also been granted one seat on Hua Xia's board. Rainer Neske, Deutsche Bank's Global Head of Private and Business Clients, said the two banks are already underway with detailed discussions on areas of commercial cooperation.

Siemens to acquire Eastime Automation Engineering

Siemens announced that it has signed an agreement to acquire Eastime Automation Engineering Co, Ltd, a local process analytical engineering company in Shanghai, and rename it Siemens Process Analytics Ltd, Shanghai (SPAS). As Siemens Automation and Drives (A&D) Group's fourth operating company worldwide specializing in process analytical systems and integration engineering, the new company will enable Siemens to better meet customer needs for total solutions by establishing localized system integration competency, and greatly strengthen Siemens's presence in China's process analytical engineering market. SPAS aims to become a world-leading provider of process analytical systems and integration engineering, focusing on the Asia Pacific market - especially China - while also serving the European and US markets.

Rhodia receives approval for new JV

Rhodia announced that it has received approval from the National Development and Reform Commission to set up a silicon joint venture with Blue Star (Group) and Blue Star New Chemical Material in Tianjin. Rhodia will hold a 35 percent stake in the JV, Blue Star (Group) 40 percent and Blue Star New Chemical Material 25 percent. Total investment in the company amounts to US$587.5 million. The JV will produce organosilicon monomer, an important raw material for silicone products, and is expected to have a production capacity of 400,000 tons.

Accor adds two Sofitel Hotels in Nanjing

Accor has added two distinct Sofitel hotels in different areas of China's rising commercial capital of Nanjing, the Sofitel Galaxy Nanjing in the city centre and the Sofitel Zhongshan Golf & Resort. Sofitel Galaxy Nanjing is poised to become a landmark property in Nanjing's fast growing central business district, with convenient access to major commercial buildings, shopping centres and offices. The 42-storey Sofitel will be Nanjing's most prestigious internationally branded deluxe hotel, offering 278 guest rooms, an 875 square metre multi-purpose ballroom, plus seven meeting rooms ranging from 60 square metres to 160 square metres. Located in the city's Zhongshan district, the 190-room Sofitel Zhongshan Golf & Resort Nanjing will offer guests an urban retreat just 20 minutes away from the bright lights of the city. These two Nanjing hotels continue the largest-ever expansion of the Sofitel brand in China and the Asia Pacific region. Over the next two years, Sofitel will increase from the current 29 hotels in eight countries in Asia Pacific to 47 hotels in 12 countries. It will establish the Sofitel brand as the largest five-star hotel brand in the region.