Discover the Infinite Business Value of China Contracts

Foreign Investment Law

Good China contracts often go through a negotiation process that ensures both sides are getting the best deal possible. A China contract is the best way to prevent the breach of an obligation and it is also the perfect weapon of defense in case of undesirable legal proceedings.

Although the current geopolitical situation between the US and China is not highly conducive, still China offers a huge business prospect. Beijing, Shanghai, Shenzhen, and Guangzhou generally have the best business environment. Businesses from retail to electronics to home goods can grab the diversity of business opportunities available in China.

 

Western companies need to keep in mind that China has its unique judiciary system, law and regulations. If you are interested in opening up a manufacturing or production hub in China, you almost certainly will need a contract that perfectly satisfies Chinese legal requirements. Good China contracts often go through a negotiation process that ensures both sides are getting the best deal possible. Good negotiation should lead to a mutually successful outcome that prevents conflict down the line and sets the foundation for a strong partnership moving forward. A contract will never be enough to prevent the breach of an obligation, however, it will be the perfect weapon of defense in case of undesirable legal proceedings.

 

Foreign companies doing business in China usually maintain three types of manufacturing agreements with a Chinese factory:

  1. Original Equipment Manufacturing (OEM): Used when a foreign buyer purchases a product already being made by the factory and simply adds its own branding to it;

 

  1. Contract Manufacturing (CM): Used when a foreign buyer has a fully developed product design, which is then brought to a factory for commercialization and mass production; and

 

  1. Original Design Manufacturing (ODM): Used when a foreign buyer approaches a factory with a basic design and specifications, but the factory actually makes the commercial design and ultimately the production.

 

Doing business in China comes with both great opportunities and great challenges

China provides skilled, inexpensive labor while newly opened Free Trade Zones are making foreign investments and China sourcing even more economical. For many reasons, China has emerged with an interesting amount of advantages that appeal to both domestic and foreign entrepreneurs and investors. With wide-ranging reforms designed to give businesses and entrepreneurs fewer headaches, China tops the chart for doing business in Asia.

In the view of the expert business lawyers in China, the product development stage is perhaps the riskiest time for the foreign companies doing business in China and yet it is the most overlooked aspect for the overseas companies. It has been noted that the foreign business owners use NNN and OEM agreements for the production stage and hardly use product development agreements.

Do keep in mind that many international services are blocked by the Great Firewall of China. The first realization that foreign companies often need to make is that China is in no way a uniform and homogenous market. Yet there are intricacies native to the technological landscape that one needs to be aware of. Intellectual Property vulnerability is another major difficulty you have to face while doing business in China.

The presence of a qualified China business lawyer community is also one of the major factors for China’s global prominence as the finest business hub. Starting from IP protection help to trademark registration assistance, China lawyers offer amazing services to their global clients so that they can carry out their business process in a completely hassle-free way.

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Why it is important to understand the details of Chinese labor contract law.

Suing a Chinese Company

Labor contracts are an essential part of recruitment in China. The labor relationship between an employer and an employee in China is based on the Chinese Labor Contract law. The Labor Contract Law in China provides a comprehensive list of scenarios in which employers can terminate an employment contract.

Foreign businesses that are trying to enter China have to deal with different aspects related to how to set up a company, taxes, and sooner or later they will have to hire employees. The challenge for many foreign companies is understanding the China labor law and the differences between this one and other countries’ labor laws.

 

Labor contracts are an essential part of recruitment in China. The labor relationship between an employer and an employee in China is based on the Chinese Labor Contract law. It covers and addresses a large number of topics, and for the most part, seeks to protect the employee. Subsequently, it is illegal for a company to hire a full / part time employee (local or foreign), without an updated and valid labor contract.

 

Article 2 of the Labor Contract Law stipulates that if an employer within the territory of China establishes, carries out, alters, removes or ends a labor contract with an employee, the relevant law may be applied. If a foreigner holding an employment certificate is employed wholly within the territory of China and establishes labor relations with domestic employers, the labor contract law shall be fully applicable.

 

 

Like other countries, the Chinese labor contract must include several clauses, such as:

 

  • Employment term and probation period term
  • Job description
  • Definition of working hours, rest hours and vacation days
  • Severance packages for overtime work and termination of employment
  • Safety at work conditions
  • Social benefits
  • General information: Employee name, ID, company name and address, etc.

 

 

The Labor Contract Law in China provides a comprehensive list of scenarios in which employers can terminate an employment contract. Even where such terms are not included in an employment contract, the employer can still rely on these statutory clauses in order to terminate the contract. Employment contracts, social insurance, wages, are some of the aspects that companies have to understand in order to be compliant in China.

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