Home -> Law Blog Directory -> International Law Blogs -> China Law Blog

International Law

: China Law Blog

The Legal Basics On Starting A China Business. Clinical Testing As Example.

By Dan Harris and Steve Dickinson

One of the many things I love about being a lawyer is learning about various industries. What so happens to lawyers is that we get one client in an industry, and then, through word of mouth, we end up getting a whole slew of others in the same industry. That has happened to us in spades with clinical testing, a global industry booming in China. I woke up this morning to an email between my firm's lead China lawyer, Steve Dickinson, and a potential client needing help in establishing its clinical testing business in China. The email does a great job laying out the basics of what clinical testing companies must do to establish themselves legally in China and to protect themselves legally from employee and IP issues. But nearly everything in this email applies with equal force to nearly all businesses, particularly service businesses, seeking to get off on the proper legal foot in China. This email sets out the essential big three for doing just about any business right in China: 1) Proper entity registration: 2) Proper HR/employee protections; and 3) Intellectual property protection. Here is the email, with a few changes to protect the recipient's identity:

As you know, the medical testing field has great promise in China. However, working with Chinese hospitals is extremely difficult. Frankly, India and Russia are even worse in this regard, so working in China makes a lot of sense. Based on our discussion, this is what you will need to start up in China: 1. Form a WFOE. The key is to pick the city. If you go with a second tier city, the cost will definitely be less than in a Shanghai or Beijing. You can always add branches if you set up offices in other cities later. 2. Employment agreements. The new labor contract law requires you deal with employment very carefully. For a company like yours, you will need the following: a. Basic employment agreement. b. Company rules and regulations. c. IP/Trade Secrecy agreement. d. Non-Compete agreement with key personnel (optional). For employers with a U.S. background, there is always a certain amount of shock at the detail and complexity of these agreements. HR is currently the number one issue for foreign investors in China. Starting with the contracts the right way is a key to future success. 3. Basic agreements for trials. a. Agreement with hospital. c. Three way agreement. If possible, it would be good for you to make these agreements "modular" so you can reuse the agreements with new hospitals.

For more on the business of clinical testing in China, check out our previous posts on the subject: -- China Medical Testing Gone Bad -- Novartis Into China -- Where Have You Been? -- China's Service Sector Will Reign, Part IX -- World's Best For Clinical Trials -- China Medical Testing Redux: P. Diddy Checks Back In Come One Come All: China As BioMedical Nirvana

Full post as published by China Law Blog on March 25, 2009 (boomark / email).