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Head of court calls for new private lending laws

THE head of a court that has upheld the death sentence of Wu Ying, a once hugely wealthy businesswoman who was convicted of fund raising fraud, urged China's legislature to draft laws on the country's flourishing but less regulated private lending sector.

Qi qi, head of the Zhejiang Provincial High People's Court, has submitted proposals to define the concept of private lending, and to confirm the legitimacy of fund-transfer among companies, he told reporters on the sidelines of the annual session of China's legislature in Beijing during the weekend.

"Less than 10 percent of loans from state-owned banks are given to private companies," Qi said. "To legalize private lending is to pump the underground money to water the most thirsty section of the economy."

He said that legalizing direct borrowing among companies will help clarify the boundary of private lending, which is currently gray and sometimes fuels fund-raising fraud.

He also suggested lifting the ceiling of legal interest rates for lending, which is currently four times the benchmark rate set by the central bank.

Last year, courts in China heard a combined 608,477 cases concerning private lending, nearly 40 percent more from a year earlier, Qi said. A total 114.3 billion yuan was involved in the disputes.

The high court under his leadership has in January upheld the death sentence of Wu Ying, who was accused for using hundreds of millions of yuan borrowed from acquaintances for luxury purposes instead of business. The death penalty is awaiting review from China's supreme court.

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Revised criminal law to give suspects greater protection

When Zhang Guoxi returned to his office from lunch one Thursday afternoon in July 2010, a team of anti-corruption investigators was already waiting for him.

What followed, according to court documents, was a month of interrogations that eventually resulted in the construction official admitting that he accepted 76,000 yuan ($12,000) in bribes

When the case went to trial, however, judges deemed the confession inadmissible due to allegations it had been obtained illegally.

It was a landmark decision, and National People's Congress deputies are set to vote on a revised Criminal Procedure Law that is aimed at further protecting the rights of suspects in custody and preventing forced confessions.

Public security bureaus have relied heavily on self-incrimination to solve criminal cases, said Tian Wenchang, director of the All-China Lawyers Association's criminal committee.

"These changes (to the law) will, hopefully, reduce the risks during interrogations and improve the investigative tactics used by the police," he said.

A draft of the amended law was released to the public in September and received roughly 80,000 comments, either on e-mail or through the official website of the NPC, the country's top legislative body.

While most people acknowledged the progress being made, the media attention at home and abroad largely focused on several clauses that would have allowed police to detain suspects without informing families for up to six months.

In the version set to go before this year's plenary session of the NPC, almost all the controversial aspects appear to have been omitted.

Wang Zhaoguo, a senior lawmaker, explained to deputies on Monday that the draft now states that public security bureaus must inform a suspect's family within 24 hours of their detention.

The only exceptions, he added, would be when the case is "related to State security or terrorism", or if informing the family would "impede an investigation".

Cautious, courageous

At the time of his arrest, Zhang Guoxi, held a key post in the construction department of a government-funded holiday village in Ningbo, a booming city in East China's Zhejiang province.

According to records released after his trial in March last year, anti-corruption officers detained him without a warrant. The suspect said he was interrogated for three days, first in a hotel room and then in a prosecutor's office, and was given only a few hours of sleep.

He said that at no time did investigators produce documents authorizing his detention or take any written testimony.

After three months, Zhang said he was transferred to a detention house in Shaoxing, where he was allowed to sleep four hours a day.

"They made me assemble strings of colored lights, fixing 100 colored bulbs to a 8-meter-long cable," he told China Daily on March 6. "I had to finish at least 27 strings every day, which was impossible for a new hand. I kept working until my fingers were blistered."

When the case reached the courtroom, prosecutors for Ningbo's Yinzhou district accused Zhang of taking 76,000 yuan from contractors in exchange for lucrative construction projects between 2005 and 2008. As evidence, they presented a signed confession.

