In the news: Wal-Mart's China failures revealed, more FTZs announced and BAC issues new Arbitration Rules

The truth about Wal-Mart's China business

After years of claiming China was one of its best markets, Wal-Mart has revealed its performance there was among the worst in its major countries. Its China business has been crumbling for years, hidden by questionable accounting and unauthorised sales practices, including bulk sales to other retailers and alleged sales bookings when no merchandise left the shelves. This made the business appear strong despite slowing retail transactions and a growing unsold inventory. While Wal-Mart attributes its success to a productivity loop of selling for less, growing sales, operating for less and buying for less, its China business fell victim to what has been called "unproductivity loop", where more bulk sales to other retailers led to lower profit margins, monthly price mark-ups and, ultimately, fewer customers. And now the figures can no longer be concealed. How many other foreign businesses are in a similar position

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China to create three new FTZs

China plans to create three new free trade zones modelled on the Shanghai pilot FTZ as the government tries to support trade and boost slowing growth. The new zones will be in the southern and eastern provinces of Guangdong and Fujian and in the northern port city of Tianjin. Although the FTZ was initially celebrated as a testing ground for free market reforms with lowered financial and FX barriers and FDI controls, investors and practitioners have been disappointed with the zone's progress as investment activities there are subject to similar restrictions as in the rest of the country. Will the actual implementation of these freedoms really work this time It is clear that these efforts are aimed at jumpstarting high-end manufacturing and export industries, but foreign investors will need clear evidence of how labelling these areas as FTZs really affects investment access.

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Beijing Arbitration Commission issues new 2015 rules

The Beijing Arbitration Commission (BAC) published its revised Arbitration Rules on December 4. They will come replace the 2008 rules and come into force on April 1 2015. Amendments include provisions for counterclaim rules, joinder, multi-party arbitration, consolidation, interim measures and an emergency arbitrator. The Rules have also increased the scope and flexibility of procedural measures as well as tribunal discretion for assessing evidence. Although it remains to seen how these substantial changes will work in practice, it is clear that BAC is keeping in line with international best practice. CIETAC has just issued its new rules as well and the changes show the two institutions are moving in a similar direction.

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Chinese environmentalists name and shame 1,000 companies

Environmental groups in China issued a report detailing over 1,000 companies that regularly exceed emissions standards, in an attempt to name and shame Chinese industries that contribute to air pollution. Alleged violators include highly profitable listed companies in China, such as Kingboard Chemical Holdings, Aluminium Corp of China and SinoChem Cokechem. The report was released by the non-profit Institute of Public and Environmental Affairs and two other NGOs. Kingboard, whose investors include Fidelity Management and JPMorgan Chase, has been accused of "deliberately discharging in secret, discharging in breach of set limits and fabricating online monitoring data". The report advised investors to think twice about investing in Chinese companies that violate pollution standards. With the new Environmental Protection Law coming into effect next year, rules and penalties will be harsher but what really determines change is proper and consistent enforcement.

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