Chińsko-Polski Desk

One team of Swiss and Chinese lawyers
Local - in China and Europe
Which industries are encouraged, restricted or prohibited for foreign investment in China?

Starting from January 30, 2012, the new Catalogue for the Guidance of Foreign Investment Industries has come into force. The Catalogue is the first document that any foreign investor going to China shall consult, because it provides the information on the accessibility of foreign investments to the different industries of China.

For foreign investments, Chinese industries are classified into four categories: (i) encouraged, (ii) restricted, (iii) prohibited and (iv) allowed. The Catalogue covers the encouraged, restricted and prohibited industries, whereas the industries not mentioned by the Catalogue are construed as being allowed and having no particular policies for foreign investment.

Generally speaking, the encouraged industries are mainly high-tech, environmental protection, new energy and those, which China is short of.

Some examples of the prohibited industries are construction and management of natural reserve and wetlands of international importance; development of state-protected wild animal and plant resources; news websites, online video and audio program service, internet café service, culture-related online business (except for music); construction and operation of golf course; and development and application of human stem cells and gene diagnosis therapy technology.

Besides the investment related regulations, for each industry, the specific regulations, detailed rules and administrative measures issued by the State and/or its competent administrative governmental agencies are important, since such legal documents are the basis for operation of such specific industry.

What are the forms of foreign direct investment in China?

Foreign direct investment in China may take three forms:

1. Foreign Invested Enterprise (“FIE”)

FIEs are divided into four categories: Sino-foreign equity joint ventures (“EJVs”), Sino-foreign co-operative joint ventures (“CJVs”), wholly foreign owned enterprises (“WFOEs”) and foreign invested companies limited by shares (“FICLBSs”).

2. Branch entities established in China by foreign enterprises (“Foreign Branch Entities”)

According to Company Law of PRC, foreign companies may set up branch entities to engage in business operations within the territory of China. In order to set up a branch, the foreign company has to file an application with the relevant authority for approval, register and obtain a business license for the branch. The branch does not enjoy the status of a legal person in China and the foreign company shall bear the liabilities of operational activities of its branch.

3. Representative Offices established by foreign enterprises (“ROs”)

ROs are established to engage in business liaison, product promotion, market research and other permitted activities in China.

Under Chinese law, ROs are not permitted to directly engage in operational activities. But in practices, some kinds of ROs, such as ROs established by foreign consulting companies, law firms, accounting firms are taxed by Chinese tax authorities for their business income derived from China.

What is the basic registration procedure for the incorporation of a FIE?

The incorporation of a FIE mainly includes the following basic steps:

(1)    Obtaining the Certificate of Approval from Ministry of Commerce (“MOC”) or its competent branch;

(2)    Name Registration at competent Administration of Industry and Commerce (“AIC”);

(3)    Obtaining the Business License (“BL”) from AIC. In addition, some FIEs, which are engaging in special activities, need the special approval from the competent administrative authorities before/after the issuance of the Certificate of Approval and/or the BL.

(4)    Miscellaneous Registrations: these registrations include but are not limited to registrations at Public Security Bureau, Technology and Quality Supervision Bureau, Local/State Tax Bureau, Foreign Currency Administration, Customs Administration, Statistics Bureau, Labor Bureau.

Which documentations should be prepared for the incorporation of a FIE?

In order to incorporate a FIE, the foreign investor needs to prepare several documentations and submit them to different governmental authorities for approval.

The mainly required documentations are as follows:

(1)  The Application Letter;

(2)  The Feasibility Study Report (“FSR”);

(3) The Joint Venture Contract (“JV Contract”, not applied to WFOE);

(4)  The Articles of Association (“AoA”);

(5)  The Appointment Letters of the directors;

(6)  The Appointment Letter and ID document of the Legal Representative;

(7)  The notarized Business License or other identity certificate of the investors;

(8)  The Address Certificate, such as the Rental Agreement; and

(9)  Other documentations required by the government authorities.

What is the minimum registered capital requirement for a FIE?

The law does not specify minimum registered capital requirements for EJV, CJV or WFOE. But, the PRC Company Law requires the following minimum registered capital:

(1)  For limited liability companies, the minimum registered capital is RMB 30,000, unless any law or administrative regulation prescribes a higher minimum amount;

(2)  For one-person limited liability companies, the minimum registered capital shall be RMB 100,000;

(3)  For a joint stock limited company, the minimum registered capital shall be RMB 5 million, unless any law or administrative regulation provides a higher minimum amount.

