The Flanders-China Chamber of Commerce, the EU-China Business Association and the China IPR SME Helpdesk organized a webinar focused on “Enforcement of Intellectual Property Rights in China” on 5 November 2020.

Moderator Peter Sczigel, Project Executive of the China IPR SME Helpdesk introduced the webinar’s topic and the speakers. The China IPR SME Helpdesk is a project of the European Commission, which has been operating for more than 10 years. It provides European SMEs with IPR-related advice, how to do business with China, how to register patents and trade marks, and how to deal with any perceived or real IPR infringements in China. The major tool is the enquiry helpline, reachable through the website, email or telephone, and it is free of charge. The free and confidential advice will be provided within three working days.

Ms. Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce and the EU-China Business Association, introduced both organizations.

Mr. Matias Zubimendi presented the topic of the webinar, how to enforce intellectual property rights in China.

1. Introduction to IPR. Innovation patents and utility models protect the technical aspects, products and processes in a way that the owner of the technology will be the only one capable of manufacturing, producing, importing and exporting the intellectual property rights. The company will have a monopoly over the technology and be able to control who imports and exports products made with the technology. One way of enforcing IPRs is having control of which products can enter or leave the country. Design patents protect how the products looks. Trade marks protect the distinctiveness of a product, namely a sign that is capable of distinguishing your product from the product of your competitors. It can be a logo, a name, a combination of colors, or sounds, anything that helps a product to be distinguishable from another one can be registered as a trade mark. Copyrights protect originality, the expression of an idea. They do not protect the idea itself but how to express it in words or sounds. They require registration but even without it there is a level of protection. Trade secrets and know-how protect information that is secret and protected by the company by specific measures. There are two main principles in IPR protection: registration and territoriality. Registration means that your IPR will be protected once registered. In China, IPR that is not registered has almost no protection at all and if you want to enforce IPR it is very important to have a registration. In China there is the “first to file rule”, which means that the company that first registers IPR will have priority over any other registration. In case of bad faith registration there are however alternatives. It is advisable to register IPRs before entering the Chinese market, because it will easier, faster and cheaper to protect your IPRs. The territoriality principle means that registration will grant protection only within the territory of the country where it was registered. China has four jurisdictions – mainland China, Hong Kong, Macao and Taiwan – each with its own intellectual property rights office and you would need to register your IPRs in each one if you want to have full protection in the entire territory of China.

2. Essential to do’s before the enforcement proceeding. Talking about enforcement of IPRs, it means that there is another company that is infringing or potentially can infringe one of your IPRs. The first thing to do is to find a Chinese attorney and to find company information of the company infringing your IPRs. This can be done by consulting the public database National Enterprise Credit Information Publicity system at http://gsxt.saic.gov.cn/ . The database holds all public information about every company registered in China. It will show you who the shareholders and the legal representative are, as well as the capital, address, phone number and IPRs. It is possible that you have to deal with shadow companies which use a public name that is not their real legal name. When consulting the database, you need the legal name of the company in Chinese. The English name may not match the Chinese one. It is good practice to request the business license of the company to obtain the legal name of the company. You can also use Google or Chinese search engines to try to find the legal Chinese name of the company. The second thing to do before enforcing is collecting evidence through public Chinese notaries. If you are abroad or are using a foreign notary you need to legalize the documents at the Chinese Embassy in your country. In the case of online infringement it is possible to obtain evidence through blockchain, for example to prove the contents of a website at a certain moment. There are companies who collect evidence digitally to be used in the courts.

3. Enforcement proceedings. What are the different options? There are six alternatives: negotiations; administrative actions; custom seizures; notice and take down; civil litigation; and criminal sanctions.

3.1. Negotiations: The first method to try is cease and desist letters, which is a legal document in which you are requiring the other company to stop specific actions such as selling counterfeited products. Cease and desist letters work in China in a very similar way as in Europe although they are not as effective. You will need the signature of an attorney. Make sure you have already collected evidence because after receiving a cease and desist letter, the infringing company may for example remove infringing products from its website. When negotiating with a Chinese company you can use the stick or the carrot method, either warning them that you will sue and ask compensation or showing them their mistake and asking them to pay license fees to use your technology. Considering the fact that legal actions are expensive and can take years, for SMEs it is worth considering the carrot option, because the company will earn profit from the license and be able to solve the problem in a short period of time.

3.2. Administrative actions can be pursued through the China National Intellectual Property Administration (CNIPA), the State Administration of Market Regulation (SAMR), the Quality and Technical Supervision Bureaus (QTSBs) and the Copyright Office. Those administrative bodies can order raids on defendants’ premises to seize and destroy offending items; impose injunctions to force the infringing party to desist; and levy fines on the infringing party for trade mark infringement, copyright infringement and counterfeiting patent certificates, but not for patent infringement. The main benefit of administrative actions is that they are fast, inexpensive, are very good for collecting evidence, and are performed by experts who know what they have to do.

3.3. Custom seizures. The Custom Office allows companies to register their intellectual property rights online in English free of charge. It is especially useful in the case of trade marks and design patents. The registration is important because once it is done, every time a product is leaving or entering China, custom officers seeing the trade mark have to notify the company and deposit the products in the Customs Office for at least 22 hours during which the company that has been notified can decide whether to take any action. This is one of the most efficient methods for the protection of IPRs. This is especially important if your company is planning to manufacture the product in China for sale in different jurisdictions. If you have your IPR registered in China, you can control who can import and export your technology and you could prevent the infringing products from being exported from China.

