Acquisition International (‘AI’) names Horizons Shanghai Corporate Advisory the ‘Leading Cross-border Corporate Transactions Advisory of the Year.’
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Horizons Shanghai Corporate Advisory (‘Horizons’) is honoured to be recognised by AI for its expertise in serving clients in cross-border transactions. Particularly, the adoption of the Anti-Foreign Sanctions Law coupled with the ongoing border restrictions and the import and export logistical issues has significantly impacted cross-border transactions in China In the below, The Square (‘Square’) speaks with Dr Danny Luk, Horizons Corporate Advisory Senior Equity Partner (‘Danny’), Dr Roberto Gilardino, Horizons Corporate Advisory Regional Partner for Asia and Additional Countries (‘Roberto’), and Dr Lucia Myriam Gisa Netti, Horizons Corporate Advisory Regional Partner for EMEA, Russia and Belarus (‘Lucia’) on how Horizons is leading clients through the shifting developments in cross-border transactions, specifically for inbound investments in China.
Square: Today, China’s zero-tolerance approach to COVID-19 is viewed by many as China self-isolating from the international community. How has Horizons steered clients through the unprecedented times?
Danny: Continued entrance restrictions into China have prevented many from visiting, studying, and working in China. With no further indications as to when the restrictions will be eased from the Chinese government, we have worked with shareholders residing aboard. Mainly, in implementing a robust corporate governance via management mechanisms. As a result, subsidiaries are still governed by the headquarters even if senior management are not currently in China.
Square: From Horizons, what are the main important changes affecting FDI in China and how is Horizons aligning clients?
Danny: We are increasingly assisting consumer goods and high-tech companies to establish entities in China. Namely, the growth of technology and the middle-class market around China has generated a huge appetite for foreign companies to seize opportunities. Whilst many manufacturing plants in traditional sectors such as retail are moving operations to South Asian countries or Eastern Europe. Therefore, the foreign direct investments (‘FDI’) in China is rapidly evolving. Though China is no longer the low-cost labour and manufacturing country. Rather, FDI in China shall align with the 14th Five-Year Plan (2021- 2025) for National Economic and Social Development Through 2035 (published on March 12, 2021). At Horizons, we are advising foreign entities to implement a new playbook. One that correlates with national strategy and the domestic market.
Square: In 2021, China adopted several laws which emphasized national security and sovereignty – for example, the Anti-Foreign Sanctions Law of People’s Republic of China (‘AFSL’) in June 10, 2021. What is the impact of ASFL for clients?
Roberto: Since the promulgation of AFSL, Horizons was inundated with inquiries from both clients and non-clients. Primarily, US investors wanted to understand how the new law may affect their businesses. ASFL provisions the right to take corresponding countermeasures to any foreign country that imposes sanctions on China, Chinese organisations, entities, or individuals. China sets a legal basis to enforce penalties for companies and individuals implementing foreign sanctions on Chinese entities or individuals. Therefore, we have been involved in reviewing internal policies such as redrafting China-specific policies for global companies.
Square: AFSL follows from the China Export Law of the People’s Republic of China and the Rules on Counteracting Unjustified Extra-Territorial Application of Foreign Legislation and Other Measures effective from 1 December and 9 January 2021, respectively (‘Laws’). Therefore, how should companies prepare for the Laws?
Roberto: As a corporate advisory, our expertise is not only navigating clients through the complex legal framework, but also the cultural misinterpretations. This can often make or break a cross-border transaction. From the western perspective, many interpret the recent Laws as restricting FDI in China and business operations. However, China holds a more significant and influential role in the world today than 40 years ago. We that the Laws set a stronger stance on those who sanction Chinese companies and individuals based on their governing laws and ideologies. The Laws are not subjective attacks towards foreign entities, rather an objective legal basis to safeguard its entities and individuals.
Square: In addition to AFSL, the Data Security Law of the People’s Republic of China (‘DSL’) and the Personal Information Protection Law of the People’s Republic of China (‘PIPL’) came into effect on September 1, 2021, and November 1, 2021. What are the developments for companies operating in China?
Roberto: Data are important assets for companies and utilised in multiple ways – such as deciphering strategies, informing leaders, and innovating new products and services. The life of data is its mobility to flow from customer to business, business to business, business to government, and so forth. The Cybersecurity Law of the People’s Republic of China (‘CSL’), DSL, and PIPL define the guiding principles for cyber and data sovereignty, which are both national security-based and industry-based. As a result, we recommend foreign companies to evaluate and define the data generated and handled in China. Ultimately, implement China-specific cyber management.
Square: For 2022, what are your predictions for cyberspace and data legislation in China
Lucia: Since the CSL, DSL, and PIPL set forth the blueprint for cyberspace and data governance. Forthcoming related rules and regulations should be implemented in 2022. Specifically, main implementations should include important data categories defined by industry departments and security reviews for cross-border transfers. Indefinitely, data and cyber governance shall be a major priority for companies in China to implement. Foreign HQ should understand how to integrate the China-specific provisions with their global operations.
Horizons is leading cross-border transactions in China through the rapidly changing legal landscape. From the national development policies and new national security legislation, inbound investments need to nimbly navigate through the new developments. Equally, such legal frameworks shall affect FDI from the initial investment launch to its daily management and liquidation. The China market is more sophisticated, and many domestic companies are innovating their industry – specifically in technology. Hence Horizons is supporting FDI to formulate a new playbook.
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