However, it shall be noted - as also indicated above - that for certain industries, a higher minimum registered capital exists. Also, a general requirement exists that the registered capital shall suit the scale and need of the company. Besides, some local governments do have their minimum registered capital requirements for FIES that could be much higher than those provided for in the Company Law. Therefore, the minimum capital requirements have to be determined in each individual case, depending on the vehicle, industry and location of business.

What company organ should be established in a FIE?

(1)  Board of Directors (“BoD”)

The BoD is the highest authority for EJV and CJV.

(2)  Shareholders’ Meeting/Shareholders’ General Meeting

The Shareholders’ Meeting is the highest authority for WFOEs. For FICLBS, the highest authority is the Shareholders’ General Meeting.

(3)  Board of Supervisors (“BoS”)

The establishment of a BoS is required for FIE as follows: For EJV, CJV and WFOE, the BoS shall be composed of at least 3 persons. For those FIEs in which there is a relatively small number of shareholders or which is relatively small in scale, it may have 1 or 2 supervisors and does not have to establish the BoS, wherea for FICLBS, the BoS must be composed of at least 3 persons.

(4)  Management Team

The structure of the management team which generally includes the General Manger (“GM”), Deputy GM and high-level managers is regulated by the AoA of the company.

How about the accounting and auditing requirement for a FIE?

FIE should produce a finance and accounting report, examined by a recognized auditor, at the end of each fiscal year. Financial and accounting statement include: balance sheets; profit and loss statement, statement of the company’s financial situation, and statement of profit distribution.

FICLBS must comply with even more stringent regulations.

The fiscal year shall be in accordance with the calendar year, i.e. from January 1 to December 31 of each year.

Regarding the auditing requirement, each year, the company should submit an auditor’s report, signed by a certified public accountant registered in China, together with its financial and accounting statement.

Regardless of whether it made a profit in the relevant fiscal year, the FIE should file its income tax returns and final accounting statements with the tax authorities within four months after the end of each calendar year.

How to transfer shares of FIEs?

Transfer of shares in a EJV, CJV or WFOE by a shareholder shall be subject to the approval by the competent MOC which has approved the establishment of the company, and registered with the AIC. The share transfer shall not cause a violation of the industrial policy in using foreign investment (e.g. the transfer shall not result in the foreign investor(s) having more than 50% if the industry does not allow more than 50% foreign investment). Besides, if the shares are to be transferred to a third party, i.e. a party other than the existing shareholders, the consent of the majority of the other shareholders shall be obtained, and, for a transfer that has obtained such consent, the other shareholders have the preemptive right to purchase the shares.

With regard to FICLBS, a significant restriction is that a promoter cannot sell its shares until three years after the establishment of the company. If the company goes public after its establishment, the promoters’ share acquired prior to public listing cannot be transferred until one year after the public listing takes place. In addition, the transfer of shares in a FICLBS may be subject to restriction for other reasons.

What is the foreign exchange control policy regarding the operation of an FIE?

In China, the foreign exchange is strictly controlled especially in the areas of the daily operation of an FIE, although such control has been loosened to some extent, by the revision of the Regulation of PRC on Foreign Exchange Administration in 2008.

All FIEs must obtain the approval from competent Administration of Foreign Exchange for the foreign currency account opening and conduct the foreign currency registration formalities. Such foreign currency registration should be examined annually together with the annual AIC examination. The opening bank has the right to supervise the FIE’s operational remittance in foreign currency.

During the operation, FIEs may borrow foreign currency from foreign banks in accordance with PRC laws and regulations, subject to the registration with competent Administration of Foreign Exchange.

The expatriate staff could change their salary and other lawful income derived from China into foreign exchange and remit out of China after paying relevant tax.

How to rent offices for FIEs?

A valid address is required for the establishment of a FIE. It shall be ensured that the office rented satisfies certain legal requirements and is thereby suitable for your business purpose. 

Besides, according to PRC Urban Real Estate Administration Law, all rental agreements should be recorded at the competent real estate administrative authority. Although no specific penalty is stipulated in the PRC Urban Real Estate Administration Law for those parties that did not record the rental agreement properly. More and more cities have published or are going to publish the rules to regulate the rental record in detail.

What are the basic tax privileges for FIEs?

Prior to 1 January 2008, Foreign Invested Enterprises (FIE) and domestic enterprises were taxed under two different income tax regimes. FIEs and foreign enterprises were subject to the foreign enterprise income tax, the rate of which is lower than the respective rates for domestic enterprises, and also the FIEs enjoyed exemptions and reductions in the first five years after establishment. However, the new Chinese Enterprise Income Law unified the two different regimes, as a result of which, the FIEs and domestic enterprises must pay the same income tax.

