The Seattle Times Company

NWjobs | NWautos | NWhomes | NWsource | Free Classifieds |

Business / Technology

Our network sites | Advanced

Originally published August 30, 2010 at 5:48 PM | Page modified August 31, 2010 at 2:08 PM

Comments (0)     E-mail E-mail article      Print Print      Share Share

Chinese lawyer talks trade, investment in Washington state

Before he opened the first private law firm in China 18 years ago, Q.H. Charles Duan came to study in Seattle, where he graduated from the University of Washington Law School and became the first foreign-law consultant admitted by the Washington State Supreme Court.

Seattle Times business reporter

Before he opened the first private law firm in China 18 years ago, Q.H. Charles Duan came to study in Seattle, where he graduated from the University of Washington Law School and became the first foreign-law consultant admitted by the Washington State Supreme Court.

As managing partner at Duan & Duan in Shanghai, he has represented foreign and Chinese companies in some of the most high-profile cases of the past 15 years, including Microsoft and 3M fighting intellectual-property piracy; China National Offshore Oil Corp. (CNOOC), the Chinese company that tried unsuccessfully to purchase Unocal; and Rio Tinto, the Australian company whose employees were arrested in China and accused of stealing state secrets.

Duan, who is also a delegate to the People's Political Consultative Conference, a government advisory body, said he has been calling for more support for private companies in China, along with higher salaries and lower taxes to put more money into consumers' pockets and to stimulate demand.

In a visit to Seattle last week, Duan spoke to the Trade Development Alliance and discussed trade and Chinese investment in Washington state in an interview. Below is an edited version of the interview.

Q: China recently surpassed Japan as the world's second-largest economy. What is this new economic power doing for its political ambitions?

A: The U.S. has regarded China as a global nation, particularly in the last two years. Lots of people talk about the G-2 [the U.S. and China] instead of G-20. From a U.S. perspective, China plays a role and sometimes even a dominant role in international economy, security and reconstruction.

China's population is 10 times Japan's. China's per capita [gross domestic product] is still only one-tenth of Japan. U.S. GDP accounts for $14.8 trillion. China's GDP was $4.9 trillion. It may still have a long way to go to catch up with U.S. ...

Some people say 10 or 20 years. If you look at [currency] appreciation, that time can be shortened. If as some congressmen in U.S. [say], Chinese RMB [renminbi] should appreciate 20 percent, maybe in five years China can catch up to the U.S.

Our per-capita income is very low — only about $3,000, while in the U.S. people have $25,000.

China still wants to be one of the developing countries. ... China does not want to be more responsible for international obligations, because we're poor. That's the Chinese government view.

Q: China's current economic system has been described as "Sino-capitalism," in which business networks are more important than legal codes and the Chinese state controls money making.

A: State-owned companies control more than 70 percent of resources. Private enterprises and foreign companies or joint ventures only have about 30 percent. Chinese state-owned companies only employ about 40 million people. But the banks only lend money to big companies, not small companies. I may call it state-owned capitalism. In the U.S. capitalism is controlled by private owners.


I'm on the standing committee of the All-China Federation of Industry and Commerce. We have thousands of members of private companies in our organization. We need to have more policy, law and regulations to protect private companies, to support private companies, which employ more than 75 percent of Chinese workers. They are real power — they should get more resources.

Q: What are the lessons of the Rio Tinto case for foreign companies doing business in China?

A: The key issue in that case is what is state secrets? Even I do not know....

I actually recommended we revise the state secrets law. What is legal and lawful collection of economic data in China and what is spy activity? Even if I come today with my briefcase, could I be taking trade secrets in my computer past the border to the U.S.? In the law we need to have a very precise and clear-cut definition. If not, everybody, no matter foreigners or Chinese, could be trapped.

Q: Why isn't there more progress on intellectual-property protection?

A: There's lots of piracy in China. Not only piracy of foreign technology, but they also infringe on local technology. Now [there's] more and more demand for Chinese government to enforce the law. Selective enforcement of the law is the biggest problem in the legal system. In the U.S., you enforce the law equally for everybody. In China we have very good laws, but we only have selective enforcement.

If you offend officials, they just kill you easily by regulation. But if you have a good relationship with them, they don't enforce the law. If they enforce it 100 percent, lots of people can be sentenced to jail.

But a lot of times the local government said this company brings a lot of tax revenue for me, so I do not want to kill them because if I kill them, who gives me the tax?

Q: The U.S. seems to be in a jobless recovery and the trade deficit grew to $50 billion in June. It's clear that China is the target of retaliation efforts by Congress. What is China doing to rebalance trade?

A: We need to change the priorities and make the domestic consumer first and investment by state-owned companies second. The bill I submitted in March has four [suggestions]: the first is reduce tax to give more money back to enterprises and common people so we can increase domestic consumption. We need to develop new energy and clean energy. Mr. [Warren] Buffett doubled his investment in BYD Auto in China. For every electric car they sold in Chinese market, the Chinese government gives them 70,000 RMB subsidy. Basically, Mr. Buffett's profit comes from the Chinese government subsidy.

We need to protect IP and encourage more companies to invest in new technology. We want to free Chinese currency, so we push to make a plan to release all the restrictions on investment in capital items in three to five years. Then you will see like Japanese companies in the 1980s a wave of foreign investments from China.

And to encourage Chinese companies to come to the U.S. to make investments. I told Shanghai Automobile to open a factory in Chicago, where they bought a battery company.

Last year we had about $100 billion investments from all over the world to China, but China only had $3 or 4 billion go out. It's a much more severe situation than the trade deficit.

Thirty-three U.S. states and municipal governments have established a branch office in China. If Chinese companies make investments like Japanese companies did, it certainly will increase the employment rate here.

Kristi Heim: 206-464-2718 or

E-mail E-mail article      Print Print      Share Share

More Business & Technology

UPDATE - 09:46 AM
Exxon Mobil wins ruling in Alaska oil spill case

UPDATE - 09:32 AM
Bank stocks push indexes higher; oil prices dip

UPDATE - 08:04 AM
Ford CEO Mulally gets $56.5M in stock award

UPDATE - 07:54 AM
Underwater mortgages rise as home prices fall

NEW - 09:43 AM
Warner Bros. to offer movie rentals on Facebook

More Business & Technology headlines...

No comments have been posted to this article.

Get home delivery today!



AP Video

Entertainment | Top Video | World | Offbeat Video | Sci-Tech