China Legal Frameworks

In order to create favorable investment environment and to encourage overseas firms to invest in China, since the year of 1979 the Chinese government has gradually set up a relatively complete legal system, and constituted a foreign investment policy system, which mainly includes industrial policies, regional policies, regional policies, tax policies and financial polices. 1.Legal Frameworks The main laws and regulations for foreign investments in China include:

1.1Major foreign investment laws and regulations
The law of P.R.C on Chinese-Foreign Equity Joint Ventures and its implementation regulations;
b)The law of P.R.C on Chinese-Foreign Contractual Joint Ventures and its implementation regulations;
c)The law of P.R.C on Wholly Foreign-Owned Enterprise and its implementation regulations;
d)The law of P.R.C on Foreign-invested enterprises, the income tax and its implementation regulations;
e)Provisions on Guiding Foreign Investment Direction; Industrial Catalogue Foreign Investment; Catalogue of Advantageous Sectors for Foreign Investment in Central and Western Regions;
f)The law of P.R.C on the Protection Taiwan Compatriots Investment. (Notes: the related laws and regulations also apply to the investments from Hong Kong, Macao and Taiwan in China mainland.)
1.2General Laws and Regulations
The Company Law of the P.R.C;
b)The Contract of the P.R.C;
c)The Insurance Law of the P.R.C;
d)The Arbitration Law of the P.R.C;
e)The Labor Law of the P.R.C;
f)Provisional Regulations of the P.R.C on Value-Added Tax;
g)Provisional Regulations of the P.R.C on Consumption Tax;
h)Provisional Regulations of the P.R.C on Business Tax;
1.3International Treaties
Bilateral Investment Treaties
(2) Bilateral Agreement on the Avoidance of Double Taxation

 

Forms of Foreign Investment

Chinese-Foreign Equity Joint Ventures, China-Foreign Contractual Joint Ventures, Wholly Foreign-Owned Enterprise are the three main forms of Foreign Direct Investment in china for absorbing foreign capital. Other investment terms include Share Company with Foreign Investment, Foreign Invested Holding Company, Joint Exploitation, BOT, etc. 2.1 Chinese-Foreign Equity Joint Ventures Chinese-Foreign Equity Joint Ventures anew also called as Share Company with Foreign Investment. They are enterprises jointly established within Chinese territory companies, enterprises, and other economic entities on the other side. An equity joint venture shall be invested and operated jointly by both foreign and Chinese investors, who shall share the profits and losses, as well as risks, in proportion to their respective shares in the registered capital. Chinese-Foreign Equity Joint Ventures are Limited Liability Company, and possess the status of Chinese legal person.

In such an enterprise, the proportion of the investment contributed by the foreign party shall in general not be less than 25% of the total. The partner could offer cash, or other kinds of things instead such as building, workshop, machinery, industrial property right, special technique, and field utilization right The profits and other legal interests that foreign investors have shared can be remit out or reinvest China. 2.2 Chinese-Foreign Contractual Joint Ventures Chinese-Foreign Contractual Joint Ventures are enterprises jointly established within Chinese territories by foreign companies, enterprises, other economic entities of individuals and Chinese companies, enterprises or other economic entities, according to their cooperative conditions. The both parties to a contractual joint venture should prescribe in the contract their respective conditions, lights, obligations, incomes distribution, responsibilities for risks and debts, the company management and negotiations on the property transaction at the expiration.

 

When establishing China-Foreign Contractual Joint Ventures, the foreign party provides land, factory buildings, certain usable machines and facilities, and in some cases a certain amount of capital as well. Chinese-Foreign Contractual Joint Ventures may posses the status of conventional person or not. 2.3 Wholly Foreign-Owned Enterprise Wholly Foreign-Owned Enterprise is invested entirely by foreign companies, enterprises, other economic entities or individuals within Chinese territory in accordance with the related Chinese laws. Wholly Foreign-Owned Enterprise usually takes the form of limited liability companies, and do not include the Chinese Branch of foreign company or other economic organization. 2.4 Share Company With Foreign Investment Share Company with Foreign Investment are stock limited companies set within China's territory by foreign companies, enterprises, or other economic organizations with Chinese companies, enterprise or other economic organizations, which is established according to the principle of stock.

