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ABC News, and almost every other international news agency, has recently reported that former Chinese Communist Party Politburo member Bo Xi Lai has recently lost the appeal of his corruption conviction. As a result, his life sentence stands.

Most commentators, IPG Legal included, seem to agree that the charges brought against Mr. Bo were politically-motivated and the entire legal system in China, particularly as it relates to cases that may seriously affect China’s political or economic system, is still in large part controlled by the Chinese Communist Party.

I have myself observed a Chinese criminal court try and convict a man who had no access to a lawyer. The case involved a large company suing a private businessman for fraud. Before issuing her final ruling on the case, the judge went into a backroom where she consulted with Communist Party officials on how the case should be concluded. Unsurprisingly, the man was convicted, and even more unsurprisingly, the judge was quite frank about what she was doing in the backroom.

This was just one guy defrauding a mid-tier business… so, we can imagine what must be happening behind the scenes when something actually important comes along.

IPG Legal will keep you updated with more news about the case as it happens. We don’t think we’ve seen the last of Mr. Bo just yet.

To learn more about the case and read the article from ABC News see:
China Court Upholds Bo Xi Lai Conviction, Life Term.

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IPG has seen great development in China over the past decade, but worries that many recent developments projects are occurring to quickly and without proposer feasibility studies. Opportunities abound in China, but the recent issues with retail and residential space notes an issue that can kick investors in the butt – China has a real estate bubble that may be ready to pop. The bubble may be bringing opportunities to the more creative investors.

The Financial Times has noted that:

  • As crowds shouted and pushed for the latest iPhone in Beijing on Friday, a glitzy mall across the street was bathed in silence, with just a handful of shoppers hunting for bargains.
  • The frenzy at the Apple store underscored the rise of the Chinese consumer, a development that analysts say is needed to support the global economy and make China’s growth more sustainable.
  • But the empty SOHO complex cast a different light on what is happening in the world’s second-largest economy: consumption is rising, but not nearly as fast as vast shopping centres are being built.
  • A boom in the number of malls without a matching increase in actual shopping gets to the heart of what analysts see as the fundamental problem of the Chinese economy: too much investment, too little consumption.
  • “There was an exponential two or three years where record numbers of malls were built around the country,” said Frank Marriott, senior director for Asia at property consultant Savills. “It has to take a bit of a breather.”
  • Within a half-hour walk from Beijing’s fashionable Sanlitun district, eight shopping complexes have opened in recent years. While one mall called the Village – home to the Apple store that was pelted with eggs on Friday – is bustling, many of the others are visibly struggling.

We will be posting articles, in the near future, for investors interested in capitalizing on the Chinese real estate bubble.

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As those of you who have read my blog over the past 6 or 7 years (I can’t even remember how long I have been writing it) you know that I have always been a big fan of Hong Kong. Ever since 1989 when I sailed into Hong Kong on U.S. Navy ship as a young U.S. Marine Officer I have been enthralled with the city.

While the dramatic beauty of Central and the sky scrapers overlooking Victoria Harbor against a backdrop of lush green mountains, the iconic Star Ferry and other attractions make it my favorite city in the world, it is the business climate and rule of law that make it the best place in the world to do business.

I have written about this in Hong Kong and the Rule of Law and Hong Kong Phooey and numerous other articles on the topic. I also advise my clients from all over the world on using Hong Kong as the only legal corporate structural platform for their entry into China and South East Asia. Well, we now have another reason to support Hong Kong as a market entry, financial and administrative center for China operations – regardless of the scope of business.

China’s State Administration of Taxation just announced a change in the rules governing the withholding tax that foreign investors pay on dividends repatriated from their share of investments in Chinese companies. Companies and shareholders based in countries outside Mainland China (such as the United Kingdom, Hong Kong and Singapore) that have double taxation agreements (DTAs) with China will only have to pay 5% in withholding tax on the dividends they receive from Chinese companies, instead of the usual 10% payable by companies and shareholders resident in countries without DTAs (U.S. and many EU companies).

Although the reduced rate has been available for several years Hong Kong holding companies did not meet the ‘substantial business activity’ requirement which has in effect been removed. So, now there is even more reason to use Hong Kong as the structural platform for you operations in China and beyond.