Similarly, the privileges enjoyed by FIEs in respect of other taxes have also been greatly eliminated. At present, there are hardly any significant tax privileges for FIEs, although, in reality, some local governments have issued various policies, in order to attract foreign investments.

Which law is applicable when a Chinese court hears a foreign-related contractual dis-putes case?

In principle, parties to a foreign-related contract may generally choose the law applicable to the dispute. There are, however, certain contracts which, as a compulsory requirement of Chinese law, must be governed by Chinese law, including:


(1)  Contract on a Chinese-foreign equity joint venture;

(2)  Contract on a Chinese-foreign contractual joint venture;

(3)  Contract on Chinese-foreign cooperation in the exploration or exploitation of natural resources;

(4)  Contract on the transfer of shares in a Chinese-foreign equity joint venture, Chinese-foreign contractual joint venture or wholly foreign-funded enterprise;

(5) Contract on the operation by a foreign natural person, foreign legal person or any other foreign organization of a Chinese-foreign equity joint venture or a Chinese-foreign contractual joint venture established within the territory of the People's Republic of China;

(6) Contract on the purchase by a foreign natural person, foreign legal person or any other foreign organization of share equity held by a shareholder in a non-foreign-funded enterprise within the territory of the People's Republic of China;

(7) Contract on the subscription by a foreign natural person, foreign legal person or any other foreign organization to the increased registered capital of a non-foreign-funded limited liability or company limited by shares within the territory of the People's Republic of China;

(8) Contract on the purchase by a foreign natural person, foreign legal person or any other foreign organization of assets of a non-foreign-funded enterprise within the territory of the People's Republic of China; and

(9) Other contracts subject to the law of the People's Republic of China as prescribed by a law or administrative regulation of the People's Republic of China.


For other contracts than those listed above, if the parties to the contract have not chosen the law applicable to the dispute, then the issue of which law shall be applicable depends on the types of the contracts, as well as the specific issues involved. In this regard, Chinese law contains quite detailed rules.


It shall also be mentioned that, the Chinese law also provides for the possibility of rejecting the application of foreign law, for the reason that the application of such foreign law would be in contradiction of the public interests of China.


The above addresses only the law applicable to the substantive contractual dispute. For the procedural issues relating to the legal proceedings, the Chinese court would as required by law apply the civil procedural law of China.

How can foreign court decisions and arbitral awards be enforced in China?

1. Recognition and Enforcement of Foreign Judgments in China:

The party concerned may, within two years after the last day of the performance period specified in the judgment, directly apply to the intermediate people's court of the People's Republic of China located in the place where the party subject to the enforcement has its domicile or where its property is located, or a foreign court may, in accordance with the provisions of the international treaties concluded or acceded to by the People's Republic of China or on the principle of reciprocity, request recognition and enforcement by a people's court.

An order of recognition and enforcement will be granted, if the People’s Court considers:

(1)  the legally effective judgment or order of a foreign court;

(2)  neither contradicts the basic principles of the law of the People's Republic of China nor violates the state and social, public interest of China, and;

(3)  there is an international treaty or bilateral agreement concluded or acceded to by both, the foreign country and the People's Republic of China, regarding the enforcement of judgments, or precedents of reciprocity exist.

In case neither relevant treaties nor international conventions have been signed or joined to and no circumstances of reciprocal relations exist between China and the foreign country, a party concerned may raise a lawsuit before the People’s Court and the competent People’s Court will make a judgment and enforce the judgment or written order of the People’s Court.

2. Recognition and Enforcement of Foreign Arbitral Awards in China:

The party concerned shall, within 2 years after the last day of the performance period specified in the arbitration award, directly apply to the intermediate people's court located in the place where the party subject to the enforcement has its domicile or where its property is located. The people's court shall deal with the matter in accordance with the relevant provisions of the international treaties concluded or acceded to by the People's Republic of China or on the principle of reciprocity (China joined “United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards” [“New York Convention”], 10th June 1958, on 2nd Dec. 1986).

A People’s Court shall give a ruling within 2 months from the date of accepting the application. If there is no special circumstance, the foreign arbitral award shall be completely executed within 6 months after giving the ruling. If the People’s Court considers that recognition and enforcement should be refused according to New York Convention, it shall file this case to the higher People’s Court, then to the Supreme People’s Court for approval. 

What has to be observed, if an arbitral award made in China shall be enforced in Europe?

China, like most European countries, has joined the “United Nations Convention on the Recognition and Enforcement of Foreign Arbitral Awards” (New York Convention) 10th June 1958. The Party, who wants to apply for recognition and enforcement of an arbitral award made in China, shall submit a duly authorized original award or a duly certified copy thereof and the original arbitration agreement or a certified copy thereof together with the application for recognition and enforcement. The arbitral awards and arbitration agreements, if not made in the official language of the country where recognition and enforcement is sought, a translation in such official language shall also be submitted. It should be pointed out that such translation shall be certified by an official or sworn translator or by a diplomatic or consular agent.

