Category Working in China

China honors foreign experts with Friendship Awards

Forty nine foreign experts from 19 countries were honored with Friendship Awards Friday in Beijing by the Chinese government for their outstanding contributions to the country.

Vice Premier Hui Liangyu expressed his welcome to all the foreign experts and international friends working in China.

“It’s a process of give and take. Talent exchanges benefit all countries involved,” said Jan Wolter Post, who was honored for his contribution to China’s automobile industry by introducing advanced technology and research on green-fuel automobiles.

China was confident in opening increasingly to the world and invite more foreign experts to work in various domestic sectors, Post said.

The Friendship Award, which was set up in 1991, is the highest award the government confers on foreign experts who have made outstanding contributions to China’s economic and social progress.

“Your professional qualities and dedication have deeply impressed the Chinese people, and your profound friendship with the Chinese people and your valuable contributions to China’s modernization will be eternally remembered by the Chinese government and the Chinese people,” Hui said.

He said the government would continue to push forward the strategy of reinvigorating China through developing skills and lay equal emphasis on the training and development of domestic talent and introducing international expertise.

A total of 850 foreign experts from 55 countries had been conferred the award by last year.

“My husband got the award in 2003 for his efforts in environment protection,” German NGO expert Dorath Lehrach said.

“At that time I thought maybe someday I could be honored this award, and today it comes true,” said Lehrach, who assists Chinese NGO development.

According to the State Administration of Foreign Experts Affairs, China introduced 340,000 foreign experts and professionals in 2005, but the country urgently needs senior foreign professionals with innovative, decision-making and management skills.

“We sincerely hope for and welcome the arrival of more foreign experts, overseas Chinese experts and international friends to participate in China’s modernization in every way in the future,” Hui said.

After the ceremony, Hui, on behalf of Premier Wen Jiabao, invited the experts and their families to attend a grand reception to mark the 57th anniversary of the founding of the People’s Republic of China, which falls on Saturday.

Source: Xinhua

An Intel Leader Discusses His Lessons in the China Game

Ian Yang, the Beijing-based co-general manager for Asia Pacific for Intel Corp., spends most of his time steering one of the world’s biggest tech companies through one of its most exciting — and complicated — markets.

When Intel first came to China 21 years ago, the country was a tiny market for the microprocessors and other computer chips Intel makes. But that certainly has changed. While Intel doesn’t break down its revenue by country, Asia outside Japan now accounts for half of its total sales. A big part of that is China, the world’s second-biggest market for personal computers after the U.S., and the place where most of the laptop PCs sold elsewhere in the world are made.

Mr. Yang, 41 years old, joined Intel in 1986 when he was studying in the U.S. at what is now called Kettering University in Flint, Michigan, as one of its first mainland Chinese employees. He returned to China in the mid-1990s to head up a small sales and marketing team, which helped developing Intel’s relationship with a then little-known company called Legend. That company is now called Lenovo Group Ltd., and is the world’s third-biggest PC vendor by sales.

Mr. Yang was promoted to country manager in 2000 and rose to his current job helping to oversee sales and marketing throughout the region in July, 2005. He sat down with Wall Street Journal reporter Jason Dean in Beijing to talk about his experience as a global manager.

WSJ: What was your first job and what did you learn from it?

Mr. Yang: My first job was a co-op job [a training job that is part of a college program] at Intel. The first day I reported to work I saw this little sign behind reception that said “The customer is our No. 1 asset.” I thought, “Wow.” I just came from China and had no concept of this customer orientation. So I thought, well, if I keep doing all the right things for the customer at this company, then I’ll probably do OK.

WSJ: What advice would you give someone starting out today who wanted to get into your field?

Mr. Yang: These days, not a lot of students really have any sort of internship or co-op kind of work experience. It’d be great if the education system here could mirror some of the U.S. cooperative programs where college kids could gain some work experience.

WSJ: What’s your favorite business book?

Mr. Yang: There are a lot of generic management books. But about six months ago, a book caught my attention called “It’s Your Ship” [“It’s Your Ship: Management Techniques from the Best Damn Ship in the Navy,” by Michael Abrashoff]. It was written by the former commander of the USS Benfold, a high-tech destroyer in the U.S. Pacific Fleet.

In the Navy they always have this ceremony to send off the old guy and welcome the new guy. At the ceremony, the old guy was booed. [Abrashoff, who taking over,] was totally shocked at how happy the crew was to see the previous guy go. And he said there’s no way I want that to happen.

The big concept was that when he talked to everybody, he said “I’m committed as the commander of this ship to do my part to fix it. But as a sailor of this ship, you have as much obligation or responsibility as I do. It’s your ship, as well.”

WSJ: What is the one thing you wish all new hires knew?