3.4. Notice and take down. This is similar to how online anti-infringement works in the EU on platforms such as Amazon and Ebay, and in China on Taobao or JD. Notice and take down is organized by the online retailers. A new e-commerce law from 2019 regulates this. The law gives the e-retailer the duty of using this method, which usually takes less than one week. If the e-retailer does not take action, it will also be liable for infringement. Most e-retailers now offer IPR protection programs, many in English. The notice and take down procedure requires you to prove that the complainer is the rights holder of the IPR; the links to the infringing products, and the business license or certificate of your company. The infringing products will be removed from the e-retailer’s website, but you will not receive compensation. This procedure is fast, inexpensive, performed by experts, and it allows you to collect evidence.

3.5. Civil litigation. In China there are three alternatives for civil litigation: the regular People’s Courts, the Intellectual Property Courts and the Internet Courts. In the case of innovation patents, it is advisable to got to the intellectual property courts because it may require experts to understand the case. Internet courts are new, the entire process happens online, and the cases you can take to these courts are very specific, such as online copyright infringement and e-commerce cases. The main advantage is that the whole procedure only takes up to 27 days. In civil litigation, there are three preventive actions that can be taken. The evidence preservation order (EPO) is useful for collecting evidence of something that was manufactured, including collecting photos and invoices. This requires a bond of between CNY20,000 and CNY1 million, so it is expensive. The second action is the Asset Preservation Order (APO) to prevent the offending party to simulate a bankruptcy to avoid paying compensation by freezing the bank account. This will also require a bond. Finally, there is the preliminary injunction, which is useful for trade secret cases to prevent a person disclosing sensitive information. Civil litigation is very useful because it will provide compensation, allow to destroy and confiscate the infringing goods and stop the infringer from continuing selling the goods.

3.6 Criminal sanctions. Common cases are patents, trade marks and copyrights. The IP owner can report the case to the Public Security Bureau (PSB). It is also possible for administrative agencies to transfer the case to a criminal agency when the suspected damage exceeds a certain threshold. A trade mark owner can also choose to file a criminal lawsuit with the court, known as a private prosecution.

Take away messages.
• Register your intellectual property rights. Unless you have registered your rights you have almost no recourse in China.
• Be vigilant. Patrol trade fairs and surf the various B2B and B2C websites such as Alibaba and Taobao on the lookout for infringing articles.
• When you identify infringement, enforce your rights. If you build a reputation for being reactive, and if needed litigious, then companies will be less likely to infringe your rights in future. The resources required to achieve such a reputation very much depend on the extent of the infringement.
• Build your case carefully. Ensure that you are taking action against the right company in the right form.

You can contact the Helpline at question@china-iprhelpdesk.eu

A Q&A session concluded the webinar. In case of IPR infringement is it more useful to settle it in court or directly with the other party? This will depend on the case and how many resources the company has. If you do not have many resources and you go to court, it will be almost impossible to pay all the fees. If you do go to court, first contact a Chinese attorney and design a good strategy.

Additional information: New judicial guidelines issued by the Supreme People’s Court (SPC) to protect new-type intellectual property rights in an innovative manner came into force on November 9. Courts in Shenzhen, which have seen a boom in IP-related disputes in recent years, are allowed to explore ways to safeguard IP rights in some new sectors, including artificial intelligence (AI), life sciences technology and internet information. The guideline consists of 33 articles. The Guangdong Higher People’s Court heard 165,000 IP cases from January to October, of which 60,000 were filed in Shenzhen. Punishments for IP violators have also been intensified since last year. “The amount of compensation in patent cases solved by the province’s courts since 2019, for example, has risen by about 1.5 times, and compensation in more than 20 cases each exceeded CNY10 million” said Gong Jiali, President of the Guangdong Higher People’s Court, the China Daily reports.

The Flanders-China Chamber of Commerce and Flanders Investment & Trade organized a webinar with the Flemish Economic Representatives in China on 28 October 2020. During the webinar, the three Flemish Economic Representatives – Marc Struyvelt in Beijing, Bart Boschmans in Shanghai and Eva Verstraelen in Guangzhou – talked about how exporting companies could be supported in times of Corona.

Ms. Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce, introduced the three Flemish Economic Representatives. They will offer more information on the actual situation in China concerning economy and trade, and daily life. You will also get more information on the export support they are able to provide in times of corona. It is remarkable that life in China has returned to normal. The speed and efficiency of China’s response to Covid-19 is impressive. The Chinese economy has almost recovered and China is the only country that will record positive growth this year. According to the IMF, China’s economic growth will be 8.2% in 2021, which would be the highest growth rate in 10 years. Many international brands consider China to be their most important growth market in 2020. China has become world leader in certain sectors such as the internet industry and artificial intelligence. The Chinese market still offers many opportunities for our Flemish entrepreneurs. Flanders’ export to China has increased in the first half of 2020 by 27.5% compared to 2019 to €3,82 billion, and is thereby number eight in the list of export markets. Especially remarkable was the increase in chemicals and pharmaceuticals at 45% and non-ferrous metals at 80%. Flanders’ imports from China amounted to €7.65 billion, a small increase of almost 5%. The 33rd negotiating round of the EU-China investment agreement has now concluded and the aim is to have it signed by the end of the year. It will offer Flemish companies better access to the Chinese market.