 

All principal of Share Company with Foreign Investment is made up of equal amounts of stocks, every stockholder would take certain responsibility for company in accordance with his amount of stocks, and the company is responsible for debts with all estate. It is a form of foreign-invested company, which fits with relative regulations of national laws and statutes on foreign investment company.
2.5 Foreign Invested Holding Company Foreign Invested Holding Companies are Chinese-Foreign Equity Joint Ventures or Wholly Foreign-Owned Enterprise within Chinese territory that deals with direct investment usually in the form of limited liability companies. Foreign investor, who applies to establish an Foreign Invested Holding Company must possess great assets and good reputation, establish a certain mount of companies within China, and own over $30 million of actual-paid part of registration principal. Upon the approval of the Chinese government, Foreign Invested Holding Company could enjoy a broader field of managing than other ordinary companies, in an attempt to encourage big overseas companies to carry out their series of investment plans.

At present foreign invested Holding Company can invest in the fields of industry, agriculture, infrastructure and energy that the county encourages and permits. 2.6Joint Exploitation Join Exploitation refers to Chinese company and foreign company sign venture contract to carry out a joint exploration on inland and offshore petroleum, and mineral resources. It is a widely used from of economic cooperation in the field of natural resources exploration throughout the world. The main features of the joint exploration are high risks, high input, and high return. Joint exploitation is usually carried out in three phases: exploration development and production.

 

Tips for you to do safe and smooth business in China....

Doing business in China is profitable but also a challenge for some businessmen worldwide as there are too much trouble involved without enough Due Diligence work. 90% of the Chinese suppliers require 30% deposit before production and 70% of rest balance before delivery in China. Also sometimes the supplier use high-quality samples to attract the order but use worse materials for bulk production, we have witnessed countless trade disputes every year in China and sometimes it is quite risky for a foreign enterprise to purchase directly from a Chinese supplier. Here are the right steps for you to do safe and smooth business in China: 

 

First, if you have not found any reliable suppliers, then you’d better book an On-site Professional Sourcing service from a third-party local service company like:

http://www.chinabizservices.com/service/Suppliers/On_Site_Sourcing_Service/

Sometimes only local experts can find out the truth for you in China. 

 

Second, if you have sourced some suppliers by yourself, before you pay any deposit, you'd better book a third-party Basic Verification or Factory Inspection service like below to fully check out your suppliers.

http://www.chinabizservices.com/service/Verification_and_Investigation/Basic_Verif/ 

Or 

http://www.chinabizservices.com/service/Verification_and_Investigation/Factory_Ins/

The purpose of any verification service is to discover their real registered information and export qualifications etc in order to avoid future trouble. 

Third, if your order is very big, sign a formal Purchase Contract with them before paying the deposit. A formal Purchase Contract both in Chinese and English is very important as China is NOT an English speaking country, local courts only regard Chinese version of contracts as the official ones. 

Fourth, if your order is very big, book a third-party During-production or Pre-shipment QC Inspection service like below before paying them the rest balance.

http://www.chinabizservices.com/service/Management/Pre_shipment_QC_Inspection_Serv/ 

Fifth, book a third-party Loading Process Supervision service to protect your interests after you pay them the rest balance in China.

http://www.chinabizservices.com/service/Management/Loading_Process_Supervision_Ser/ 

Sixth, try to use your own 'shipping forwarder' like STIN in China ( STIN can contact a shipping agent, arrange shipment and clear the customs for you for FREE if you use STIN 'purchasing agent' service in China, by this way you will control everything at your end.)

 

Of course if you need a ONE-STOP business solution service from China, you can simply book a third-party ‘purchasing agent’ service, then they shall act as your own buying office and all above services can be covered in this service. 

http://www.chinabizservices.com/service/Purchasing_Agent_Service/ 

A qualified professional purchasing agent service may help you smooth every step in following aspects in China in person: 

Sourcing new suppliers or factories; 

Sampling; 

Supplier verification and auditing; 

Management of suppliers; Price negotiation; 

Delivery support (Logistics); 

Formal contract documentation support; 

Quality Control management; 

Loading process supervision; 

After-sale Service support; 

Other services may be available upon request. 

