How Effective China Binding NNN Contract is?

Make IP protection a core responsibility of the entire China management team, not merely a function of the legal or brand protection teams, and adjust internal information flows and reporting structures to reflect those responsibilities. Registering your IP in China is one of the most important things that companies can do even before they start looking for manufacturers in China.

Instead of drafting a pure NDA agreement, foreign companies should be opting for a Non-Disclosure, Non-Use, and Non-Circumvention agreement (NNN) that includes the normal protections of an NDA including non-disclosure and non-use provisions but in addition to those, also non-circumvention protection. China NNN agreement prevents your Chinese manufacturer from distribution of your IP to 3rd parties. It stops Chinese suppliers from using your IP for any purpose other than manufacturing the product in question for you and prohibits a supplier from selling directly to your clients.

 

Must have Provisions in a China NNN Agreement

  • NNN agreement should be written to be enforceable in a Chinese court with jurisdiction over the Chinese defendant.
  • It will need to be written in English and Chinese and we will need to be able to make slight edits (such as changing the supplier’s name in English and Chinese) so you can re-use the document (for the same product) but for different suppliers.
  • An NNN agreement must include a sum certain contract damage provision that a Chinese court can and will enforce by ordering the seizure of the defendant’s assets.

 

NNN agreements should clearly define which rights are being disclosed or licensed, their nature, and their scope. Always have a written contract for all business activities in China, and the language should be Chinese. Keep in mind that your contract is not translated into Chinese from another language or from Hong Kong to the mainland, because the meaning of a translated version could be ambiguous and could hold an entirely different meaning. That’s why China lawyers suggest drafting the NNN contract completely in the Chinese language.

 

NNN agreement should be written to be enforceable in a Chinese court with jurisdiction over the Chinese defendant. This means that Chinese law is the governing law, Chinese is the governing language, and exclusive jurisdiction is in a Chinese court with jurisdiction over the defendant. the China-specific Non-Disclosure, Non-Use And Non-Circumvention Agreement (NNN), and accompanying Original Equipment/Design (OEM/ODM) Manufacturer Agreements. These agreements are used to protect your confidential information and to prevent your Chinese manufacturer from competing with you or going around you to your customers or vendors. In other words, they make sense for almost every company doing business with China.

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Financial Technology Regulations of China Businesses Must Be Aware Of

The rapid rise of financial technology (fintech) in the People’s Republic of China (PRC) inevitably generates financial risks.  To prevent and resolve these risks, the government has regulated many fintech application areas, including peer-to-peer lending, third-party payment, cryptocurrency, etc. For the last couple of years, Chinese authorities have been closely monitoring and regulating fintech businesses.

In the fintech development plan brought in by the Chinese government in August 2019, the official definition of fintech by the Chinese authorities is: “Financial innovation driven by technology, which aims to use modern scientific and technological achievements to transform or innovate financial products, business models and business processes, and promote the quality and efficiency of the financial services industry.”

 

According to CNBC, Chinese authorities stepped up efforts to improve lending to privately run, smaller businesses in the wake of the coronavirus pandemic this year.

 

Liu Fushou, Chief Counsel of China Banking and Insurance Regulatory Commission said “On one hand, we support reasonable innovation in the financial industry under the premise of controllable risks. At the same time, (we) maintain that innovation serves the real economy and must contribute to it.”

 

China’s fintech industry has been growing rapidly over the past decade and is dominated by the largest payments and peer 2 peer lending markets in the world. But it is not all smooth as Chinese authorities are imposing strict rules and regulations on the fintech industry. CBIRC’s Mr. Liang stressed that financial technology did not “change the nature of finance. All kinds of financial activities must be subject to regulation,” he said. “[Businesses] must follow the same practices, rules, and risk management requirements as long as they conduct financial operations of the same kind.”

 

What are the key regulatory authorities in China that are responsible for the financial services sector?

  1. People’s Bank of China (PBOC)
  2. China Banking Regulatory Commission (CBRC)
  3. China Securities Regulatory Commission (CSRC)

Regulation of Non-bank Payments

Stricter KYC Requirements- 3 types of accounts that have escalating regulatory requirements.

Tiered Regulatory Regime- better rated PIs will be subject to fewer regulatory scrutiny.

Emphasis on Small Transactions- spending limits in accordance with the principle.

 

China introduced two new sets of industry standards, one for registering all new blockchain projects, with 500 of them being included in the first two tranches, and the second one for 11finetch product categories for digital payments. Additional regulations were introduced for mobile financial payment platforms, voice and image recognition technologies as well.

Sometimes regulation can slow down a process, but that’s not the case in China. In fact, regulation is driving the FinTech market in China. The PRC is striking a balance between encouraging fintech innovation and reinforcing regulation.

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