However, the defendant said he had received only 6,000 yuan, while his attorney, Jiang Jiangao, said his client's testimony had been illegally extracted with the use of violence.

In an unprecedented move, the panel of three judges sided with the defendant and threw out the confession. Court records quote the presiding judge as saying that the initial investigation into Zhang was "flawed" and that the "testimony should be excluded".

The panel went on to return a guilty verdict, yet as the "value and harm (of the bribes) were minimal", the defendant received no criminal punishment. He was, however, sacked from his job.

In an interview with China Daily last week, Jiang, who is currently appealing 42-year-old Zhang's conviction at an intermediate court, called the decision to reject the signed confession "cautious but courageous", and said it "casts light on future judicial rulings".

Soon after the events in Ningbo, the Supreme People's Court also issued a warning to law enforcement agencies to prevent forced confessions.

"I've heard that judges in other places have failed to (dismiss disputed evidence) under similar circumstances, either because they were fearful about challenging prosecutors or just disregarded procedural justice," said Chen Guangzhong, a leading expert on criminal proceedings.

If the NPC votes to approve the revised law, analysts say it will not only provide institutional support for similar rulings, but it will also be the first time China's 30-year-old criminal procedure code has embodied the constitutional spirit of protecting human rights.

Li Zhaoxing, spokesman for the NPC, told a news conference that the draft to be tabled at this year's plenary session identifies human rights protection as an essential principle.

"It's slow progress," admitted law professor Chen Weidong at Renmin University of China, "but legislation is a gradual thing, in which improvements are made little by little."

Code of conduct

Criminal Procedure Law was one of seven new laws introduced in 1979, when statesmen say the country was shifting its priority from class struggles to economic development.

Yan Duan, 78, a professor at China University of Political Science and Law who was on the panel that first drew up the regulations, recalled that many of the original clauses were designed to address issues that had arisen from the "cultural revolution" (1966-76).

Consisting of 164 articles, the 1979 code ruled that oral testimony "can only be accepted after confrontation in court", a principle she said was "a lesson drawn from the cultural revolution", when many people faced groundless accusations.

Characteristics from the times can easily be seen in the first version, which upholds Marxism, Leninism and Mao Zedong Thought in its first clause, and says the code is to "combat enemies" and protect the people.

The emphasis on ideology was removed 17 years later. Chen Guangzhong, a consultant on the 1996 revision, said the code absorbed several suggestions from NPC deputies and was eventually expanded to 225 clauses.

As the code regulates criminal investigations and court hearings, he said that the more detailed it is, the less chance there is for disputes. The country's Criminal Law has about 400 articles, he said.

"Legislation is not stagnant," said Chen, the former president of China University of Political Science and Law. "It's a process through which laws are improved by lawmakers' efforts to adapt to new social conditions."

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Ipad Dispute Signals New Era in Trademark Troubles

SHANGHAI iPotato, isock, icouch, istove, i-you-name-it. An Internet search for "i" words from A to Z will turn up just about any combination you might think up, from all over the world, only a handful of them related to Apple Inc.

Given its penchant for "iproducts," Apple's current troubles in China over the iPad trademark are not its first, and are unlikely to be its last. China's importance as a major consumer market is bringing fresh headaches for companies, and even celebrities, seeking to protect and claim brand names. That's apart from the usual problems with piracy and other infringements.

Financially troubled Proview Electronics Co., a computer monitor and LED light maker, says it registered the iPad trademark in China and elsewhere more than a decade ago and wants Apple to stop selling or making the popular tablet computers under that name. Apple says Proview sold it worldwide rights to the iPad trademark in 2009, though in China the registration was never transferred.

The number and variety of such disputes is rising as Chinese companies seek to leverage trademarks to their advantage, either for the sake of acquiring attractive brand names or for financial gain, said You Yunting, a lawyer with the Debund Law Office in Shanghai, which specializes in trademarks and patents.

