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Commercial Awareness Update - June 2019
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<blockquote data-quote="Angel" data-source="post: 11643" data-attributes="member: 980"><p><strong><u>London-Shanghai Stock Connect ([USER=1]@Jaysen[/USER])</u></strong></p><p></p><p><strong>The story</strong></p><p></p><p>After four years of preparations, the Shanghai-London Stock Connect launched on Monday.</p><p></p><p>Foreign companies can now list in mainland China for the first time.</p><p></p><p>The programme allows Chinese companies to raise money via the London Stock Exchange, while companies listed in Britain can sell existing shares to Chinese investors*.</p><p></p><p><strong>Impact on businesses and law firms</strong></p><p></p><p>The London-Shanghai Stock Connect is a message from Britain that London will not lose its place as a leading financial centre post-Brexit.</p><p></p><p>It’s also a message from China that its markets will continue to open up despite its trade war with the US and slowing economic growth. The country has sought to demonstrate this commitment by increasing investor protections and opening up more sectors for investment.</p><p></p><p>It’s not easy for law firms to break into China. There are cultural differences, strict government regulations and pressures on fees. It’s also <em>very </em>competitive; there were 174 international law firms in China in 2012. Guess how many Chinese law firms were registered in China in 2012? 19,361.</p><p></p><p>But a presence in China benefits a firm's brand and prestige. It sends a signal to the market that they are <em>truly</em>a global law firm. The move also attracts foreign clients looking to invest in China; they’ll need a law firm to walk them through the process, negotiate with Chinese counsel, comply with tough regulatory restrictions and protect their intellectual property.</p><p></p><p>There’s also promise for the foreign law firms that are able to form relationships with Chinese companies early. Over the coming decades, China’s outbound investment will rise as it moves away from an economy driven by cheap manufacturing towards technology and innovation. Foreign law firms have a competitive advantage here. They are global and they understand how deals are done in Western markets. They know deal structures and how to negotiate M&A documents. That’s attractive to Chinese businesses that want to go global.</p><p></p><p>*This is through trading depositary receipts, which represent shares in a company. You can read more about how this works here: <a href="https://www.thecorporatelawacademy.com/london-shanghai-stock-connect-a-turning-point-or-a-bridge-to-nowhere-a-guide-to-chinas-financial-markets/" target="_blank">https://www.thecorporatelawacademy.com/london-shanghai-stock-connect-a-turning-point-or-a-bridge-to-nowhere-a-guide-to-chinas-financial-markets/</a></p><p>________________________________________________________________________________________________________________________________________________________________</p><p></p><p><strong><u>Hong Kong’s Protest ([USER=980]@Angel[/USER])</u></strong></p><p></p><p><strong>The Story</strong></p><p></p><p>Last week, Hong Kong were swarmed by one of the largest demonstrations the country has ever experienced. The chief purpose of the protest is to demand the HK government to withdraw a controversial extradition bill that allows criminal suspects to be extradited to mainland China, Taiwan or Macau. This puts Hong Kong residents at the risk of being entrapped in China’s legal system. This is a concern because, to say the least, China is a country whose commitments to human rights are <em>not</em>exactly transparent or globally popular.</p><p></p><p><strong>Impact on businesses and law firms</strong></p><p></p><p>Protests (especially one as significant as this) can be classed as a form of geopolitical risk to businesses and investors. It is the risk that the calculated returns of an investment may be affected by some unforeseen instability or political changes in the country invested.</p><p></p><p>The commercial consequences of the protests included the instant plummeting of share prices on the Hang Seng Index, the need for businesses to close stores temporarily while the demonstrations took place, and the fact that workers from all industries were encouraged by trade unions to miss work. Taken together, these consequences can add up to gravely retard the country’s economy- which further exacerbates the tension between the protestors and the government. This is a threat to HK’s reputation as an international financial hub because investors will refrain themselves from getting involved with the country’s business affairs until they are confident that matters are sufficiently stable and predictable.</p><p></p><p>At the time of writing, the protests did convey sufficient pressure on the government to decide suspending the controversial bill. Such news immediately lifted commercial confidence, and the HSI rose. However, the matter is likely to be far from being settled. What the HK citizens want is not just for the bill to be suspended, but to abolished completely. Perhaps, the only certain thing for now is that commercial lawyers will be busy analysing possible legal measures to protect their clients’ businesses.</p></blockquote><p></p>
