China: Chance Bridge Partners

The development of the legal system seems to be a frequent concern when it comes to investing in China.  I had a great opportunity to visit Chance Bridge, a leading Beijing law firm, to discuss legal issues surrounding investing in China.  The meeting was set up by Hari Nathan, a fellow New York University alum, and one of the newer attorneys at the firm.  I met with Hari and Ning Zhu, a managing partner and the leader of the firm’s capital markets team.  The firm has 40 employees, and it focuses on cross-border investing.

John Lunt with Ning Zhu and Hari Nathan

Hari and Ning gave me a great tutorial on structuring foreign business relationships in China, ranging from consulting arrangements to joint ventures.  As would be the case in any country, a local expert is critical when doing business in China.  I could clearly see the essential role of both the local legal experts and the local business partner.  While a contract may specify a certain course, everyone will defer to the government and to the “local” partner.   The discussion increased my comfort level for business in China—while what was written in a contract mattered less 10 years ago, now the contract will carry the day.  Investment in the large cities has become very international, and regulation is improving.  They stressed the great foreign investment protection that now exists in China, and that it is getting closer to international standards.

China’s financial markets are still developing, so the risks are certainly higher.  Some local companies do not have the internal controls that we are accustomed to in the U.S.  For many investment firms, the risks are compensated by the huge opportunity to enter the vast Chinese market.

Ning highlighted that Westerners cannot look at China through a U.S./European lens or they will be disappointed.  China is different, and Chinese people think differently.

I came away with a far better understanding of the Chinese legal system, but also an increased comfort that legal protections are improving as China continues to develop its financial markets.

John Lunt and Hari Nathan

Hari not only provided great legal insights about China, but he took me to a remarkable Chinese “hot pot” restaurant.  I can’t imagine what I would have eaten without Hari’s deft navigation of the Chinese menu!  Thanks Hari!

The link below highlights the Lunt Capital visit on the Chance Bridge website.

http://english.chancebridge.com/index.php?m=content&c=index&a=show&catid=61&id=165

 

Special thanks to Brennan Staheli, Devin Lindley, and the Lunt Capital team for their contributions to this report.