Recognition and enforcement of an arbitral award made in China shall be recognized and enforced by a country that is also a member of the said New York Convention, unless there are grounds for refusal. Basically, the refusal may only be based on the grounds as set down in the New York Convention, which include, among others, the invalidity of the arbitration agreement, violation of the right of being heard, composition of arbitral tribunal not in line with the agreement of the parties, ruling on a matter not subject to the arbitration agreement, the award is not yet binding or has been set aside. The burden of proof for the refusal grounds shall be borne by the party against whom the enforcement is sought. In addition, recognition and enforcement may also be refused, if the recognition and enforcement would be contrary to the public policy (Ordre Public) of that country where recognition and enforcement is sought. 

Can a foreign bank receive deposit or offer other services in Chinese currency (RMB) in China?

Subject to the approval of the China Banking Regulatory Commission (CBRC), Chinese branches and subsidiaries of foreign banks are allowed to receive deposits or make loans to Chinese customers with RMB. They can also offer services in RMB in other areas including letter of credit, bank guarantee, domestic settlement, honouring commercial papers, trading on governmental bonds, financial bonds, shares or other securities, insurance agency, foreign exchange trading agency, safe box, creditability investigation and consultation, etc.

To obtain the approval of CBRC, the following conditions have to be met by such branch banks or subsidiary banks: 1) having operated in China for no less than 3 years; 2) having a profiting history of 2 years prior to the application; and 3) other prudential criteria explicitly required by CBRC.

Foreign banks shall determine the interest rates for deposits and loans and commission fees in accordance with PRC provisions. In handling deposits, foreign banks shall lodge deposit reserve funds in accordance with the provisions as regulated by the People's Bank of China.

Foreign banks may not only meet the conditions as described by the CBRC in order to engage in RMB businesses aiming at citizens within China, but also have business networks which accord with its business features and development needs.

What are the main characteristics of the Chinese Labor Contract Law?

The Chinese Labor Contract Law came into force as of 1 January 2008. This law governs the establishment of employment relationship between enterprises, individual economic organizations, non-enterprise private entities and other entities and the employees thereof, as well as the conclusion, performance, alteration, discharge or termination of labor contracts.

Form of contract: the Law provides that a written labor contract shall be entered into between the employer and the employee within 1 month after the employee starts to work, except for the situation that the employee works not more than 4 hours per day and not more than 24 hours per week for the employer, where an oral agreement is sufficient. Failure to enter into the written contract by the employer shall entitle the employee double salary for the period when such contract is absent.

Probation: for contracts with a 3 to 12 months term, the probation shall not exceed 1 month; for contracts with a 1 to 3 years term, the probation shall not exceed 2 months; for contracts over 3 years or without a fixed term, the maximum probation period is 6 months. The probation cannot be applied more than once to the same employee or to employees employed solely for certain tasks.

Non-competition: the employer may enter into a non-competition agreement with its senior staff, senior technical personnel and other employees during and after the employment. However, for the non-competition agreement to be valid after the termination of the employment, a monthly compensation shall be  paid to the employee during the restriction period. The restriction period shall not exceed 2 years after the employment has been terminated.

Circumstances in which the employer may not terminate the contract even though he otherwise would be entitled to do so under the Labor Contract Law:

(1)  The employee that was exposed to the danger of contracting a occupational disease has not taken the health check, or the employee is under diagnose or medical watch for suspicion of contracting occupational disease;

(2)  The employee contracted an occupational disease or suffers a work injury while working for the current employer, and has been confirmed to have completely or partly lost the ability to work;

(3)  The employee suffers a disease or a non-work-related injury, and is in the legally prescribed period for medical treatment;

(4)  During the pregnancy, confinement or lactation of female employees;

(5)  The employee has consecutively worked for 15 years for the employer and is less than 5 years away from his legal retirement age.

(6)  Other circumstances under which an employer shall not dissolve the labor contract as proscribed in laws or administrative regulations

 Compensation paid by the employee: the employee may be held liable for compensating the employer for breach of contract only under the following circumstances:

(1)  if the employee breaches the service term contract (a contract under which the employee receives special training at the expense of the employer),

(2)  if the employee breaches the confidentiality agreement,

(3)  if the employee breaches the non-competition agreement.

 Compensation paid by the employer: the employer will be held liable for compensating the employee under the following circumstances:

(1)  The labor contract is terminated through negotiations by the employer and employee.