Mr. Yang: I would say, for any new hire, the most important thing is assuming responsibility. That means you have to think out of the box sometimes, and you have to really initiate things rather than just receiving orders. You have to follow your own mind and do your own thinking.

WSJ: It seems like one of the challenges in your position is trying to marry this very distinct corporate culture rooted in America with a distinct business culture and educational culture in China.

Mr. Yang: You’re absolutely right. That is the challenge. In the U.S., people tend to think longer term and strategically. They are very open and fast on their feet. I think a lot of time their challenge is in executing in a disciplined way.

In my last 10 years here [in China], my observation is that there are a lot of very hard-working, devoted employees. But they don’t very openly share their ideas or thinking. It’s not like they don’t have it. But if they don’t share it, a lot of times people will have the perception that “these people are not strategic.”

But if you talk to them in their own language, a lot of times you’re surprised about how much they know about the industry, the market, the issues facing the company, and what the company should be doing.

WSJ: What was the most satisfying decision you’ve made as a manager?

Mr. Yang: [When I first came back], the local computer companies were so small. But some of my customers told me: Watch the consumer electronics market in China.

So I started influencing the management of Intel. I said we’ve got to put some longer-term strategy behind growing the local guys. I truly believed in it. I said even though these guys are small, if they take off, we can grow with them.

WSJ: Intel recently announced a major global restructuring. What is it important to tell employees at a time like this?

Mr. Yang: We’re going through a very turbulent time. I can just feel that people have a lot of questions on their minds. The last thing you want to do is not share anything with them and keep a closed door. Even without a lot of perfect answers, as a manager you have to try to help people understand why we’re going through this, calm them down, continue to focus on their jobs, don’t get panicked, and we’ll get through this as quickly as we can. But six months from now, once Intel has really sorted out its problems and once we get to a level where we are a lot more efficient again and people are a lot more clear on why we’re doing this — here’s our strategy, and you guys have every bit as much to do with it as I do — then you’ll look back and say I’m glad Intel did it.

China to strengthen income tax collection from high earners

China’s revenue officers are to strengthen the management of income tax collection from people with annual incomes of more than 120,000 yuan (15,000 U.S. dollars), said a senior official with the State Administration of Taxation (SAT).

SAT deputy director Wang Li told a national conference on income tax collection and management that a system should be established to encourage high-income earners to declare personal income voluntarily.

The SAT would concentrate efforts from October and throughout next year on strengthening management and reform of the income tax system and on building a personal income information system to better monitor the actual status of high-income earners.

“There are loopholes in collecting income taxes from this group of people as their sources of income are diverse,” said an official with SAT Information Office, who asked to be anonymous.

Personal income tax files should be established and the management of industries with higher revenues should also be highlighted, Wang said.

Meanwhile, he said China’s corporate tax revenues rose to 431.6 billion yuan in the first seven months, 29.7 percent or 98.9 billion yuan more than same period last year.

Personal income tax revenues hit 168.4 billion yuan in the period, up 16.4 percent or 23.69 billion yuan, said Wang.

The growth in personal income taxes, introduced by China in 1980, was achieved after the government lifted the personal income tax threshold from 800 to 1,600 yuan a month from Jan. 1.

Source: Xinhua

China more and more attractive to foreign experts

When she returned to China after more than a decade away, Dutchwoman Murielle Van de Pol was amazed at the huge changes that had taken place in the country.

She studied at Peking University 12 years ago, and now is back to attend the 2006 Conference on the Exchange of International Professionals which ended here on Thursday.

The changes are so massive that China looks like a completely different country, she told Xinhua excitedly.

Representing the Netherlands Senior Experts (PUM) in China, she hopes to introduce more Dutch experts to China during the conference.

Like Murielle, many foreigners living in China are experiencing the rapid changes taking place in this ancient civilization. The dynamism and energy of China make it an attractive destination for foreign experts.

Piet Hein de Wit, PUM coordinator, comes to China four to five times a year. He said he likes working in China and the people here are very hospitable.

According to Piet, PUM has signed 80 projects agreements with Chinese organizations this year and over the last 12 years about 4,000 Dutch experts have been introduced to China to work on about 1,000 projects.

During the early years of China’s reform and opening up in the late 1970s, China only introduced about 1,000 foreign experts and professionals each year. The number has grown to 200,000-400,000 in recent years.

Last year China introduced 340,000 foreign experts and professionals, according to statistics from China’s State Administration of Foreign Experts Affairs (SAFEA).

SAFEA spokesman Liu Yongzhi said China’s rapid economic growth was the key factor in attracting more international talent, and the numbers of foreign professionals introduced to China is not likely to decrease over the next five years.