What is the new normal in China and how is daily life? Bart Boschmans, Flemish Economic Representative in Shanghai, said that in Shanghai the situation has been further stabilized since our last webinar in July. The use of face masks is decreasing except on public transport. At events health QR codes are still being scanned. Travel in China has also been relaxed except to certain risk areas. Meetings and events are taking place as usual. Restaurants are busy and street markets are taking place to further stimulate the economy. In the coming days Shanghai will be a bit more nervous due to the 3rd China International Import Expo (CIIE) being held. During the two previous expos, schools were closed as President Xi Jinping himself attended the Expo, although this will not be the case this year. National pavilions have been scrapped because there will be no international delegations coming to Shanghai. Life after the pandemic is not really different, people travel again and hotels have again doubled their prices. People want to enjoy events live again instead of online. As long as the virus has not been totally eradicated and a vaccine is available, alertness will remain high. There will remain strict controls at the border and in case of new outbreaks there will be lockdowns and mass testing.

Eva Verstraelen, Flemish Economic Representative in Guangzhou, explained that the situation in South China was similar to the one in Shanghai. Only one in two people still wear a face mask on the street, but it is still required on public transport. Business and social life has returned to normal. At expos the wearing of face masks and scanning of the health QR code is still required, but at social events the virus seems to be far away. She added that she saw almost no signs of decoupling, or less orders being processed from Europe or the U.S. China’s economy will continue to grow in the coming years. The only relocations seem to be of Chinese companies to countries like Vietnam and Cambodia, where labor costs are lower. In Guangzhou, Covid seems to be something in the past.

Marc Struyvelt, Flemish Economic Representative in Beijing, explained that the situation in Beijing is also back to normal although a little later compared to Shanghai and Guangzhou. Many events have restarted since the beginning of October. Measures are still a bit more strict in Beijing, where about 80% of the people are still wearing face masks and the health code is checked more frequently compared to the south of China. Foreign investments in China have also increased in the first nine months of the year by 5.2%, and a significant increase in the services sector by 15% and in the high-tech sector by 25%. This year, e-commerce has become very important, especially in second-, third- and fourth-tier cities. Flemish companies should perhaps pay more attention to e-commerce.

What kind of export support can you provide in times of corona, now that it is very difficult for representatives of Flemish companies to travel to China? Bart Boschmans explained that Flanders Investment and Trade has a Covid exit plan consisting of three pillars: a one-time subsidy for experienced exporters and a subsidy for starting exporters, which have both now ended. A third pillar is the “reboot your export packet” to participate in FIT group booths. Flemish SMEs can thereby participate in international trade shows at reduced costs, although at present there are almost no trade shows.

Eva Verstraelen said that FIT is setting up info booths at trade shows where companies can exhibit their materials. At a logistics show in Shenzhen in September we received exhibits from Flemish harbors and logistics companies and did networking and looked for contacts. She also participated, together with two Flemish provinces, in the China Environment Expo in September, where Flemish cleantech companies were presented. At the high-tech fair in Shenzhen in November there will be both an online and off-line version, but registrations for this event have already been concluded.

Marc Struyvelt explained the concept of virtual meeting days, bringing Flemish products to the Belgian embassy where we invited Chinese buyers. In a second phase the Chinese buyers will be linked to the Flemish companies. It is very important to keep up the contacts with Chinese importers for whom its is now much more difficult to travel abroad. Bart Boschmans said there has also been an event at the Belgian Consulate-General in Shanghai with more than 30 importers and follow-up B2B meetings. In September we also had an info booth at an environmental technology fair where FIT represented some companies. At the upcoming Food and Hotel Fair, FIT will not have a booth this time, but VLAM will have a booth and FIT will provide practical support.

Which sectors offer the most opportunities for Flemish SMEs? Marc Struyvelt is looking out to the publication of the next Five Year Plan for the years 2021 to 2025, for which details will only become available in March 2021. However, there will be two important pillars: firstly, technological innovation in China. China wants to become less reliant on the U.S. for technological products. Secondly, they want to have more domestic consumption to become less dependent on exports. In the near future investments will be made in several sectors, including cleantech and the environment. President Xi Jinping has announced that China wants to become carbon neutral by 2060, which is a very ambitious target. In wastewater treatment, waste-to-energy, combating desertification and off-shore wind energy there will certainly be opportunities. Infrastructure is also important, including traditional infrastructure such as the high-speed rail network and new infrastructure such as 5G, big data, AI, and charging stations for electric vehicles. We should also not forget sports and health products. Three big sports events are being planned in the coming years: the Winter Olympics, the Universiade and Asian Games, for which there will also be huge investments. There are also many small sectors, such as for example animal food and welfare. People are spending a lot of money on their pets. So in several niche sectors there are also plenty of opportunities.

Bart Boschmans: E-commerce has increased significantly, including elderly people who have for the first time made online purchases. The importance of online learning, meeting and working will perhaps diminish a little, but will remain important. The use of streaming, gaming, and videoconference platforms has increased and Chinese have resumed consuming. Sales of luxury vehicles has increased substantially, but also those of middle-class cars. But there are no miracle sectors.

Eva Verstraelen: Sectors offering opportunities to Flemish companies also include electric home appliances because people realize the importance of comfortable living. All those appliances need to be interconnected inside the home but also to the outside world. For example, a company is producing sensors to be installed in beds for sick or elderly people, which can measure the heart rate. If a problem is detected, a hospital is automatically contacted. Everything related to health, including fresh foods, is also important. A certain segment of the Chinese population is earning more and can afford to buy high quality and reliable products. Everything related to milk products, baby foods, organic products, bio-foods etc. is booming. Chocolate containing less fats has been more popular among Chinese consumers. Chinese also want to discover new tastes as they have become more interested in foreign countries. A consumer expo will be held in Hainan in early 2021, for which there is already a lot of interest in Chinese media.