(2)  The labor contract cannot be performed anymore through no fault of the employer or employee as prescribed in Article 40.

(3)  The labor contract is lawfully terminated by the employee due to the fault of the employer as prescribed in Article 38,

(4)  The labor contract is terminated due the employer’s restructuring proceedings under Bankruptcy Law,

(5)  The labor contract is terminated upon expiry of its term, and the employee refuses an equal or better renewal condition.

(6)  The labor contract is terminated due to the bankruptcy, business license revocation, ordered shut down, dissolution or liquidation ahead of schedule of the employer.

(7)  Other circumstances prescribed by relevant laws and regulations.

Standard of compensation by the employer: for each full year the employee has worked for the employer, the employer shall compensate an amount equal to the employee’s monthly salary.

The employer’s liabilities for recruiting an employee who has not terminated the labor contract with his/her former employer: in such case the employer shall assume a joint and several liability to compensate damages suffered by the former employer.

How can a FIE obtain a loan in China?

Requirements for FIEs to obtain loans from commercial banks are the same as those for Chinese domestic companies. The FIE needs to meet the following requirements: 

The applying FIE has obtained a business license issued by the Administrative Department for Industry & Commerce and opened an account with a Chinese bank. The registered capital has been fully paid in within the prescribed period according to the articles of association and has been verified by a certified public accountant registered in China. A board resolution regarding the loan application has been made and the power of attorney has been issued. The project of investment in fixed assets of the applying FIE has been approved by a planning department. The applying FIE has the capability to repay the loan and has provided a reliable guarantee for repaying the loan and the interest thereof. 

A reliable guarantee for the repayment of the loan may be provided either in form of a credit guarantee or mortgage guarantee. Preferential policies apply for FIEs, which are providing loan guarantees: 

Chinese commercial banks are permitted to accept guarantees provided by the foreign shareholders. FIEs are permitted to apply to the designated Chinese banks dealing in foreign exchange business in China for RMB loans by means of foreign exchange pledge. All foreign exchange funds of a FIE may be used as a pledge; the RMB loans under foreign exchange pledge may be provided with the credit guarantee of an overseas financial institution or a foreign-funded financial institution within the Chinese territory. The special restrictions on the registration formalities for foreign exchange pledge or foreign exchange guarantee and on the credit grades of foreign-funded banks which provide foreign exchange guarantee shall not apply. The RMB loans secured by guarantees by any foreign shareholder or foreign exchange shall conform to the industrial policies and may be used to meet the demand of fixed asset investment or liquid funds, but shall not be used for any foreign exchange purchase. 

Apart from taking a loan from a commercial bank, a FIE is also entitled to obtain a loan from its shareholders.

What are the property rules in China?

1) Types of Ownership

Chinese laws know three types of ownership: state ownership, collective ownership and private ownership.

The laws determine which properties belong to the state and the State Council exercises the ownership rights of state-owned properties on behalf of the state.

The properties exclusively owned by the state are mainly urban land, minerals, rivers, maritime areas, radio frequency spectrum resources and etc.

The laws also determine which properties are considered as collectively-owned realties and movables:

(1) Lands, forests, mountains, grasslands, wastelands and tidal flats that shall be in the ownership of collective as provided for by law;

(2) Buildings, production facilities, farmland, and water conservancy facilities that are in the ownership of collective;

(3) Facilities for education, science, culture, sanitation and sports, etc that are in the ownership of collective;

(4) Other realties and movables that are in the ownership of collective.

2) The acquisition of ownership

In general, the creation, alteration, transfer and extinguishment of property rights of movables are subject to and take effect upon the delivery of the property.

Change of property rights of realties is subject to registration with relevant authorities to be effective, unless otherwise provided by law (the exceptions mainly being: natural resources owned by the state are not subject to registration, property rights determined by court judgments and the acquisition of property rights due to succession and factual conducts take effects from the time of the judgment, succession or conduct).

3) Usufructuary Rights

Usufructuary right means the right to utilize the property. The major types of usufructuary rights are land use rights, water-intaking right, exploration rights, mining rights, fishery rights, contracted land management right, easement.

Although the Law generally permits both movables and immovable properties as being objects of usufructuary rights, all explicitly established usufructuary rights are related to immovable property.

i) Land Use Rights for Construction Purpose (Rights to Use Construction Land)

The law provides that land use rights (LUR) may be established on ground surface, beneath ground or above ground separately, and that newly established LUR shall not prejudice previously established usufructuary rights.

The automatic extension of residential LURs is also adopted by the Property Right Law, while the extension of all other LURs is subject to the application to and approval by the land authorities.

