Business in China

Chopped and screwed

Why corporate disputes in China often revolve around rubber stamps

 




Jun 20th 2020 | words 446

 

 

 

CHINA IS IN the vanguard of new technology, from facial recognition to 5G networks. Many Chinese firms, though, rely on something from an earlier age: a hard, usually rubber chop with a firms name engraved on it, to be dipped in crimson ink and stamped on important documents. Chopping is seen as more authoritative than a mere signature. The 2,000-year-old tradition may seem quaint. But in China, who controls the chop controls the company.

 

Consider three ongoing kerfuffles. On June 4th the board of Arm China, the Chinese joint venture of a chip designer owned by Japans SoftBank, voted to remove its boss, Allen Wu. Just one snag: Mr Wu refused to go. Because he still holds the chop, he has continued to act in Arm Chinas name, and threatened legal actions to defend his position. A week later Bitmain, which makes bitcoin-mining computers, announced that it had replaced its old chop with a new one. They looked virtually identicalBitmains Chinese name in a red circle around a starexcept for a new serial number. But it was enough to indicate that one of the feuding co-founders, Micree Zhan, now has the upper hand.

 

The oddest recent chop bust-up occurred in April. Li Guoqing, the ousted co-founder of Dangdang, a once-popular e-commerce platform, broke into its headquarters and, in a bid to retake the company, removed dozens of its official chops (besides the main chop, others are used for things like contracts and tax receipts). Dangdang declared the seized chops to be invalid. But on June 13th it was reported that the police had cleared Mr Li of wrongdoing, implying the chops are his for now.

 

Chops have figured in business fights elsewhere. In 2007 Russian police seized seals from Hermitage, an investment firm owned by Bill Browder, a deported financier, and used them to re-register its companies under others names. But in 2015 Russia eliminated the need for company seals. In Japan and South Korea, where chops are still used, tussles over them are rare.

 

In Chinas sharp-elbowed business world chop rows remain more commonand mostly unreported. Managers sometimes misuse seals to enter side contracts. Lawsuits to reclaim a chop can drag on, says Eric Carlson of Covington & Burling, a law firm, so many cases are resolved out of court. But, he notes, technology is catching up with tradition. China is starting to deploy electronic chops, which are easier to monitorand to strip from aggrieved wielders.

 

 

 








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Economist | Business And Rubber Stamps

 

 

Business in China

Chopped and screwed

Why corporate disputes in China often revolve around rubber stamps

 




Jun 20th 2020 | words 446

 

 

 

CHINA IS IN the vanguard of new technology, from facial recognition to 5G networks. Many Chinese firms, though, rely on something from an earlier age: a hard, usually rubber chop with a firms name engraved on it, to be dipped in crimson ink and stamped on important documents. Chopping is seen as more authoritative than a mere signature. The 2,000-year-old tradition may seem quaint. But in China, who controls the chop controls the company.

 

Consider three ongoing kerfuffles. On June 4th the board of Arm China, the Chinese joint venture of a chip designer owned by Japans SoftBank, voted to remove its boss, Allen Wu. Just one snag: Mr Wu refused to go. Because he still holds the chop, he has continued to act in Arm Chinas name, and threatened legal actions to defend his position. A week later Bitmain, which makes bitcoin-mining computers, announced that it had replaced its old chop with a new one. They looked virtually identicalBitmains Chinese name in a red circle around a starexcept for a new serial number. But it was enough to indicate that one of the feuding co-founders, Micree Zhan, now has the upper hand.

 

The oddest recent chop bust-up occurred in April. Li Guoqing, the ousted co-founder of Dangdang, a once-popular e-commerce platform, broke into its headquarters and, in a bid to retake the company, removed dozens of its official chops (besides the main chop, others are used for things like contracts and tax receipts). Dangdang declared the seized chops to be invalid. But on June 13th it was reported that the police had cleared Mr Li of wrongdoing, implying the chops are his for now.

 

Chops have figured in business fights elsewhere. In 2007 Russian police seized seals from Hermitage, an investment firm owned by Bill Browder, a deported financier, and used them to re-register its companies under others names. But in 2015 Russia eliminated the need for company seals. In Japan and South Korea, where chops are still used, tussles over them are rare.

 

In Chinas sharp-elbowed business world chop rows remain more commonand mostly unreported. Managers sometimes misuse seals to enter side contracts. Lawsuits to reclaim a chop can drag on, says Eric Carlson of Covington & Burling, a law firm, so many cases are resolved out of court. But, he notes, technology is catching up with tradition. China is starting to deploy electronic chops, which are easier to monitorand to strip from aggrieved wielders.

 

 

 








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