"This is an era of development and people are paying more attention to brand names now," said You. "China is not good at innovation. I'd say Proview would not be suing Apple if its financial situation was fine."

Apple and Proview are battling in Chinese and U.S. courts. Apple's right to make and market the iPad under that name in China may hinge on a pending ruling from the High Court in Guangdong, in southern China. Over the past month, the conflict has escalated with Proview challenging not only Apple's use of the mainland Chinese trademark but also the 2009 deal, which involved worldwide rights to the iPad name.

Whatever the outcome, the dispute highlights the rising stakes of the trademark name game in the increasingly lucrative China consumer market, one that most global companies cannot afford to miss out on regardless of the risks.

"China's been infringing on patents and copyrights and so on from the beginning. Now, it's a globally important market and this is where a lot of companies are depending on for growth," said James McGregor, a senior counselor for consulting firm APCO Worldwide and a former chairman of the American Chamber of Commerce in China.

"It's getting more attention now, and maybe some of these infringers are getting more aggressive," he said.

The issue touches practically every type of product or industry.

Former NBA star Michael Jordan is suing a Chinese sportswear maker, Qiaodan Sports Company Ltd., for unauthorized use of his name and images associated with his own brand, such as his old jersey number, "23".

"Qiaodan," pronounced "CHEEOW-dan," is the moniker Jordan has been known by in China since he gained widespread popularity in the mid-1980s.

"I am taking this action to preserve the ownership of my name and my brand," Jordan said in a video clip on his website. "No one should lose control of their own name."

Qiaodan said in a statement that its brand has no direct relationship with Michael Jordan and professed to respect his "athletic achievements and contributions" in basketball.

"I would not say Proview registered its trademarks maliciously, since it did it more than 10 years ago. But I would say that the Qiaodan company did, since Jordan was famous before the company was even founded," said Tao Xinliang, president of the Intellectual Property Institute at Shanghai University.

The craze for grabbing trademarks is of course not confined to China: The recent hoopla over New York Knicks point guard Jeremy Lin touched off a rush in the U.S. to trademark the "Linsanity" catchphrase C including a trademark application on Lin's behalf.

But Chinese businesses seem to be taking an especially proactive approach. A maker of basketballs, volleyballs and soccer balls in the east Chinese city of Wuxi registered the "Jeremy S.H.L." trademark C for Lin's Chinese name Lin Shu-hao C back in July 2010.

Under China's trademark system, legal experts say, squatters find it easy to claim trademarks they have no intention of using, and then demand that would-be users pay up.

"Abusive registrations" under China's trademark system abound," said Mark Cohen, a visiting professor at Fordham Law School. "In China today there is everything from Apad to Zpad registered or under consideration C from companies that may not make products that compete with the iPad or make products at all," he said in an emailed commentary.

The problem, said Huang Wushuang, a professor at the Intellectual Property Institute of the East China University of Political Science and Law, in Shanghai, is not with the laws.

"The laws are sound, but some people in China just like to be free riders," Huang said.

Hence such products as the iPhone gas cookers recently found in Wuhan, a city in central China, complete with the iPhone name and famous apple symbol, but none of the device's myriad functions. Or the many fake Apple retail outlets found in many cities.

Some unlikely sounding iproducts are apps, like the social media "hot potato" game called iPotato.

In contrast, Proview registered its ipad trademark for its own "Internet Personal Access Device," part of its "iFamily" range of products launched around 2000, long before Apple came up with its popular tablet computer.

With the iPad 3's launch looming, many in China are expecting Apple to settle with Proview, as it has in past trademark scrapes. "It will be costly if Apple loses, and not being able to sell the iPad under that name here in China, such a big growing market, would hurt the company's image," said Tao.

A ruling against Apple in Guangdong could also oblige the company to only add its famous logo to the machines after they are exported from China, said Huang.

