Doing Business in China

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Doing Business in China- A Legal Perspective [pic]

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Introduction

One of the oldest legal systems in the world is Chinese law. The Chinese Legal system is made up of Confucianism and Legalism. Confucianism is based on the Confucian philosophy of social control and moral education, and legalism based on codified law and criminal sanction. Since the 20th-21st century Chinese law became a mix of both traditional Chinese and western approaches. Even till this day the Peoples Republic of China are changing the laws, because many areas both inside and outside the country need to strengthen the “rule of law” in China, and also international trade and globalisation provoke transformations in many areas of the Chinese domestic law. Some people say that law is not important in China, but if you’re doing business over there Chinese law are very important. Businesses must obey the laws. Making contracts is a must and carefully drafted as this will minimise disputes and will outline clearly your obligations. If your contract is breached legal arguments will help your negotiations and will enforce the contract even more.

The Legal environment of foreign investments in China

China is one of the fastest and strongest growing economies in the world today. This is why many foreign companies are expanding their businesses and setting up in China. One of the most important aspects that will determine whether you can invest in China is the legal environment. There are many different problems in the legal system in China that will affect foreigners setting up and investing there, China has set up a legal system to promote foreign investment; this system has been strengthened by a number of domestic legislations and bilateral and multilateral agreements.

In order for China to accomplish its obligations and pledge as a new member of the World Trade Organisation (WTO), China has reformed, and made itself more open to foreign investors, it also has engaged in many international pacts. It also allows more foreign industries some including telecommunication industry, commercial, financial, insurance and foreign trade sectors. It has on average 30 different government departments continuously updating their regulations. China is slowly but surely making its legal background more complimentary to foreign investors by changing its laws and policies of their market economy and international legislation.

“The legal framework governing foreign enterprises comprises three basic legislations. These laws as well as their provisions constitute the core of the legal system governing foreign investments in China. To supplement these laws, a series of regulations and measures concerning the establishment, management, reform, purchase, investment, reinvestment, termination, and liquidation of foreign enterprises had been introduced”[1]

Laws

There are four certain key aspects of China’s business law environment; labour laws, tax laws, intellectual property laws, import/export law, Competition Law and Foreign Exchange Law.

Labour Law

On the 1st January 2008 the labour contract law changed. This was due to the rising number of worker disputes. The law states that an employment contract must be written up with one month of hiring an employee, and it must give a clear resource to employees whose rights have been dishonoured. These areas should be included in the contract; unemployment pay, trial periods, layoffs, non-complete clauses and collective bargaining.

The law states, that one should work 40 hours a week, the standard working week in China is in theory from Monday to Friday 9:00am-6:00pm, but in reality the local Chinese companies make their employees work overtime and they don’t compensate the employees for it. All employees are entitles to three national holidays, Chinese New Year (first day of the first month of the lunar calendar), International Labour day (first week of May) and National...
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