As regards the buildings, fixtures and their affiliated facilities built by the holder of the right to use construction land, the holder shall enjoy the ownership thereof, unless it is otherwise proved by any contrary evidence.

Unless it is otherwise prescribed by any law, the right-holder has the right to alienate, exchange, use as equity contributions, endow or mortgage the right to use construction land.

For alienating, exchanging, using as equity contribution, endowing, or mortgaging the right to use construction land, the parties shall enter into a corresponding written contract. The parties concerned may make stipulations on the contractual term. However, this term may not exceed the remnant term as stipulated in the first contract on transfer of the LUR.

ii) Easement

Easement is a right derived from a contract between right holders of two immovable properties (dominant tenement & servient tenement), where the holder of the dominant tenement has the right to utilize the servient tenement to facilitate the use of the dominant tenement.

The right usually takes the form of passage through the servient tenement, objecting building on the servient tenement for better ventilation and lighting of the dominant tenement, objecting the owner of the servient tenement to make noises. The specific Easement Right depends on the particular agreement between the contracting parties.

The easement becomes effective upon entering into the Easement Contract. However, the right holder of an Easement Right cannot oppose the Easement Right to third parties in good faith, unless the right has been properly registered.

4) Property Right for Security

There are three types of Property Rights for Security: mortgage, pledge and lien. The object of mortgage can be either movables or immovables and the creation of a mortgage does not require the delivery of the property; the object of pledge can be either movables or certain types of rights (such as bills, bonds, equity interests, intellectual properties, receivables), and the creation of a pledge is subject to the delivery of the object or the corresponding pledge registration; the object of lien can only be movables, and the possession of the property by the lienor is indispensable for the right.

How to acquire land use rights in China?

In China, the ownership of land belongs to either the state or collectives (of farmers). The ownership of any land cannot be transacted, except that the state according to the respective rules and procedures expropriates (subject to adequate compensation to farmers) collective-owned land. 

However, the rights to use land (LURs) can be applied for or transferred. Investors may acquire LURs either by obtaining such right directly from the government (LUR Assignment) upon payment of assignment price, or purchase the right from a non-governmental entity (LUR Transfer). Both Assignment and Transfer are on a paid basis, which are the main and most usual way to acquire LURs. Free LURs are granted (LUR Allocation) in some exceptional cases, such as building of government offices, , military facilities and other infrastructure and public welfare facilities. 

The assignment of all industrial purpose land must be subject to public sales such as bidding, auction or listing on a LUR market. And the assignment price must not be below the Bottom Price of that certain area which is fixed according to certain formulation. 

The term of Assignment LUR lasts from 30-70 years. Most industrial land has a validity of 50 years.

How to have my trademark protected in China?

With very few exceptions, your trademark may not be protected by trademark laws in China unless it is registered in China. 

1. National registration and international registration 

There are two ways to have your trademark registered in China if you are a national of, or have domicile or real and effective industrial or commercial establishments in, a country party to the Madrid Union (both China and Switzerland are parties to the Madrid Union, for more information about parties to the Madrid Union please refer to 

One way is filing for registration directly to the Trademark Office of P.R.C ("national registration"), whereas the other way is filing for registration to the International Bureau of WIPO (IBOW) through the intellectual property authorities of your country, while at the same time expressly requesting such registration to be extended to China ("international registration"). IBOW is an organization which administers the Madrid System, a system established by the Madrid Agreement and the Madrid Protocol for facilitating international registration of trademarks. 

If you are neither a national of, nor have real and effective industrial or commercial establishment in, a country party to the Madrid Agreement, you may only choose the national registration.

Compared to the national registration, the advantage of the international registration, besides the efficiency (one application for the registration in many countries), is that the time needed to acquire the registration is shorter. However the disadvantage is that your international registration certificate usually is required to be endorsed by the trademark authorities, if you want to rely on your trademark registration to seek the protection from Chinese legal enforcement authorities in certain circumstances, for example, taking raid action against fake products. 

2. Procedures for national registration 

For more details about the procedures for international registration, you are advised to contact the intellectual property authorities of your country. 

For filing a national registration in China, a foreign applicant is required to entrust a certified Chinese trademark agent. Usually though not necessarily a law firm is involved as intermediary, not only to facilitate the communications, but also to ensure that a certified and qualified trademark agent is entrusted and that a fair fee is charged. In some cases, a trademark agent will grant a firm in cooperation with it a considerable discount, which usually covers all or a substantial part of the expense you spent on retaining a law firm for this matter. 