Many in China believe Apple will settle with Proview to avoid disruptions in its marketing and supply chain. Proview has repeatedly announced its willingness to settle. It appears desperate as Taiwan's Fubon Insurance Co., one of the company's major creditors, has moved to have the ailing computer monitor maker liquidated.

Others say Apple may feel giving in to Proview would set a dangerous precedent given the size of the Chinese market and its importance. Apple has limited its comments on the Proview dispute to a terse, two-sentence statement.

"They have to try to draw the line somewhere. What's the next guy going to do?" said McGregor. "If you're a big company like Apple ... it's like the U.S. not giving in to terrorism; they may not give in to frivolous lawsuits because then you just invite other people to do the same."

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Chilean president meets Chinese senior lawmaker

SANTIAGO - Chilean President Sebastian Pinera on Monday met with senior Chinese lawmaker Wang Zhaoguo to discuss ways to deepen bilateral cooperation.

During the meeting, Pinera extended a warm welcome to Wang Zhaoguo, who is leading a delegation of the National People's Congress delegation (NPC), China's top legislature, to Chile for a three-day official visit starting from last Saturday. He believed that the visit would deepen the existing profound friendship between the two countries.

Pinera said the Chilean government regards its relations with China with a strategic perspective and attaches great importance to developing bilateral ties that have been forged for 42 years.

The Chilean president highlighted the success achieved by the two countries in bilateral economic and trade cooperation ever since the signing of the free trade agreement in 2005, adding that Chile is willing to work with China to expand the cooperation in science and technology, new energy and agriculture, to benefit the peoples of both sides with news opportunities.

For his part, Wang, vice chairman of the NPC standing committee, congratulated Pinera on the important achievements made by the Chilean government and its people under his leadership.

Wang said relations between Chile and China have witnessed rapid development since the establishment of diplomatic ties, especially since the forging of the China-Chile comprehensive cooperative partnership in 2004, and China has always attached importance to developing relations with Chile from a strategic perspective.

Wang appreciates Chile's adherence to the one-China policy, adding that China is ready to work with Chile to promote pragmatic cooperation in various fields based on the important consensus reached by President Hu Jintao and Pinera in 2010.

China and Chile are both important developing countries, he said. As the international situation is undergoing profound and complex changes, consolidating and developing the friendly ties is not only in line with the fundamental interests of the two countries and peoples, but also conducive to common development while safeguarding the common interests of the vast number of developing countries.

Chile is the first leg of Wang's visit which will also take him to Brazil and Trinidad and Tobago, at the invitations of the National Congress of Chile, the National Congress of Brazil and the Parliament of Trinidad and Tobago.

Japanese Lawyer's Indictment Against Chinese Captain "Unlawful"

China on Thursday rejected a Japanese lawyer's indictment, based on a judicial panel's decision, against a Chinese captain involved in a collision with two Japanese patrol boats in the East China Sea in 2010.

"I would like to reiterate that the Diaoyu Islands and adjacent islets have been inherent parts of the Chinese territory since ancient times, on which China owns indisputable sovereignty," Foreign Ministry spokesman Liu Weimin said at a routine press briefing.

The Japanese side is not entitled to carry out any "official business" in the waters surrounding the Diaoyu Islands, he said.

"And any form of so-called judiciary procedures taken by the Japanese side against Chinese citizens is unlawful and invalid," said Liu.

A judicial panel of Japan's Naha District has voted for the mandatory indictment of Zhan Qixiong, the 42-year-old Chinese skipper who, along with his crew and boat, was seized by Japan after the collision and returned after repeated Chinese representations.

"Japan's actions during the event have caused severe damage to Sino-Japanese ties," Liu said, urging the Japanese side to act in a way that is conducive to strengthening relations between the two countries.

Lehman, Lee & Xu is a top-tier Chinese law firm specializing in corporate, commercial and intellectual property matters. For further information on any issue discussed in this edition of China Law Digest , or for all other enquiries, please e-mail us at or visit our website at

© Lehman, Lee & Xu 2012.
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