EU SME Centre launches online law database

To help newcomers to the market get a first impression of what might be in store for them from a legal perspective, experts from the EU SME Centre have put together a collection of English translations of the most essential laws SMEs are likely to come across when exporting to, or investing in, China. For the most essential laws, a link to the original Chinese version is provided as well.

Many European companies, particularly SMEs, operating in China are not always aware of some of the most fundamental laws and regulations that affect their business in the marketplace. There are many reasons for this, including language barriers, the lack of in-house expertise and frequent changes to the regulatory environment. The amount of laws has been increasing at a breathtaking rate since China took up the task of creating a ‘socialist legal system with Chinese characteristics’ little more than 30 years ago, driven to some extent by the requirements of China’s integration into the global economic order and its accession to the World Trade Organisation in 2001.

Even though many of these laws are still not clearly implemented and are insufficiently enforced, those related to the economy are, by now, relatively well defined and routinely applied. Thus, European SMEs entering the Chinese market can expect a reasonable degree of legal protection in the country, provided they know their rights and responsibilities and act accordingly.

Since even a minor infraction could put an otherwise successful business venture at risk and entail significant costs, it is strongly advised to make use of the services of a lawyer thoroughly familiar with the practicalities of the Chinese legal system from the very start of your engagement with China.

The database, which is freely accessible on the website of the EU SME Centre, is divided into seven business and legal areas:

1. Foreign investment
   Including general regulations and laws on wholly foreign-owned enterprises, joint ventures, foreign-invested partnership enterprises and representative offices.
2. Cross-border trade
   Including the Chinese Foreign Trade Law, the Regulations on the Administration of the Import and Export of Goods and the Regulations on the Administration of Technology Import and Export.
3. Foreign exchange administration
   Including the Regulation on Foreign Exchange Control.
4. Taxes
   Including regulations on corporate income tax, individual income tax, turnover taxes and major taxes involved in the operation of a representative office.
5. Visa policy
   Including the Exit and Entry Administration Law.
6. Labour-related laws
   Including the Chinese Labour Law, the Labour Contract Law and the Decision of the Standing Committee of the National People’s Congress on Revising the Labour Contract Law.
7. Franchising
   Including the Regulations for the Administration of Commercial Franchising and the Administrative Measures for the Record-Filing of Commercial Franchises.

In addition to facilitating initial orientation on commonly encountered requirements, the database is also helpful when considering the best entry strategy, deciding on the scope of business in China and entering into negotiations with a legal advisor. It also serves as a secondary source of information to the Centre’s guidelines and reports, many of which deal with legal aspects of market entry in China.

Dig deeper

English translations of Chinese laws should never be used as a basis for final decision making, as key information may be contained within the nuances of individual words or expressions in the wording of a law. Even though the greatest care has been taken to only include accurate translations, the risk of erroneous interpretations has to be taken into account.

In addition, laws evolve constantly and the most recent edition tends only to be available in Chinese. Finally, interpreting laws correctly may depend on an understanding of related regulations and sometimes even diverging opinions by local authorities, something which only an experienced local lawyer can be expected to possess.

The EU SME Centre law database will help European SMEs in the early stages of market research to better understand China’s prevailing legal norms, thus supporting informed decision making when analysing if circumstances are right for their entry to the market.

The law database can be seen in full by visiting www.eusmecentre.org.cn/content/law-database.

The EU SME Centre assists European SMEs to export to China by providing a comprehensive range of free, hands-on support services including the provision of information, confidential advice, networking events and training. The Centre also acts as a platform facilitating coordination amongst Member State and European public and private sector service providers to SMEs. The EU SME Centre is a project funded by the European Union.