For filing a national registration in China, the documents you shall prepare include (a) Power of Attorney for the trademark agent you entrusted; and (b) a specimen of the trademark in compliance with certain specifications in form (all documents should also be translated into Chinese if the original form is in other languages). You should also designate the classes of goods or services on which you want to register your trademark. If you want to claim priority, i.e. subject to certain conditions taking an earlier date as your filing date, a statement to this effect and the corresponding documents shall be additionally submitted. 

With regard to the time frame for acquiring the registration, currently one to one and half year is needed before the trademark application is examined by the Trademark Office of China, and if the examination is passed, the trademark application will be published, so that any third party may have the chance to oppose the registration of the trademark. If no opposition is filed during three months after publication, the trademark will be registered and the registration certificate issued.

Why and how shall I have my trademark recognized as a “well-known trademark” in China?

As defined by Chinese law, a "well-known trademark" is a trademark which is widely known to the relevant people, and which has a higher reputation. 


The "well-known" status of your trademark promises a much bigger market share for your products or services. Besides and from a legal point of view, a "well-known trademark” in China may enjoy certain “privileges” over a non-well-known trademark, including that (a) a "well-known trademark" can prevent same or similar trademark from being registered and used on the same or similar goods or services, or even on different or dissimilar goods or services, depending on whether the "well-known trademark" has been registered in China or not; (b) the five years’ time constraint imposed on a trademark holder’s right to request the cancellation of an improperly registered trademark does not apply to a "well-known trademark" holder if such improper registration is done in bad faith; and that (c) if someone registered a "well-known trademark" as his company name, the holder of such trademark may request competent authorities to cancel such registration. These legislative privileges are more than significant to the holder of a renowned trademark, especially in light of that enforcement of intellectual property in China is not very satisfying at present. 


With regard to the procedures for recognition of a “well-known trademark”, it shall be noted that there is no special and independent system for that. Rather a “well-known trademark” can only be recognized upon your special request in a specific case, being a dispute you raised against a same or similar trademark to be registered or already registered, or an action you initiate with legal enforcement authorities against the use of a same or similar trademark, or a lawsuit in which your trademark is claimed to be protected, or any other occasion where you want your interests attached to your trademark to be legally protected. 


Depending on what the specific case is, one of three authorities upon your special request has the right to recognize your trademark as “well-known”. They are the Trademark Office, Trademark Review and Adjudication Board, and court. 


No matter who of the above three is in the position of determining whether a trademark is "well-known" in China, the factors that shall be taken into consideration for such determination are the same: (a) how well is that trademark known by the relevant public; (b) the period during which that trademark has been in use; (c) the period, extent and geographic scope of any publicity of that trademark; (d) the record of protection of that trademark as a "well-known trademark"; and (e) other factors for which that trademark is "well-known". While not all of the five factors are required to be satisfied, you must provide sufficient evidences to establish the fact that your trademark is really known well in China. 


Although the recognition of a "well-known" trademark is supposed to be relevant only in the specific case where the recognition is triggered, the practices are substantially different, due not only to the fact that the record of being protected as a "well-known trademark" will spare further recognitions in subsequently same or similar cases, and presumably will be relied on in subsequently different or dissimilar cases, but also the fact that State Trademark Office will regularly issue a list of trademarks which during the past period of time are recognized as "well-known trademarks". The implication is that the recognition of a trademark as "well-known" has an impact beyond a specific case. In addition, there is no restriction in terms of time period for a trademark holder to promote his brand as “well-known trademark” once his trademark is recognized as a “well-known” one in a specific case.

I intend to conclude an agreement concerning technology with a Chinese company or individual. Are there any restriction thereto or any formalities therefor?

Basically, Chinese laws and regulations concerning technology import and export divide the technologies to be imported or exported into three classes based mainly upon their impact to the national security and people’s health: (a) the technologies that are forbidden to be imported or exported, (b) the technologies of which the import or export is restricted; and (c) the technology that may be imported and exported freely.

With regard to the scope of the first two kinds of technology, the Chinese government issues and periodically updates lists, which specify what technologies are not forbidden or restricted to be imported or exported. The technologies listed on these lists are of a very limited scope.

The second kind of technology is regulated by permit. That means, if you want to import or export any technology of the second kind, the import permit or export permit shall be acquired beforehand.

While you don’t have to acquire a permit to import or export any technology of the third kind, you shall still have to register your technology agreement with the Ministry of Commerce within due time after the agreement is concluded. If the subject technology is a patent registered in China, the agreement shall be additionally registered with the Patent Office and an assignment agreement concerning a patent which is registered in China will not be effective until the registration with the Patent Office is completed.

What are the anti-monopoly rules in China?

