In the news: Executive held hostage, US law firms expand and mutual funds open up
June 27, 2013 | BY
clpstaff &clp articles &A company executive has been held captive by his employees in Beijing. US law firms have increased their headcount in Beijing and Hong Kong and foreign banks are now allowed to offer mutual funds
Workers confine executive and demand severance package
Chip Starnes, founder and president of Specialty Medical Supplies is being held hostage by employees in Beijing. The dispute began after 30 employees had been offered severance packages because the company moved part of its operations to India. The remaining 100 workers barricaded the exits believing they would also be laid-off and demanding severance packages.
Starnes said the workers created noises throughout the night and shone bright lights into his eyes to deprive him of sleep. The US executive says there are no plans to dismiss the remaining employees. However, the workers have claimed they have not been paid for two months, a point Starnes refutes.
Entrapment and sleep deprivation make this story sound like something from the Cultural Revolution. Wages are rising, especially in developed parts of the country and this has caused companies to re-evaluate whether China is the best place for them to do business. Workers are scared and there are plenty of stories out there of foreign companies shutting up shop without paying wages or severance. Who knows if Starnes is telling the truth or the workers, but this should be a warning to all foreign companies to think about how they deal with dismissals.
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US firms keep expanding in China
According to the National Law Journal, Beijing and Hong Kong experienced notable increases in lawyer headcounts. The result form part of the Journal's 350 survey and “shows that China remains a good bet for law firms.”
Beijing saw an 11% gain in lawyer headcount with a 5.6% increase in Hong Kong. Among the 20 law firms with the largest Beijing offices, 10 increased their size and five stayed the same. Baker & McKenzie, Orrick, Herrington & Sutcliffe and K&L Gates decreased in size with Dechert and Covington & Burling making it into the top 20 for the first time.
US firms in China must be doing well if they are upping head count. Compared to working at a domestic firm, lawyers at foreign outfits are subject to higher income tax rates. This means foreign firms have to offer inflated salaries to attract candidates and match what they would earn at a domestic firm with the lower tax rate. It will be interesting to see if this trend continues given the financial commitment.
HSBC and Citigroup to sell mutual funds in China
HSBC and Citigroup have won approval from the China Securities Regulatory Commission (CSRC) to sell domestic mutual funds. HSBC said it would introduce fund products soon, while Citigroup will cooperate with other fund management companies. The CSRC allowed brokerages and insurance companies to sell mutual funds to the public in February.
This is a good move by the CSRC and shows that they want to increase the role of institutional investors. It also shows that they want to attract more money into the nation's troubled capital markets. Mutual funds will also allow foreign banks to broaden their distribution channels in China.
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