A good purchasing agent service is different from a trade company and they can benefit you much more from following two points: 

1. A trade company will protect their own interests at any time during the business in China. They will not allow the clients to buy directly from their verified factories. They will 'buy' from the factories and add their own profit, then 'resell' the products to the clients worldwide, the profit of trade companies is normally 10-50% against invoice value in China, varied in different products. While a purchasing agent service, take STIN (www.chinabizservices.com) for example, will simply act as their own 'assistants, office and eyes 'etc in China, STIN service will protect the customers' interests from the beginning to the end during any business activities in China. All the service charges are fixed and transparent and the commission for STIN service is only around 5%. They only charge a small amount of service fee order by order or case by case, apparently the customer can profit more as they can buy directly from any qualified factory sourced and verified by STIN in China. The client is free to contact the factories for any question related. 

2. Trade companies normally do not have their own team of quality control inspectors, factory auditors and lawyers etc. STIN has a team of professional quality control inspectors, auditors, buyers and lawyers etc in China and apparently STIN can offer better ONE-STOP business solution services for their clients worldwide.

How to carry out a professional sourcing service in China?

 What is a Professional Sourcing service?
Professional Sourcing refers to the sourcing service carried out in a very professional way. Some buyers only search online or simply attend a general commodity trade fair, which is regarded NOT professional enough sometimes.

How to conduct a Professional Sourcing service?

First of all, Professional Sourcing means product proficiency; you have to be very proficient with the product itself, covering the product name, specifications, descriptions, application and market price etc. You have to try to be an expert in this field.

Second, Professional Sourcing indicates the proficiency of related manufacturing bases. In China, almost every city or province has their own pillar industries, esp for some special items, say, ceramics, chemicals, fireworks etc.

Actually Canton Fair is not the best place for you to meet and find out some qualified suppliers in China. There are 90% of them are trade companies, individuals or even scammers.

The best place for you to meet and find out some qualified suppliers is the manufacturing bases. For example, if you're looking for 'fireworks', you have to go to Liuyang city, which is called 'home of fireworks', where there are 400000 people directly or indirectly engaging in this business in China. 'Liuyang -- made' fireworks account for more than 60% global market at present. This is the same to other products; almost every product has their unique manufacturing bases in China. This is why there are more and more clients booking our 'professional sourcing' service in China.

This is the same situation to other products, say, Zhuji for socks, Yiwu for general commodities, Xintang for jeans, Wenzhou for ties and shoes, Anji for bamboo products, Liling for ceramics etc, Yongkang for hardwares, Shenzhen for electronics, Guangzhou for clothes, Xuchang for hair products, Changzhou for floorings etc. Of course some products may have more than two or three manufacturing bases as China is too big. For example, in North China people to go to Tianjin to buy steel banquet chairs while in South China, Shunde is the largest manufacturing base for those items. 

Third, Professional Sourcing means that you have to attend professional trade fair instead of the general trade fairs. Say, if you’re buying furniture you can have a try on Furniture China (www.furniture-china.cn), and this is the same for other product sourcing,

Door industry -- www.door-expo.com, Lock industry -- www.lock-china.net and Tube industry -- www.tubechina.net etc. More professional fair information, please have a look at: http://www.chinabizservices.com/news/2013/0701/41.html

Lastly, Professional Sourcing needs professional verification skills, you have to be able to check out their export or import qualifications and obtain their full registered information in order to avoid future business scams in China. Some professional sourcing service company like STIN offers FREE basic verification service on their suppliers after the client books their sourcing service in China.

Why do you need a professional sourcing service in China?

STIN sourcing service is becoming more and more popular among our clients worldwide due to following reasons:
First we can save you lot of time, cost and energy etc in China.
Second we are able to find out the truth and check out any of your suppliers with local officials in person.
Third we are local experts and we are very familiar with the industry clusters or manufacturing bases all over China.
STIN professional sourcing service is one of the best in China:www.chinabizservices.com

 

Chinabizservices: Tips for you to verify your Chinese suppliers onli...

Chinabizservices: Tips for you to verify your Chinese suppliers onli...: We have checked out hundredss of Chinese companies for clients worldwide this year. Some of the companies, even the Gold members of Alibaba ...