[QUOTE="Angel, post: 11643, member: 980"] [B][U]London-Shanghai Stock Connect ([USER=1]@Jaysen[/USER])[/U][/B] [B]The story[/B] After four years of preparations, the Shanghai-London Stock Connect launched on Monday. Foreign companies can now list in mainland China for the first time. The programme allows Chinese companies to raise money via the London Stock Exchange, while companies listed in Britain can sell existing shares to Chinese investors*. [B]Impact on businesses and law firms[/B] The London-Shanghai Stock Connect is a message from Britain that London will not lose its place as a leading financial centre post-Brexit. It’s also a message from China that its markets will continue to open up despite its trade war with the US and slowing economic growth. The country has sought to demonstrate this commitment by increasing investor protections and opening up more sectors for investment. It’s not easy for law firms to break into China. There are cultural differences, strict government regulations and pressures on fees. It’s also [I]very [/I]competitive; there were 174 international law firms in China in 2012. Guess how many Chinese law firms were registered in China in 2012? 19,361. But a presence in China benefits a firm's brand and prestige. It sends a signal to the market that they are [I]truly[/I]a global law firm. The move also attracts foreign clients looking to invest in China; they’ll need a law firm to walk them through the process, negotiate with Chinese counsel, comply with tough regulatory restrictions and protect their intellectual property. There’s also promise for the foreign law firms that are able to form relationships with Chinese companies early. Over the coming decades, China’s outbound investment will rise as it moves away from an economy driven by cheap manufacturing towards technology and innovation. Foreign law firms have a competitive advantage here. They are global and they understand how deals are done in Western markets. They know deal structures and how to negotiate M&A documents. That’s attractive to Chinese businesses that want to go global. *This is through trading depositary receipts, which represent shares in a company. You can read more about how this works here: [URL]https://www.thecorporatelawacademy.com/london-shanghai-stock-connect-a-turning-point-or-a-bridge-to-nowhere-a-guide-to-chinas-financial-markets/[/URL] ________________________________________________________________________________________________________________________________________________________________ [B][U]Hong Kong’s Protest ([USER=980]@Angel[/USER])[/U][/B] [B]The Story[/B] Last week, Hong Kong were swarmed by one of the largest demonstrations the country has ever experienced. The chief purpose of the protest is to demand the HK government to withdraw a controversial extradition bill that allows criminal suspects to be extradited to mainland China, Taiwan or Macau. This puts Hong Kong residents at the risk of being entrapped in China’s legal system. This is a concern because, to say the least, China is a country whose commitments to human rights are [I]not[/I]exactly transparent or globally popular. [B]Impact on businesses and law firms[/B] Protests (especially one as significant as this) can be classed as a form of geopolitical risk to businesses and investors. It is the risk that the calculated returns of an investment may be affected by some unforeseen instability or political changes in the country invested. The commercial consequences of the protests included the instant plummeting of share prices on the Hang Seng Index, the need for businesses to close stores temporarily while the demonstrations took place, and the fact that workers from all industries were encouraged by trade unions to miss work. Taken together, these consequences can add up to gravely retard the country’s economy- which further exacerbates the tension between the protestors and the government. This is a threat to HK’s reputation as an international financial hub because investors will refrain themselves from getting involved with the country’s business affairs until they are confident that matters are sufficiently stable and predictable. At the time of writing, the protests did convey sufficient pressure on the government to decide suspending the controversial bill. Such news immediately lifted commercial confidence, and the HSI rose. However, the matter is likely to be far from being settled. What the HK citizens want is not just for the bill to be suspended, but to abolished completely. Perhaps, the only certain thing for now is that commercial lawyers will be busy analysing possible legal measures to protect their clients’ businesses. [/QUOTE]
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