Pay levels in some companies and universities are now similar or even better than in developed countries, and this is another drawcard, Liu said.

About 700 foreign delegations from 30 countries, including Russia, the United States, Japan and France, attended the conference and 2068 letters of intent were signed.

Source: Xinhua

Japanese expats in China making money and building friendships

BEIJING — Li Jun is typical of China’s new middle class. Educated at university, he worked as a financial manager with a multinational firm in Shanghai. He recently bought a digital camera at one of the city’s ubiquitous electronics stores. The make? Kodak, an American brand. Li says he didn’t want to give his hard-earned money to Sony, Olympus, or any other Japanese company. It’s a sentiment shared by Zhang Yong, a deputy general manager at one of China’s leading securities companies. On the mention of Japan, he tenses up with hackles raised.

The fractious relationship between Asia’s economic giants — Japan, the world’s second biggest economy; China its fourth — has come to the fore again as Japan’s ruling Liberal Democratic Party on Sept 22 chooses a new leader to succeed Junichiro Koizumi as prime minister.

On Aug 15, Koizumi fulfilled his long-standing pledge to visit Yasukuni Shrine on the anniversary of Japan’s surrender in World War II. The shrine honors soldiers who have died fighting for their country, including 14 convicted Class-A war criminals whose names were added by the shrine in a secretive ceremony in 1978. Koizumi has visited Yasukuni every year since taking office in 2001, each time saying he went to pray for peace. Each time, China and South Korea condemned him for trampling on the feelings of the victims of Japanese military aggression.

Chinese “hatred” of Japan is balanced by a fair amount of materialistic love, too, as a visit to any modernizing Chinese city reveals. The fashions of Shibuya influence the denizens of Shanghai and Shenzhen as much as those of any other city in Asia. Hello Kitty is everywhere. Order a beer in a restaurant and you’re more likely to get Suntory than Tsingtao. Hondas, Toyotas and Nissans fight for space on the crowded streets.

More than 100,000 Japanese living in Shanghai

There are more than 100,000 Japanese living in and around Shanghai, according to the Japanese consulate, making it the third-biggest Japanese expat community in the world, after New York and Los Angeles. More than a million Japanese visit the city each year for holidays and business trips. There were more than 5,085 registered Japanese companies operating there at the end of 2005, from small restaurants to multi-national corporations. These days, they’re not only building factories to make cheap goods for rapid export, they’re opening local headquarters and selling to China’s increasingly wealthy consumers, too.

Among those entrepreneurs is restaurant owner Teruo Katayama. He predicts Shanghai will one day be like New York, so he wanted to get in on the action early. Similarly, Yuzo Sajiki and his business partner chose Shanghai as the first location for what they hope will be an international chain of hair salons. They settled on the city — after also considering Taipei, Hong Kong and Singapore — because the beauty industry is still developing. Sajiki, who trained in London and worked in New York, also felt an affinity with Chinese people. Others, like Akiko Mitani, a human resources consultant, went to learn the language to improve their career prospects. Mitani found love with a Chinese man and stayed.

For many Japanese in China, the dream turned sour in April 2005 when anti-Japanese protests started in Shenzen and spread across the country. On April 16, protests in Shanghai turned violent. Initially there was a festive atmosphere, according to witnesses such as journalist Dan Washburn, who also writes the Shanghai Diaries blog (www.shanghaidiaries.com). Things got ugly, though, as three different marches converged on the Japanese Consulate on Wanshan Road. Lines of paramilitary police protected the building, but stood by as protestors lobbed bottles, bricks and stones. Nearby, 20 Japanese restaurants and businesses were attacked.

There was no single trigger for the demonstrations, although at that time there was anger about a new Japanese history textbook that glossed over wartime atrocities. Japan was also bidding for a seat on the United Nations Security Council, and there was posturing over the ownership of the Senkaku (Diaoyu) Islands — and, of course, the festering issue of Yasukuni.

“The scale of violence was on a level we never imagined,” says Shigeru Toyama of the Japanese consulate in Shanghai. The police told the consulate that they had not given a permit for the demonstration. Under international law, it is up to the Chinese to compensate for the damage. Over a year later, the repairs have not been paid for, but negotiations continue. Initially, when the consul general visited the local government, they claimed that Japan was responsible for what had happened.

The Shanghai government said it tried to stop the protests, but independent reports indicate that the demonstrations had at least tacit support from the authorities. One blogger reported of a Red Cross Station set up near the consulate on the request of the local government. Later, the authorities — mindful of events in Tiananmen Square in 1989 — evidently became worried that the protests might trigger domestic upheaval. University students were required to watch videos about the demonstrations and told not to protest again. According to Toyama, many protestors were in fact dissatisfied with social conditions, and the violence was “not actually targeted at Japan,” he says.

