It’s interesting to read in today’s Wall Street Journal that China’s insurers legally may be able to invest in real estate soon – but they’re already doing it.

According to the Journal:

Compared with their counterparts in the West, Chinese insurers are relatively restricted in which assets they are allowed to invest in, and they have been lobbying for longer-term assets to match the big payouts they are expecting to make as China’s rapidly aging population retires. Jeanne Kang, a real-estate lawyer with Jones Day in Beijing, described the rule change as a victory for an insurance industry that has long pushed for more freedom to invest in the property market.

The insurance industry correctly recognized though, that in China, while lobbying may be a long-term strategy (and we noted how to do so here), finding today’s loopholes is the bread and butter of Chinese business.

The Journal continues:

Mei Jianping, a finance professor at the Cheung Kong Graduate School of Business in Beijing, said some insurers already have taken advantage of loopholes that allow them to buy properties they occupy, using 10% of the building and leasing out the rest.

That’s how it is in China.

Finding ways around the law often is more important than finding ways to abide by the law.

The article officer further insight into why this is the case:

[Ms. Kang] said how much [the new regulations help] the real-estate industry will depend on what she calls the “micro rules” — the notices, circulars, guidelines and administrative orders issued from China’s myriad ministries and government bodies.

Often in China, administrators or lower level authorities are what matter most to whether or not you can successfully set up shop or go after new business. The old Chinese saying, “The mountains are high and the emperor is far away” is no less certain in China business today. What Beijing proclaims as law is open to interpretation – or even refusal to comply – elsewhere.

What greases those administrators’ wheels often are corrupt practices.

James McGregor’s book, One Billion Customers: Lessons from the Front Lines of Doing Business in China, suggests: “China’s modernization is aiming at ‘rule by law’ not the ‘rule of law,’ so relationships and personal power reign supreme.’

He adds: “If you decide to sell your soul and succumb to China’s corruption, get a good price and focus on charity work in your old age.”

There’s still a lot to be said for following the law in China.

We’ve done a lot on correctly reading the tea leaves in China (here, here and here) in undertaking new business because what the government decrees does matter.

But we’ve also done a lot on ways to make headway in restricted industries, like media (here and here).

Perhaps the best advice with regard to the law in China is to try to follow it like you would in a developed Western country, but don’t be a slave to it. There’s a lot of law-subverting competition out there that’s quite willing to eat you alive.

    Channel: Local Wisdom     |