Tips for you to verify your Chinese suppliers online...

We have checked out hundredss of Chinese companies for clients worldwide this year. Some of the companies, even the Gold members of Alibaba turned out to be a business scammer in China. Your business cannot legally protected by Chinese government authorities if you're dealing with illegal Chinese companies. Hence, it's very important to verify your business partner as there are more and more business frauds coming forth in China. Here are my tips for you to verify a Chinese company:

Generally speaking, there are some links online for you to check out companies in China:
www.yp.net.cn
www.chinaeall.com
www.cnaic.org.cn
www.114win.com
etc
However, there is no English version of above services so far in China, you have to know a little Chinese to check it all by yourself. Also some of the companies did not register themselves with above yellow pages. So yellow page is not the key way to judge a business scammer in China! The best way to check out a supplier in China is to visit them in person or check them out with local government authorities in China or you can book a Basic Verification or Supplier Inspection service from a third-party service company like STIN: www.chinabizservices.com

If you don't know Chinese, still you can pre-verify your business partners from following aspects:

1. Contact information
Please note that whether their contact information is right or not, most of the scammers don't offer a right address, tel and fax number online. Some of the tel numbers are empty and some add and tel don't exist at all, they don't offer a company tel number, a private number or mobile phone number instead.

2. Registered corporate number
Every legal company in China has to register itself with Chinese government authortities and obtain an unique company number. If your business partner cannot offer you a unique registered corporate number, definitely he is a scammer, of course, he may submit you a fake number, so you have to check it out with local administrative government organs with the number he offered. There is a Chinese organ called Bureau of Industry & Commerce ( have branches at all levels ), which is the only government organ responsible for the registration of legitimate companies or enterprises in China. For example, for any legitimate companies from Changsha or Hunan province, you can contact the local administrative organ for confirmation: http://www.csaic.gov.cn/ Tel: 86-731-2891606 or http://www.hunancom.gov.cn/ Tel: 86-731-2287058 , the problem is you have to report your case in Chinese sometimes because most of the local officials do not know too much English in China.

3. Incredibly low prices, esp for international brands
Most of Chinese scammers usually entice foreigners with a very low price. If the prices they offered is too low to believe, you may have a further investigationon your partner to know why their prices are so low. Most of the scammers in China profit a lot by selling  or fakes of some branded goods to the overseas market, this is very risky because the goods shall be confiscated or detained by Chinese customs houses in case it considered illegal in China. By the way, please remember that the price for authentic /original brands like Sony, Apple, Nokia, Dell etc should be almost the same at anywhere on the globe. You cannot import from the unthorized brands distributors with cheaper price in China. They must be selling relicas,  ones or copies of brands etc ! Please simply forget such suppliers in China !

4. Payment and shipment terms
The scammers never accept L/C as their payment terms, they prefer Western Union, Paypal and T/T etc. Also they never deliver goods through formal channels in China, they prefer to deliver samples by Express like Fedex, TNT, EMS to avoid more examinations from Chinese customs house. Most of the scammers use Private Bank Accounts in China!

5. Warranty and after sale services
Scammers never take some measures to guarantee their quality and after-sale services after your payment, they may promise you a lot before payment. It's lip-services only!!!

Be careful with some of the Chinese suppliers!
By the way, I have to mention that, it does not mean the manufacturer has the right to sell or buy in case he has obtained a legitimate unique company number from local BIC in China. In China, all the enterprises with the right to import and export has to apply and obtain a certificate called Certificate of Import & Export from Ministry of Commerce of PRC and its authorized local organs in China after their registration at local BIC. Also a formal trade company has to register with Chinese Customs House and its branches before his formal business with foreign counterparts in China. Then he has to register himself with local Bureau of Inspection & Quarantine in case his products are in need of quality control. Without the registration from above local government authorities from China, no company can deal with you in formal channels in China. STIN verification or auditing service (www.bizinchina.cc or www.chinabizservices.com ) can help you out if you know nothing about Chinese!

Chinabizservices: Why do you need a purchasing agent in China?

Chinabizservices: Why do you need a purchasing agent in China?: It is not easy for a foreigner to work directly with a qualified factory in China due to the language culture and MOQ barriers etc sometimes...