Chinese call for tighter supervision on foreign-invested companies after ROK-invested toy maker folds (2)

15:44, July 26, 2011      

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To fix the situation, China's Ministries of Commerce, Foreign Affairs, Public Security and Justice jointly issued in December 2008 a guideline "to advance the international investigation and judicial action on foreign-invested companies illegally withdrawing." [ The guideline stipulates that if the Chinese plaintiff wins a lawsuit and the guilty foreign party has no assets in China, the wining party can apply to the foreign party's country to recognize and enforce the Chinese verdict.

By June 30, China has agreements with more than 70 countries and regions including ROK on the matter.

Under the 2011 Amendment to the Criminal Law, intentionally defaulting on workers' wages is a crime. If the company is foreign-funded, however, its representatives can only be detained when they are in China.

Cai Kang, an official with the Dongguan Foreign and Economic Cooperation Bureau, said that the city had previously established an early warning system against illegal withdrawal of foreign-funded companies. Special inspectors were designated to regularly monitor the operation of foreign-invested companies, especially signs of default on factory rent and wages and other abnormalities.

"The reason why we didn't detect Soyea was that our inspector posted in the local village was not seasoned enough. As the company was found defaulting only on factory rent, it was not listed on the bureau's warning list," said Cai.

Cai said the illegal pull-out of Soyea showed the loopholes in the bureau's daily monitoring, promising to improve the inspection indexes.

Sources with the Dongguan Police Department said they had started to search for Soyea's legal representative.


Primary investigations have showed that broken capital chains, ill management and recruitment difficulties led to Soyea running out of money, according to Cai.

Employee Zou Xiaoyuan recalled that some senior workers had felt "something was wrong" back in March. "They also heard some rumors as that the plant had massive debts," said Zou.

As Soyea's pull-out has come after a number of low-end manufacturers have folded amid the rising yuan, as well as climbing labor costs and soaring expenditures on raw materials and environmental protection -- many people have voiced their concern about the economy.

Nanfang Daily has published a lengthy feature, saying the difficulties the low-end companies face are as huge as those in late 2008 when the global financial crisis hit.

But Jiang Ling, Dongguan's deputy mayor, has stressed that enterprises in Dongguan are comparatively good overall.

Statistics from the Dongguan Foreign and Economic Cooperation Bureau show that in 2010, about 500 enterprises closed down in Dongguan and 266 in the first half of 2011.

A survey conducted by the bureau shows that the first half of the year had seen more than 800 overseas-funded enterprises registered in Dongguan, with an aggregate contract investment of 1.988 billion U.S dollars.

Cai said that seven companies had come to consult on renting Soyea's factory plants. "If we were in the doldrums, why have so many companies come to discuss investment?" said Cai. Enditem

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