N E W S L E T T E R September / October 2006
Story of the Month
Chinese Companies Protect Their Own IPRs
Early this year, Chinese flash-memory product maker
Netac filed a lawsuit in the Eastern District of Texas
against its American competitor PNY Technologies for
infringements on its patent, a move aimed at leveling the
playing field in its overseas development. The
Shenzhen-based company claimed PNY Technologies
violated its U.S.-registered patent on an electronic
flash-memory external storage method and device. It
also requested the court suspend sales of PNY's
flash-memory storage devices. "We want to get a fair
competition in the United States, while Netac is
expanding its presence in the overseas market," said
Deng Guoshun, president of Netac.
The lawsuit is one of the rare cases of a Chinese
company suing a U.S. firm for infringements of
intellectual property rights (IPRs) in the United States,
in Wuxi of East China's Jiangsu Province, in October
while many Chinese companies receive complaints from
2004, but the court has yet to rule on the case.
foreign companies on similar accusations. "It is an
encouraging sign that Chinese companies become
Netac had also filed a legal action in patent infringement
mature in using IPRs to protect their interests, as more
against the domestic company Beijing Huaqi
and more Chinese companies have developed their own
Information Digital Technology Co Ltd in 2002 and won
innovations and the country is trying to become an
the case in the first trial in 2004.
innovative nation," said Hu Zuochao, vice-president of
Patent Protection Association of China.
"We have spent a huge amount of money and energy on
research and development, so we hope other makers
PNY is a computer-related peripheral maker based in
will honor our IPRs," said Deng. Deng also said that
Parsippany, New Jersey, which was one of the top three
about 10 companies have already licensed the
flash-memory product makers in the United States.
technology from Netac, including the South Korean
The flash-memory product market is estimated at US$2
giant Samsung Electronics.
billion. Netac hired Morgan Lewis & Bockius LLP, one (Source: China Daily)
of the top 10 U.S. law firms and said it was also looking
into possible actions against other players in the market.
The patent application received protests from 19 other
international makers because it covered very wide areas NAROS Hosts Shenzhen BPO Event in New
and might stop any other companies from entering the York
market, and was finally approved by the U.S. authorities.
After that, Netac began to contact makers of those On Wednesday, November 1, 2006, the City of Shenzhen,
devices in the United States, including PNY and SanDisk. and the North American Representative Office of
In addition, it sued a factory of the Japanese giant Sony Shenzhen, P.R. China (NAROS) hosted a major seminar
and luncheon in New York City entitled "Shenzhen: and high technology is replacing traditional
China's New Bangalore, Opportunities and Incentives in manufacturing as the pillar of Shenzhen's economy.
Business Process Outsourcing (BPO)." Speakers included Liao Junwen, Senior Advisor to the
Shenzhen Municipal Government, Wang Xuewei,
With well over 170 guests in attendance, the seminar Director-General of the Shenzhen Bureau of Trade and
featured presentations by high-level Shenzhen Industry, Chen Xiaoling, Consul General of the Chinese
government officials as well as global leaders in the field Consulate in Toronto, and Xing Yabin, President and
of service outsourcing. The goal was to draw attention CEO of ZTE Canada.
to the trend of an emerging China, particularly
Shenzhen, in the field of outsourcing and offshoring, as
both a compliment and an alternative to other more
firmly established locations such as India and the
This event coincided with the inauguration of the
China-U.S. Chamber of Commerce (CUCC), which
featured many high-level Chinese diplomats stationed in
New York, as well as a speech from Congressman Gary
Ackerman (D-5th District, NY). A signing ceremony
was also held to finalize a strategic alliance between the
City of Shenzhen, and the China-U.S. Chamber of
US/China Business News
IBM Moves Its Global Procurement
Headquarters to Shenzhen
IBM, the world’s biggest computer services firm
announced the relocation of its global procurement
headquarters from New York to Shenzhen. The
decision to move the firm to Shenzhen came after the
company’s Asia-Pacific office completed its move to
Shanghai from Tokyo this year. This marks the first
time the headquarters of an IBM corporate-wide
organization has been located outside the United States,
NAROS Hosts Shenzhen Promotion Event in the company said in a statement.
IBM has been sourcing in Asia for more than 50 years.
On Friday, November 3, 2006, the Shenzhen Bureau of The demand for software and services across Asia and
Trade and Industry (BTI), and the North American worldwide is growing. Asia is home to more than
Representative Office of Shenzhen, P.R. China (NAROS) 1,850 IBM procurement and logistics professionals,
hosted a luncheon in Toronto entitled "Shenzhen: many of whom work at the China Procurement Center
Updates and Opportunities in China's City of in Shenzhen which has been operating for more than a
Innovation." decade. China is increasingly a key market for many
tech companies. In 2004, the country overtook the
With approximately 130 guests in attendance, the event United States as the world’s largest exporter of high-tech
served to highlight Shenzhen as a city of innovation, goods such as laptop computers, mobile phones and
where value-added industries are currently growing, digital cameras.
Sony, Sanyo, Samsung, Wal-mart, Carrefour, B&Q, and spa. The hotel’s
IKEA and many other conglomerates have set up global rooms and suites are
or regional procurement offices in the city of Shenzhen. equipped with broadband
The IBM move highlighted Shenzhen’s attraction as a internet access, state-of
sourcing center for multinational companies. -the-art communications
Starbucks Plans to Open 100 Stores in China facilities. The hotel also
Every Year has 30 function rooms,
including one auditorium
Starbucks plans to open at least 100 stores a year in that can accommodate up
China, aiming to build on early successes in the market. to 3000 people and
The coffee chain expects to eventually rival its domestic provide an ideal
U.S. market in scale. The company has opened about Shenzhen venue for
200 stores in China since 1999 and plans to accelerate its meetings, seminars and
investment in big cities such as Beijing, Shanghai and social events.