What are the most important challenges, besides not being able to travel to China? Eva Verstraelen: Travel is still difficult as not many visas are issued and in China the 14-day quarantine is strictly implemented. Goods can be imported and exported and travel in China is possible, but Flemish companies cannot come to China and the Chinese can’t go to Europe. Personal contacts remain important to the Chinese, not only initially, but also to maintain the relationship. There is also some suspicion about what is going on in Europe and the U.S. concerning the handling of the Covid-crisis as the numbers are again going in the wrong direction. Chinese businesspeople are not inclined to travel to Europe in the coming months because they consider it to be too dangerous. Bart Boschmans: There is still no prospect of ending the quarantine requirement in China and you can’t choose the hotel where you need to spend the 14-day quarantine. Marc Struyvelt: the biggest challenge is how to remain in touch with your customers. One way is to open a WeChat account, which is the most important way of communication in China. It is a very good way to stay in touch with potential Chinese customers and colleagues. The app is easy to use and also has a translation function.

How can a Flemish SME prepare exporting to China? Marc Struyvelt: A good protection of intellectual property rights is very important. The China IPR SME Helpdesk can help companies to solve their IP issues. They will receive a reply within three business days. Compared to a few years ago, there is better IP legislation and enforcement in China. Moreover, trademark protection in China is not expensive. The website of the EU SME Center is also freely available following registration. They complement what FIT is doing and are doing many market and case studies freely available. There are at least 50 sector studies available worth looking at. If you don’t find the sector study you are looking for, you can send them a suggestion. For example they are now working on a study of cross-border e-commerce. Eva Verstraelen: Don’t forget that Chinese do not have access to some websites, such as YouTube, Facebook or WhatsApp, so you should also use TikTok and live-streaming.

Is Wechat safe from a privacy point of view? Bart Boschmans: In China, you can’t do without it, just don’t divulge any company secrets on it.

WeChat IDs:
Marc Struyvelt: wxid_dbkjzic7xtmo12
Bart Boschmans: wxid_2oth2bq1ag4412
Eva Verstraelen: FeiXiawa
Gwenn Sonck: gwennsonckfccc

The EU-China Business Association organized a webinar focusing on the importance of co-operation between the EU and China in the field of research and science and how this can support economic recovery online on 14 October 2020.

Ms. Gwenn Sonck, Executive Director of the EU-China Business Association, welcomed the participants to the webinar. The EU and China have cooperated in the fields of research and science for many years. Both sides have benefited from this relationship. There is an ongoing dialogue and cooperation process in the areas of science and research. China is becoming a stronger power. The next meeting of EU leaders will take place on November 16 and will focus on the future of EU-China relations. Europe exports €4 billion worth of products to China each year. Export-led growth from Europe to China is a key policy instrument that will assist Europe to recover from the economic challenges that it faces at this time. In the first six months of this year China has become the main trading partner of the EU, passing the U.S. 25% of all research and development is carried out in Europe, and it is home to some of the finest scientists in the world. One-third of all scientific publications that are subject to peer review globally are carried out by European scientists and researchers. The new Horizon innovation and science instrument will be a key driver for economic growth in Europe between now and 2027. Meanwhile, 2.5% of China’s GDP is spent on research activities. China is a growing force in the field of innovation in several areas, such as the internet industry and artificial intelligence.

Mrs. Frances Fitzgerald, MEP, former Deputy Irish Prime Minister (Tánaiste), former Minister for Business Enterprise & Innovation: The lens trough which we see science and innovation is extremely important. At present everything is viewed through the lenses of Covid-19, climate change, digital, green, and they are all interconnected. The key point is that they are global. No one country or member state can do it on their own. What drives science and innovation? It’s about bringing the best talents and scientific endeavors in the world together. It is about cooperation and our research institutes and businesses exchanging best practices. You need to create an environment in which you can think well and can consider the issues almost without interruption. We have been through difficult times due to the pandemic and the global situation. We have to work on the issues to create an environment where innovation and jobs can thrive. We need an environment where there are shared values, openness, transparency and cooperation. In order to do that, we need to tackle those geopolitical issues. From a European perspective it is very important that there is cooperation and reciprocity. We need to have agreed rules, mutual trust, and support for a rules-based international trading system. Reciprocity must underpin the bilateral relationship. When the EU leaders discuss China-EU relations, those points will be given careful consideration.

The Horizon program offers enormous opportunities. There are hundreds of Chinese companies who are already involved. There is more money in the EU budget than ever before. China invests 2.5% of its GDP in scientific research on an annual basis, while the EU wants to invest 3%, which is a key target of the Horizon program. We have to be honest and open about respect for human rights. The Hong Kong situation has made relations fraught in many areas. Unless we put those difficult issues on the table as well, and find a way forward in terms of mutual understanding and shared values, then that actually has an impact on everything else. It creates a more difficult trading environment and barriers to exchange of knowledge which we do not want to see. Europe has many challenges in innovation. We see the extraordinary progress in China in innovation and engineering in many areas. It is definitely to the mutual benefit of the world if we can work closely together on those shared agreements about the basic principles. Take a Covid vaccine as an example. Where is that going to come from? Mainly it will come from global cooperation.

Colin Stevens wrote a report on the webinar for EU reporter. He adds that Mrs. Fitzgerald noted that “455 Chinese companies took part in the Horizon 2020 research, innovation and science programme during the period 2014-2020. Chinese companies will continue to participate in Horizon Europe, which is the new research, innovation and science framework programme that will run between the period 2021-2027.”

