Get a clear understanding of China’s real estate law and its inner significance for the foreign nationals.

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Real estate has been one of the few brightest spots in China’s investment landscape as the government clampdown is not as aggressive as it used to be even a few years ago. In addition to the Property Rights Law, China regulates real property through a series of other laws and regulations, including the PRC Law on Land Management.

With China’s rapidly expanding economy there is an increased need for residential housing, commercial space, and industrial parks that are structured to meet the unique requirements of the Chinese population. Real estate has been one of the few brightest spots in China’s investment landscape as the government clampdown is not as aggressive as it used to be even a few years ago.

 

Sectors such as large-scale theme park construction, lithium mining, credit rating services, precious metals, and internet access services that are previously restricted are now opened up to the foreign capital. In manufacturing, foreign companies are allowed to produce their own rail transport facilities, instead of having to set up joint ventures with local firms. Rules were also eased for foreign companies manufacturing electric vehicles and related products.

 

According to the data released by China’s National Bureau of Statistics on March 15: From January to February, the national real estate development investment was 139.86 trillion yuan, up 38.3% year-on-year; among them, residential investment was 103.87 trillion yuan, up 41.9%. However, this corresponds to the fact that from the beginning of 2021, all local governments in China have started to introduce a number of real estate regulation and control policies.

 

Laws on Real Property in Urban Areas

In addition to the Property Rights Law, China regulates real property through a series of other laws and regulations, including the PRC Law on Land Management, the Land Registration Measures, the Interim  Regulations Concerning the Assignment and Transfer of the Right to  Use State-Owned Land in Urban Areas (Assignment  Regulations), and the PRC Law on the Administration of Urban Real Estate (Urban Real  Estate Law). Among these laws and regulations, the Assignment Regulations and the Urban Real Estate Law primarily regulate land-use rights and ownership of residential property in urban areas.

 

Since the real estate industry works as the reservoir for the sedimentary capital of bank loans, the stabilization of real estate prices will reduce the financial systemic risks markedly.

 

Granting of the Land-use Right

 

Article 7– Granting of the land-use right refers to acts that the State grants land users the right to use the State-owned land (hereinafter referred to as the land-use right) for a certain number of years and the users shall pay the State a granting fee for the land-use right.

 

Article 8– The land-use right for the collective-owned land within a planned urban district may be granted with payment only after it is requisitioned in accordance with the law and turned into State-owned land.

 

Article 9– Granting of the land-use right must conform to the overall planning for land utilization, urban planning and the annual plan for land to be used for construction.

 

Article 10– Where the local people’s governments at or above the county level grant land-use rights for the development of real estate, they must, based on the quota set by the people’s governments at or above the provincial level, draw up plans for the total area for annual granting of the land-use right, which shall, according to the regulations of the State Council,  be reported to the State Council or the provincial people’s government for approval.

 

Article 11– Granting of the land-use right shall be carried out by the people’s governments of the cities or counties in a planned and step-by-step way. With regard to each lot granted, plans for its purposes, term of use, and other conditions shall be worked out by the departments of land administration under the people’s governments of the cities and counties in conjunction with the competent departments of urban planning, construction and housing administration. Such plans shall, according to the regulations of the State Council, be implemented by the departments of land administration under the people’s governments of the cities or counties after their submission to and approval by the people’s governments with due authority for approval.

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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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