(Photo: Marco Polo Hotel Shenzhen)
Guangzhou and in China’s fast developing hinterland.
Starbucks is also tightening control over its China
franchise. It said it had bought out the controlling Church’s Chicken Seeking to Franchise in
shareholders in the company that operates 62 outlets in China
Beijing and Tianjin.
On of the biggest fast food chains in America, is now
ICBC Completes World’s Largest IPO preparing to enter the Chinese market by franchising
stores. The executives of Church’s Chicken believe that
entering China will be an important strategy for the
Industrial & Commercial Bank of China (ICBC) has
development of the company.
completed the over-allotment option for its domestic
IPO; bringing total proceeds of its stock offer in
Church’s Chicken was founded in 1952. It now has
Shanghai and Hong Kong to US$21.9 billion-the world’s
more than 1600 stores all over the world. Church’s
largest share sale. ICBC sold an additional 1.95 billion
Chicken has signed the agreement with China Chain
A-shares in the over-allotment at the initial public offer
Store & Franchise Association to participate in the
price of 3.12 yuan, bringing the size of the Shanghai offer
forthcoming session for overseas franchisors to meet
to 46.644 billion yuan (US$5.9 billion), the bank said. It
China local master franchisees.
was the first Chinese company to use an over-allotment
option in a domestic IPO. China began permitting such
options to meet excess demand for shares in September, Doing Business in China
although the practice has long been common in Hong
Kong and other mature markets. China Takes Control of Its Real Estate Market
ICBC, China’s biggest bank, completed a Hong Kong Six Chinese ministry offices jointly released a new
over-allotment option in early November, bringing the measure to regulate foreign investment in Chinese real
Hong Kong Portion of its IPO to HK$125 billion. The estate, the Measure. The Measure provides specific
IPO, accounting for 16.7% of the banks expanded capital, rules governing:
surpassed Japan’s NTT Mobile Communications, which • The eligible forms that can be used by foreign
raised US$18.4 billion in 1998, as the global record. investors for holding Chinese real property
• The extent to which leverage financing can be
Marco Polo Hotel Opens in Shenzhen used for acquiring Chinese real estate
• The approval procedures required for investing
The Marco Polo Hotel Shenzhen has opened for business. in real property
The five-star full service business hotel is located in the The Measure may have the greatest impact on foreign
heart of the new Futian Central Business District of the real estate developers in their ability to borrow funds to
city. It is close to the Civic Center and the new finance their China real estate development projects.
Shenzhen Convention and Exhibition Center. The hotel On the hand, the Measure may have the least impact on
has 6 restaurants, swimming pool, gymnasium, sauna real estate management companies that focus on
providing management services as the Measure focuses manufacturing, and the energy conservation and
primarily on the acquisition of property, not its environmentally conscious sectors. Investment that
management. In the short term, real estate equity aids to improve and further develop China’s agriculture,
investors may find opportunities to acquire China. service industry and traditional manufacture will be
(Source: PWC China Outlook) encouraged as well. China’s growing interest in
high-tech industries like electronics, biology,
China Adopts Tax Incentives for Central petrochemical and medicines signifies that China is
Regions refocusing its foreign investment.
A senior official with the State Administration of
Taxation (SAT) stated that foreign investors in China’s
central regions can enjoy beneficial tax policies set out in
Shenzhen People – Legless Shenzhen
tax laws and regulations. SAT deputy director Wang Li
calligrapher, Huang Jianming, ascended the
told the First Central China Investment and Trade Expo
Great Wall. Huang climbed altogether 1,055
in the capital of Hunan Province that if foreign investors
steps, covering 3.7km from 8:15 to 11:03a.m.
begin to reinvest the profits generated from their
Shenzhen Art – Art critic and curator, Huang
businesses in China in other enterprises in the country or
Zhuan, will host an exhibition at the OCT
increment their registered assets for at least five years,
Contemporary Art Terminal. The goal is to
the government would give a 40 percent rebate on the
enable more people to review modern Chinese
tax paid for the reinvested capital. Wang also added,
art with a critical eye.
“If the newly-built businesses are export or high-tech
Shenzhen Nightlife – BJ’zz.com is the newly
companies, the tax paid for the reinvested capital will be
opened Jazz Bar in the 3rd Floor of the
Landmark Hotel, Luohu. The management
promises to engage major jazz acts to
Central China comprises the provinces of Shanxi, Anhui,
perform in the near future.
Henan, Jiangxi, Hunan and Hubei. It is the country’s
major farm production base as well as a principal base
for energy, raw materials and manufacturing. Opening
the country to the world and achieving sustainable
economic growth is essential to the development of
central China’s economy. The valued-added tax (VAT)
reform, Wang said, is to extend to some old industrial
base cities that need to modernize outdated industrial
projects. The VAT reform has already been launched in North American Representative Office
the north east region to provinces of Lianoning, Jilin and Of Shenzhen, P. R. China
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Los Angeles, CA 90071
As China continues to receive foreign investment, it will Tel: (213) 628-9888
be looking to welcome investors that have advanced Fax: (213) 628-8383
technology to offer.
China’s Industry Guide for Foreign Investors will
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