Mr. Zhiwei Song, President of the EU-China Association For Entrepreneurship and Innovation, said his association started in 2017 with the ambition to build up a platform with innovation as a core and to offer professional services. The Association offers incubation services for start-ups and companies who want to develop further. We bring knowledge from Europe to China, and vice versa, Mr. Song said. We promote communication between the two continents. The Association also plays the role of consultant for companies who want to work together. We help them to understand culture, regulations, and the way of working to make their collaboration smooth. The Association is organizing online discussions and presentations for Chinese who want to work in Europe and Europeans who want to work in China. It is working together with European associations to promote innovation collaboration. Colin Stevens adds in EU Reporter that Mr. Song said the Association “is participating in European Commission supported programmes such as Enrich and Euraxess”.

Colin Stevens wrote in EU Reporter on the contributions to the webinar of Mrs. Veerle Van Wassenhove and Mr. Yu Zhigao of Bekaert. Veerle Van Wassenhove is the Vice-President for R&D and Innovation at Bekaert, a globally leading company with headquarters in Belgium and a strong research foothold in China. She said that “Bekaert’s research operations in China leverages the company’s global innovation capabilities. Together, we are building expertise for both the Chinese market and globally. Covid-19 brought along some difficulties because we, as researchers, want to keep direct contact with our customers in our technology approach, but we manage.”

Yu Zhigao is the SVP Technology Rubber Reinforcement and head of the Bardec (R&D center in China). He said that “Bekaert has very strong confidence in China. There is excellent research and technical expertise in China. The company operates 18 sites in 10 cities in China and employs 220 researchers in the Jiangyin R&D center and 250 engineers and technicians in the Engineering site. The Chinese operations contribute to both world class research actions and to achieving the strategies of the company. Our research teams in China create value for our customers.”

Abraham Liukang, Chief Representative to the EU Institutions, Huawei: EU cooperation with China is very important in developing ICT-related products and services and the end-user has benefited a lot. On September 29, EU governments at a meeting of the EU Competition Council approved a series of new laws to govern the framework of Horizon Europe for the period 2021-2027. One of the new rules involves the participation of the legal entities in Horizon Europe, setting up many public-private partnerships. Horizon Europe will remain an open program, which means the best researchers from all over the world will continue to be able to contribute to their scientific excellence and discoveries into the work of Horizon Europe. Open and transparent procedures are important because it is the most effective way to ensure the strongest and most innovative results to tackle the problems that society faces, such as climate change and the pandemic. More and more research programs emanating from the Ministry of Science and Technology in China are open to international participation as well. Huawei always had a open approach in global research activities. In Europe, Huawei has 23 research centers in 12 countries. Europeans are by nature excellent software developers. That is why Huawei’s microwave research center is in Milan, the wireless one is in Stockholm, the open innovation center is in Paris, and the optical network research center in Munich. Huawei has been an active participant in both the seventh research and technological framework program (2007-2013) and more recently in Horizon 2020.

In total, Huawei has taken part in 50 collaborative research activities and different EU research initiatives. Huawei’s research activities have focused on building a new and innovative digital infrastructure. Huawei partners with over 150 universities in Europe and signed over 230 technology agreements with research and educational institutes in Europe. It is trough these activities that Huawei has become the sixth most innovative company in the world according to BCC. Huawei has been based in Europe for 20 years. The first research center was set up in Sweden in 2000. Over the next five years Huawei plans to invest €100 million in its AI ecosystem program in Europe and will work with its partners to shape the AI industry in Europe. It also wants to be an active participant in the Article 187 joint undertaking for smart networks and services, a key cornerstone of the EU policy. International cooperation within this framework is very important. Huawei looks forward to engage in Horizon Europe and positively deliver on the policy agenda of the European Union.

Colin Stevens quotes Abraham Liukang in EU Reporter as saying that “The roll-out of 5G has been politicized and this has had the direct effect of slowing down 5G deployment in Europe. Huawei takes security issues very seriously and that is why Huawei has a cyber-security evaluation center in the UK and an agreement on security issues with BSI in Germany”.

What are the challenges in China-EU cooperation moving forward? Fitzgerald: In some ways we are at a crossroads. There is a lot of motivation on both sides to move forward and to make sure that we continue to collaborate. People want to develop and strengthen the relationship. Having an open dialogue is the best way. In the EU there is a call for the policy adopted by all member states to be united and balanced. You are going to see more cooperation across EU institutions on China to have a unified approach. We need strict reciprocity. The question of state aid rules and transparency is going to be very important for Europe.

Mr. Haakma: Could you elaborate on the U.S. ban on Huawei’s innovation in the networks in Europe? Fitzgerald: One of the most dynamic discussions since I became an MEP was the seminar held in the European Parliament on that topic. Unless we have a very open discussion at the highest levels between China and Europe we will have those issues. Europe has had a very good relationship with the U.S. In terms of trade it is very fraught at the moment also related to the WTO.

Abraham Liukang: If you only look at the headlines, people may have the impression that Huawei only arrived in Europe last night, and you have to be careful of a stranger, but Huawei has been in Europe for 20 years and had a long and difficult journey to be trusted. Huawei had a comprehensive collaboration with the UK government for the past 10 years on cyber security. Huawei is one of the most audited companies in the industry and based on facts also the most secure. Looking at the track record, Edward Snowden told us, actual security in cyberspace is irrelevant to vendors. Because the issue was politicized it has slowed down 5G in Europe. If there is not such extreme pressure from the U.S. on European governments and also on the customers directly, there could be better relations between Huawei and European stakeholders. If by the end of the year there is a comprehensive investment agreement and the U.S. still has it extra-territorial law enforcement, there will be serious challenges.