The Anti-monopoly Law entered into force as of August 1, 2008. While the Anti-Monopoly Law mainly governs the monopolistic conducts taking place in China, it may also have extraterritorial effects, if the monopolistic conducts taking place outside of China have the effect of eliminating or restricting competition in China. For instance, it is subject to the review under the anti-monopoly law, if an association of foreign suppliers instructs its members to only sell products to a specific Chinese company and to reject any transaction with other Chinese buyers. 

The following three forms of conducts are defined as monopolistic conducts: 

(1)  Monopolistic agreement concluded between business operators; 

(2)  Abuse of dominant position; 

(3)  Concentration among business operators that has or may have the effect of eliminating or restricting competition 

For instance, as regards the conclusion of agreements between competing business operators an agreement with any of the following content is prohibited: 

(1)  Price fixing or manipulation; 

(2)  Restriction over the quantities of the production or sale of products; 

(3)  Split of the market for the sale of products or supply of raw materials; 

(4)  Restriction over the purchase of new technologies or new equipments, or restriction over the development of new technologies or new equipments; 

(5)  Collaboration in obstructing transactions; 

(6)  Other forms of “trust agreement” identified by the anti-monopoly authority of the State Council from time to time. 

In addition to the above three monopolistic conducts which are also regulated in the anti-monopoly law of most other countries, China’s Anti-Monopoly Law also seeks to curtail another type of monopoly which is considered to be especially prevalent and harmful in China, i.e. the monopoly by abusing of administrative power, which includes mainly the different measures taken by local governments to protect the local products from the competition from other regions, e.g. local government charge discriminating price or set discriminating technical standard for products coming from other regions.

What are the Chinese bankruptcy rules?

As of 1 June 2007 the Enterprise Bankruptcy Law entered into force. The law only applies to enterprise legal persons and aims to protect both creditors and workers of insolvent enterprises. The law embodies the notion of putting people first, as it fully considers worker's interests. At the same time it is in accordance with standard international practice in order to protect lender’s interests. 


If an enterprise legal person cannot pay off its debts due, the creditor may make an application to the people’s court for the debtor’s reorganization or bankruptcy liquidation. The enterprise legal person, who cannot pay off its debts, may also make an application to the people’s court for reorganization of the company or bankruptcy liquidation. Additionally, it may file an application for a settlement with its creditors. The application has to be filed at the people's court where the debtor is domiciled. 


When accepting an application for bankruptcy, the court assigns an administrator, which takes over the property of the debtor, takes management decisions, disposes the property and acts for the debtor in legal proceedings. 


The bankruptcy procedure shall have binding force over the debtor’s assets in- and outside of the territory of the People’s Republic of China. 


After the debtor’s assets have been liquidated, the costs for bankruptcy liquidation and community liabilities shall be paid first. The remaining amount shall be distributed to the creditors in the following order: 1. employees’ salary and social securities, 2. taxes, 3. the common claims. 


Where the bankruptcy assets are not sufficient to satisfy the demands for repayment that are arranged in the same group, it shall be distributed on a pro rata basis. 


A director, supervisor or senior manager who violates his obligations of being honest and diligent and thus causes enterprise bankruptcy shall be subject to relevant civil liabilities according to law. Any legal entity that violates the provisions of the Enterprise Bankruptcy Law and thus constitutes a crime shall be investigated for criminal liabilities according to law.

How can foreign investors bring up their complaints to the competent governmental agency concerning their foreign investment?

FIEs and their investors can file their complaints (including claims, suggestions, opinions) at the State Center for Complaints of FIEs and the competent departments of local governments, if they believe that their lawful interests have been infringed by Chinese administrative organs. The MOFCOM Coordination Office for Complaints of FIEs shall be responsible for coordinating, instructing and supervising the acceptance and hearing of such complaints, formulating policy principles for resolutions of disputes. 


When filing a complaint, all documents must to be in Chinese, and the particulars on basic information, relevant evidence, contacts and so on shall be included thereof. 


The complaints will be rejected, if (a) the complainant has started or already finished litigation, administrative reconsideration or arbitration procedures in the same matter, (b) the compliant has been accepted and heard by discipline examination or supervisory authorities, (c) the complaint is made in an anonymous manner, (d) the complaint has been accepted by the complaint acceptance organ, (e) the complaint fails to meet any other requirement for complaint acceptance.


As a result of a successful complaint, the receiving department may issue an opinion, stating its proposals of solutions to the complainant and the related authorities, or coordinate with the related authorities, or transfer the complaint to the related authorities for solution, or take other appropriate measures.

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A regularly updated publication providing sound basic knowledge on foreign direct Investments in Greater China, customs and international trade systems, taxation, capital markets, foreign exchange, intellectual property rights and labor law.
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