Avoid Chinese Joint-Venture Partners in China

King Ahab Redivivus

Corruption is endemic in China.  A recent article in the Sydney Morning Herald provides a vivid reminder of how bad things are.  An Australian businessman, Matthew Ng has been sentenced to 13 years in a Guangzhou jail.  Clearly he must be a low-life of a pretty bad order.

Actually, no.  He appears a decent, upstanding husband, father, and businessman.  His real crime is that he and his company were commercially successful.
 

Ng was chief executive of a successful London-listed travel company called Et-China. He was detained in November last year after he and other shareholders had contracted to sell the company to a Swiss firm for about $US100 million.

It turns out Et-China had a local joint-venture partner,  Guangzhou Lingnan.  Whilst in jail, Ng was made an offer which apparently no-one thought he could refuse.  Accept a lower "give-away" price from Guangzhou Lingnan, or face years in jail, even (at the time) the death penalty.  Here is the kicker: "Guangzhou Lingnan is the largest company owned by the Guangzhou municipal government."

The local political bosses--who, of course, control the police and the law courts--effectively took Et-China out and stole it from Matthew Ng and his co-owners.  They must have wanted the whole $US100m for themselves. Funny, that.  

The blatant political subversion of the courts to rank injustice and theft was on display during the court case.

The Australian consul-general and Australian journalists were also absent, as authorities had told lawyers and the Australian government that yesterday's hearing were merely procedural.  ''It's particularly shocking because we were not even informed that there would be a verdict before hand,'' Ng's lawyer in court yesterday, Chen Yong, said. ''I don't want to comment on the Chinese judicial system.'' . . .

''It is very unfair, I don't think there is any human rights here,'' Ms Chow said. ''His defence case was not considered by the judge. She read everything from the prosecution case.'' Before Ng's detention, the company's chairman Zheng had been detained under the Communist Party's secretive and extrajudicial interrogation and isolation procedure known as shuanggui.

The company chief financial officer, Yang, was also detained under shuanggui. She was sentenced to 4½ years in jail, commuted to 3½.

The Guangzhou court was of the kangaroo kind; the trial was a trumped up, show trial.  Pillage was the objective.

Maybe Guangzhou is a rogue area, with unusually corrupt local government.  But, maybe not.

Observers close to the case also speculate on whether it demonstrates a growing loss of central authority over local governments and other official agencies.

 It used to be said that a critical key to conducting business successfully in China is to engage a local joint-venture partner.  It is becoming clear that this path is fraught with danger, if the business becomes a commercial success.  It only increases the likelihood that the business will become an object of envy and greed and will be stolen by judicial perversions.

King Ahab is alive and well in Guangzhou--and, one fears--throughout China.