Mrs. Fitzgerald: It is a very particular situation with the U.S. at the moment. Geopolitics is a reality that is impacting companies. Very important for the EU to consider is what is in the best interests of our citizens. There are human rights and values issues in the relationship with China. The more transparency on these issues, the more responses you will get that companies like to see. It is all interconnected.

Q&A: How is China improving IP protection and what are the best practices? Abraham Liukang: We always emphasize the importance of IPR protection. We benefit from global IP protection. As a private company, we make sure that Huawei has the highest standards, and try to be the best example of a Chinese company with headquarters in China and as an international company in Europe. In the IPR case we are one of the best examples. We are ranked No 1 in the European Patent Office in terms of patents granted. Mr. Yu Zhigao: When you set up a plant in China, you face this issue. As a leading company, people try to get everything from us. You need to classify the different levels of your confidential information and build up the system to protect it. A second issue is how to retain our people. Good cooperation with the local authorities is also important.

Is closer cooperation with China an option to limit the EU’s current over-reliance on U.S. companies’ data to advance their position in artificial intelligence? Abraham Liukang: The ideal situation is that the whole world becomes one system and there is no worry that technology would be weaponized for political reasons. The over-reliance in Europe in the data sector has been emphasized and in the case of semiconductors that for raw materials they rely on China too much. If everybody closes its door and creates an end-to-end solution of its own, it is neither practical, nor cost effective. One solution is to use the open source platform.

Is there a risk that decoupling would happen in ICT products with one set of standards for the U.S. and one for China? Zhiwei Song: If that happens it would be a pity for the whole world. We need to try to avoid having two standards. Abraham Liukang: The world used to have many standards for telecom: GSM, CDMA, TDMA, but now there is one 5G standard. What made this happen? Europe played a key role with an open and international cooperation. Europe has a role to play again in the 6th era.

Closing remarks of Mr. Jochum Haakma, Chairman EU-China Business Association: The EU-China Business Association wants to offer a platform to businesses and to policy makers as well to have an exchange of views on different topics related to EU-China Issues. We try to promote trade links between Europe and China. We link companies together where they have a common interest and we advise on best practices that will drive the EU-China bilateral trade relationship. The new EU investment screening regulation came into force only last Sunday so EU Member states will have to consult with Brussels. China should take on a leadership role. It would be a very positive development if China and Europe were to agree on the terms of the new investment treaty.

Colin Stevens in EU Reporter quotes Mr. Haakma as saying that “the reality is that we do live in a complex world – where trade, politics and security issues at times seem to be inter-linked. The digital economy is growing faster than the global economy. Increased activity within the digital economy is going to play a key role in driving growth in both Europe and China.”

Link to Colin Stevens’ article in EU Reporter

The Flanders-China Chamber of Commerce and AllBright Law Offices organized a webinar focused on the Impact of the New PRC Civil Code on Foreign Invested Companies in China on October 8, 2020.

Ms. Gwenn Sonck, Executive Director of the Flanders-China Chamber of Commerce and the EU-China Business Association, introduced the speaker, Mr. Carl Li, joining the webinar from Shanghai, and the subject of the webinar. AllBright Law Offices, a structural partner of the Flanders-China Chamber of Commerce, is Shanghai’s largest Chinese law firm, ranked seventh-largest in the country. They have 21 branches in the Chinese mainland as well as in Hong Kong, London and Seattle. The have more than 3,000 lawyers in their team. Their areas of expertise include foreign direct investment, mergers & acquisitions, company law and compliance. Mr. Carl Li is the Senior Partner at AllBright Law Offices. He has 20 years of intensive experience of providing legal services to foreign investors. He is one of China’s top 15 M&A lawyers in 2020 at Asia Legal Business Awards. He is also a recommended M&A lawyer in Asia-Pacific 2020 according to the Legal 500. His clients include Fortune 500 transnational corporations and middle-sized European family businesses. Mr. Li graduated from Renmin University, the top 1 law school in China, and he is also a graduate of the EMBA program at the China International Business Schoo, which is also the top 1 business school in China. He was a visiting scholar at the University of Maryland in the U.S. and also trained at Harvard Law School.

Mr. Carl Li, Senior Partner AllBright Law Offices, said his law firm would be happy to provide services to the Members of the Flanders-China Chamber of Commerce, and would like to share his experiences on the new Chinese Civil Code. Three important laws and policies were published in China this year. Firstly, the Foreign Investment Law, which became effective from January 1 this year. The law will have a very positive and important impact on the operations of foreign-invested companies in China. Second is the negative list for foreign investment, as China is speeding up its opening up in certain industries, such as the financial industry and automotive industries. In these two industries, foreign investors are now allowed to set up 100% foreign-owned companies. However, the automobile industry is still opening step by step. For commercial vehicles, you can now have 100% ownership of your subsidiary. In the financial industry, some very big companies like Blackstone and Citigroup also set up 100%-owned companies in China. So you should check whether your industry has now opened more than before.

The law we will discuss in this webinar is the new Civil Code. It is not a new law but it took years to review the Civil Code. There are already a number of civil laws, such as the marriage law, but all those civil laws have now been combined into a unified Civil Code. Revisions were also made to better protect the rights of individuals and companies, which is also very good for foreign investors in China. Your company’s legal interests will be better protected. However, it is a very big law, so we cannot review everything in this webinar. The English version of the Civil Code still has to be published and is not always very relevant to companies because it focusses on individual citizens’ civil rights.

