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China Updates – November 2020

Offshore economic and business activities are being encouraged by the People’s Bank of China in Shanghai. 

The Shanghai Head Office of the People’s Bank of China (PBOC) and the Shanghai Municipal Commission of Commerce released a circular encouraging the advancement of development for offshore economic and business opportunities on the 16th of October (Shang Hai Yin Fa No. 180 [2020]). The€¯Commission€¯will regularly send a list of qualifying companies that are engaged in offshore activities and assign designated commercial banks in Shanghai to give guidance and services, such as cross-border financial services, international settlements, trade financing through free trade accounts based on international regulations and practices.


Hainan will release measures to encourage the economic and business environment. 

On 11 October 2020, an action plan was released by the General Office of the Hainan Provincial Party Committee and the General Office of the Hainan Provincial People´s Government, in order to create a world-class business-friendly environment in the Hainan province. The goal of the measures to be implemented will be to fast-track the creation of an easy, dynamic and international business environment, to further enhance the current market players and the current construction of Free Port of Hainan.

The actions in the plan are grouped in 11 categories which will be implemented to further improve the pilot reforms proposed by the movement such as separating the business licenses from the operation permits in the process of establishing a company. Regarding some administrative licensing aspects that fall under the provincial or local level, €œrecord-filing€ and €œcompliance promise€ will be included in €the optimization of access service€.


China moving forward to a paperless Special e-VAT system. 

The Chinese government’s tax authority is conducting a series of trials to develop and implement an electronic invoicing system. The new system is being rolled out in only a few cities in the country (Ningbo, Hangzhou, and Shijiazhuang). It is planned that by the end of 2020 this new Special e-VAT system will be implemented nationwide.

China is moving towards a new era of digitalization and its tax system must follow this trend. The Special e-VAT system will let the companies manage and handle this matter more efficiently. With the new system companies will apply, check, and verify the electronic VAT invoices on the Tax Bureau website.

It is expected that this new system will cut the time and resources used by the companies which in many times had to spend a lot of time in dealing with the administration, requirements, procedures, and commuting.


Shanghai is being driven to financial glory thanks to Pudong District. 

A friendly and regulatory innovation environment is driving Shanghai’s Pudong New Area to the city’s ambition to become a major financial hub. Among other regulatory breakthroughs, institutional innovations for financial opening-up has helped Pudong New Area to make an appearance as the home of 97 units from international asset managers. This area is now home to China’s densest concentration of legal entities of foreign banks and insurers.

During the first six months of the year, Pudong’s financial sector achieved 202.2 billion yuan ($30.6 billion USD) and year-on-year growth of 7.5%, official data showed.

Shanghai has already overtaken Tokyo as the world’s third-ranked financial center. Number one and two positions are held by New York and London, respectively, information based on the most recent Global Financial Centres Index, released in September jointly by Z/Yen, a UK think tank, and the China Development Institute, a Shenzhen-based research organization.


The current employment market in China after the COVID-19

The employment ecosystem in China in 2020 has been affected by the COVID-19, especially for the expatriate community. Both employers and employees have been dealing with lay off, terminating a contract, visa, compliance, and so on. These are some of the situations we should pay attention to:

  • Make sure the contract in the Chinese version does not differ from the English one, even though the Chinese are the prevailing version. Your employment contracts should be reviewed by a lawyer who is native or fluent in Mandarin.
  • Make sure the contract does not have illegal provisions that violate employee rights, which can waste time and energy if it is not written properly.
  • Compare the content with the offer letter. Both versions and the clauses within should be the same.


Information required when making a legal inquiry

It is common for both employers and employees to have questions regarding the laws, rules, and regulations in China. There are some questions that need to be addressed for the lawyer to provide an accurate answer in the specific context:

  • Who are exactly the parties involved?
  • Where, in which location, exactly?
  • Provide your legal counsel with the employment contract and your company’s staff handbook. The lawyer will need time to check applicable national laws and also local laws.
  • It might be necessary to ask local authorities to clarify the local requirements.

Based on the information provided, lawyers shall come up with an assessment of how many hours will be needed. Clients can either engage a law firm on a retainer basis if it will be for a long period of time or on hourly rates if it can be solved within a few hours.


Registering your trademark in China

Since China only acknowledges trademarks registered within its own jurisdiction, foreign companies in China should keep this in mind when entering the market to avoid future conflicts, costs, and waste of time. These are the basic requirements to register your trademark in China:

  • The trademark must be legal, not similar to an existent flag or organization.
  • The trademark should be distinctive and stand out from other goods.
  • The trademark cannot be functional and cannot refer to the model of the goods or service itself.
  • The trademark must be available for registration.

The timing can vary from 10 months to 1.5 years. Choosing a proper Chinese name is also a key part of the process to avoid getting a name made up by the audience who cannot pronounce its original name.