The Civil Code has already been published but will come into force on January 1, 2021. You can discuss the law with your Chinese counsel, management and consultant to better understand the law. The Civil Code has seven parts. Many of the contents were already stipulated in other laws. The seven parts are: 1. general principles; 2. real rights; 3. contracts; 4. personality rights; 5. marriage and family; 6. succession; 7. liability for tort. About 70% of the articles already existed in previous laws.

The first topic is changes related to contracts. For all foreign-invested companies in China a commercial contract has been signed. There are some new points concerning commercial contracts in the Civil Code. Violation of public order and good morals may become a general reason for the invalidity of the contract. This is a general rule which also applies in Europe and other countries that have a Civil Code. But now it has been broadened and could create some uncertainty. There are also new rules about national security review procedures, which are already stipulated in the Foreign Investment Law. For most businesses this is not a concern, because it only applies to a number of limited situations, such as military or other sensitive business. In that case it is better to check with the authorities, your lawyer or consultant before signing a contract. A second point is that a contract without the right to dispose of the property of others is valid only if it is ratified by the right holder or if the person without the right to dispose of the property has obtained the right of disposition after signing the contract. The buyer will have the right to terminate the contract. In the Civil Code relevant rules were deleted, which means that the contract without the right to dispose of the property of others is valid in principle. In addition, according to Article 597 of the Civil Code, if ownership cannot be transferred because the seller has not obtained the right of disposition, the buyer can terminate the contract and request the seller to bear the liability for breach of contract. After the Civil Code comes into effect, if a party to the contract is unable to perform the contract because it has no right to dispose of the property, it can be directly required to bear responsibility for breach of contract. In the new Civil Code the buyer is better protected.

This is not new, but just a reminder that the laws of the People’s Republic of China shall apply to contracts for Sino-foreign equity joint-ventures, Sino-foreign contractual joint-ventures and Sino-foreign cooperative exploration and development of natural resources. Even if you have to use the Chinese law, you can still chose arbitration in other countries, such as in Singapore, Stockholm or London. If in the contract you use standards terms, and those terms will greatly affect the interests of other parties, or exclude or mitigate the liability of the party providing the standard terms, such terms are invalid and you can sue the other party.

There are new rules on alternative obligation. Where there are several subject matters and the debtor only needs to perform one of them, the debtor shall have the right to choose, unless otherwise stipulated by the law or agreed between the parties. There are also new rules on subrogation in emergencies. Article 536 stipulates that prior to the maturity of the claims of a creditor, where the limitation of action period for the claims of the debtor or the accessory rights related to the claims soon expires or the claims of bankruptcy are not declared in time, the creditor may request in subroagtion the counterparty of the debtor to perform the obligations thereof for the debtor, to declare to the bankruptcy administrator or to conduct other necessary acts. You don’t have to go to court for arbitration or litigation.

When the parties have agreed that non-monetary claims cannot be assigned, the parties shall not act against a bona fide third party. Another issue is the termination of an indefinite contract. If an indefinite-term contract contains the continuing performance of obligations, any party may rescind the contract at any time, provided that it shall notify the other party within a reasonable time limit. Similar rules exist for lease contracts. Another typical situation is signing of a framework contract with no fixed term.

A final issue is changes related to typical guarantees. Two important guarantee rules have been changed: The existing law does not clearly stipulate that the right to use sea areas can be mortgaged, but this issue will be completely resolved after the Civil Code comes into effect. Secondly, educational, medical and other public welfare facilities of non-profit legal persons established for the purpose of public welfare cannot be mortgaged. Concerning the assignment of mortgaged property, in principle, the consent of the mortgagee is not necessary for assignment of the mortgaged property. So it is important to pay attention how to protect your own rights.

Answering to a question, Mr. Carl Li said that existing contracts should be reviewed according to the new Civil Code, if the contract is still performed after January 1, 2021.

The Flanders-China Chamber of Commerce organized a webinar focused on Financial Incentives for Doing Business with China online on 1 October 2020.

Ms. Gwenn Sonck, Executive Director, Flanders-China Chamber of Commerce, introduced the webinar and the speakers.

Mr. Rik Daems, Senior Advisor International Investment Funds FPIM-SFPI, Vice Chairman and President of the Investment Supervisory Board, China-Belgium Direct Equity Investment Fund (CBDEIF) and President of the Parliamentary Assembly of the Council of Europe PACE-CDE, talked about the different investment vehicles for Belgian companies investing in China and Chinese companies investing in Belgium. He was speaking from the European Parliament in Strasbourg. The Federal Holding and Investment Co (SFPI-FPIM) is basically the Belgian sovereign wealth fund, managing the Belgian federal government’s shareholdings with a total balance sheet at the end of 2019 of over €2 billion and an additional €15 billion that they manage on behalf of the Belgian government. In the next months the SFPI will grow a lot bigger as the new Belgian government will put all its investments in the Fund.

The Fund was established in 2004 with about €100 million equity, which was doubled in 2013. Together with a sister fund, the total is now around €650 million. By mid-2020, the Fund had invested in more than 85 companies. The fund manager is a Shanghai-based joint venture between BNP Paribas Fortis Bank and Haitong Securities. In principle 15% of the initial capital is reserved for Belgian Related Projects (BRP) and this target has already been reached. For several years the Fund has been nominated as “one of the best PE funds in China” by Forbes China. The average rate of internal rate of return (IRR) is approximately 30%. The size of an investment is normally between €3 million and €8 million and the average share of equity is between 5% and 15%. The Fund is looking for companies that are already in a stage of development and have the potential to grow to become the first or the second one in the market.

The China Belgium Mirror Fund was established in 2012 between China Investment Corp (CIC) and SFPI and is fully invested and in divestment mode. It is not available for new investments.

Datang-SFPI Venture Capital Fund was established in 2012 by CICT – a merger between the Datang Group and Wuhai Fiberhome – to proceed with green investment and early-stage investments. The capital is CNY100 million, with CNY64 million still available. This fund is focussing on telecom investments in China.

Two other funds are the BMI-SBI Belgian Cooperation for International Investment, which besides equity investment also offers long-term finance. They have a great analysis capacity and can give you a first opinion about your investment project. BIO, Belgian Investment Co for Developing Countries, established in 2001, invested in more than 160 projects in 52 countries. It is focused on development aid but China is still classified as a developing country. BIO has an investment capacity of €600 million.

Mr. Steven Levecke, Senior Investment Manager, Capricorn Partners, presented the Capricorn Fusion China Fund aimed at building investment bridges between Europe and China. It started as the Asian-Europe Fusion Fund and has been rebranded as the Capricorn Fusion China Fund. Capricorn Partners is an independent manager of venture capital and equity funds that invest in minority shareholdings in innovative companies. It has a 27-year track record and about €400 million under management. It is also the independent advisor of the China-Belgium (Europe) Technology Innovative Industry Fund (China-Belgium Fund), a CN350 million fund set up at the end of 2019 by two Chinese investors to invest in European high-tech companies.

The Capricorn Fusion China Fund was initially set up by people linked to the Heylen Group, an industrial holding. The ambition of the Fund is to provide capital for transcontinental growth by offering a platform for successful innovative entrepreneurs allowing them to scale their business on another continent by selecting the right partners and applying smart capital. The Fund is not sector-specific. The target size of the Fund is around €75 million, aiming to make investments in 10 to 15 European or Chinese companies to build a balanced portfolio. Investments will range from a minimum €2 million to a maximum of €5 million. The idea is to have a meaningful minority stake. There are different trends creating opportunities for European companies in China: a growing middle class, strong urbanization, health tech, high-end manufacturing and so on. On the Chinese side, the Fund would like to invest in technology companies exploiting opportunities in Europe. One successful deal Capricorn was involved in was Punch Powertrain, an independent automotive supplier, which in 2010 was a struggling manufacturer of shiftless transmissions. Punch Powertrain was taken over by Yinyi Group in 2016 for €1 billion, giving an IRR of 60%. Finally, Mr. Levecke presented the Fund’s investment team and the investment committee and investment advisors. The Fund also has access to the network of Horsten International. Based on the work of Horsten, the Fund made its first investment in Xi’an Thiebaut, a Sino-Belgian joint venture specialized in the production of collapsible aluminum tubes. The Capricorn Fusion China Fund has bought Horsten International’s 6.6% share in Xi’an Thiebaut.

Contact: Steven Levecke, steven@capricorn.be

Mr. Tim Lievens, Senior Investment Manager PMV, introduced the Participatie Maatschappij Vlaanderen (PMV), the investment vehicle of the Flemish government to support mostly Flemish SMEs in their expansion, either organically or through acquisitions. PMV facilitates the growth and financing of those companies. The two pillars of PMV are financing for entrepreneurs and investments in infrastructure, real estate and renewable energy. PMV’s financing instruments are guarantees for traditional bank financing; senior unsecured loans; mezzanine loans; venture debt and equity.

In order to provide loans, banks require securities. Sometimes the securities the company can offer are not sufficient. PMV can provide the guarantee the banks need to finance a company’s international expansion. PMV can support different types of debt financing including investment credit; working capital facility; factoring facility; and leasing facility. PMV can also directly provide loans to companies. The focus is on mature companies with an experienced management, a track record of positive cash flows and a strong business plan. The loans are always flexible and non-dilutive to the capital structure. The third type of financing is equity investment, focussed on cleantech, ICT, creative industries, the circular economy, and life sciences & care. Investment is up to €20 million in a minority stake. PMV is looking for sound industrial fundamentals in a company. The repayment capacity is the single most important issue based on the business plan. PMV only invests in the Flemish headquarters of the company, but the money can be used to finance projects abroad. Biobest is an example of a company in PMV’s portfolio.

Contact: Tim Lievens, tim.lievens@pmv.eu

Mr. Wim Bosman, Business Development Specialist, Marketing and Communication, Credendo, introduced the traditional export credit agency of Belgium with almost 100 years of expertise in trade credit insurance. It is active in several businesses and activities, ranging from traditional trade credit insurance, financing related to exports, and reinsurance. Credendo is protecting Belgian undertakings in China against political risk. Political Risk Insurance (PRI) covers the investments made by a Belgian company in a foreign enterprise, excluding commercial risks. Investments can be equity, structured loans or quasi equity, such as loans without repayment schedule. Credendo’s PRI covers the risk of expropriation; political violence; business interruption for six months; currency inconvertibility and transfer restrictions; award default and embargo. Award default means that if you have been awarded authorization but the government suddenly decide that you cannot continue your business anymore and they do not honor international arbitration. Credendo also offers ECA funded solutions for tenors from two to five years focussed on SMEs, including forfaiture and buyer credits. Credendo can also offer financial guarantees for bank loans.

The country risk of China is available on the Credendo website. To manage your risks, you can use the Credendo Risk app.

Contact: Wim Bosman: w.bosman@credendo.com