That was initially hard to swallow for Katayama, who dreamed of becoming China’s first Japanese restaurant chain to sell “okonomiyaki” and curry rice. Conveniently located on the route to the consulate, his business was ransacked, its screens, tables and chairs hauled outside and set ablaze. Emi Nakao, a translator and writer, says she was too scared to go outside and became wary of speaking Japanese in public. One girl was hit by a man on the subway because she was speaking Japanese on her mobile phone, according to Mitani.

Even so, “the aftermath was not so serious,” says Toyama. Some Japanese-owned businesses actually experienced a boost from the problems. Sajiki’s hair salon, Matinee, which was not damaged, saw customers increase as more Chinese came by with words of encouragement. It was a similar story at Katayama’s restaurant, Ajikura, when it reopened. He also got valuable publicity when his story was reported in media around the world. “Now 70% of our customers are Japanese, the other 30% Chinese and other nationalities, whereas before they were mainly Japanese,” he says.

Expats trying to help the relationship

By working in China, many Japanese feel that they are helping the relationship between the two countries, as well as making a living. Toshie Nakai decided to move to Shanghai 10 years ago after learning of the hotel boom in China. Now in charge of training at a five-star American hotel, she works with a team of Chinese and deals with cultural differences on a day-to-day basis. On the Chinese side, she had to instill among the workforce an ethos of customer service and hospitality; among her Japanese guests, she had problems with older men getting drunk in public wearing only yukata, behavior that seemed arrogant to Chinese. “I had to educate them,” she says. “They came here thinking they were visiting somewhere like a local Japanese hot springs.”

Japanese-language magazines, such as Hu-ism and Shanghai and Beijing Whenever, are doing their bit to close the gap. Akiko Hagiwara is a former editor of Hu-ism. “I wanted the magazine to focus on art and human interest stories,” she says, to communicate the culture of China to Japanese readers.

Carina Chen is an active advocate of better Sino-Japanese relations and formed the KIM cultural exchange group four years ago. (KIM comes from the Japanese words kako, ima and mirai, or past, present and future). KIM meetings attract up to 100 participants, about a 50-50 mix of Japanese and Chinese along with some other speakers of Japanese. On the day of the demonstrations, Chen arranged for Japanese scholar Tone Morimoto to talk to the Shanghai YMCA about the two countries’ relationship.

Chen went to Tokyo for a two-month exchange program when she was a high school student and expected Japanese people to be severe and unfriendly. Instead she found them to be kind. Lou Ning, a computer programmer, tells a similar story about his 16 years living in Tokyo, and agrees that mutual mistrust is a product of ignorance. Interestingly, they both feel that Japanese people often don’t like Chinese culture. “If I was Japanese and came to China, I would see so many things that I would find unacceptable,” Lou says.

Mixed Japanese-Chinese couples sometimes have more problems with Japanese relatives than Chinese ones. Akihiro Sawano, a deputy sales manager who lives in Shanghai, met his wife, Wang Min, when he came to China to work for a Japanese electronics company. His wife’s family had no problem with their marriage in 1999, but his own mother wasn’t happy and still hasn’t visited them. Sawano and his family mostly speak Chinese at home, although his young son, Ryo, is bilingual and goes to a Japanese school. Mitani also had problems with her family when she married her husband, Zhou Yunbo. “When we met, he couldn’t speak any Japanese, and they were worried that I’d be living in a Communist country,” she recalls.

Human-to-human contact between Chinese and Japanese invariably helps mutual understanding, Chen says. Conversely, misunderstandings are exacerbated and perpetuated by schools (although the irony of Chinese protesting about inaccurate textbooks was lost on demonstrators), and the media, which in China is tightly controlled by the state.

Recently, questions have surfaced about freedom of expression in Japan, too. A right-winger was recently arrested for burning down the house of Koichi Kato, a once-powerful politician who publicly criticized Koizumi for visiting Yasukuni shrine. The alleged arsonist later tried to kill himself in Kato’s garden in the traditional hara-kiri manner.

Koizumi protege Abe also reportedly worshipped at the shrine in secret earlier this year. If Abe is elected and again follows in Koizumi’s footsteps into the hallowed courtyards of Yasukuni as Japan’s leader, it won’t help thaw the icy state of Northeast Asian politics, whatever he prays for. Instead, it’s left to individuals — expats and locals, in Tokyo, Beijing, Shanghai and elsewhere — to maintain the bonds of friendship.

“Sixty years ago Japan was dark, like this 60-year-old kimono,” KIM founder Chen says in her fluent Japanese, pointing at a fabric in the antique shop she manages. “Now the culture is light. People change.”

The hope of Chen and others with a vested interest in Japan and China being friends is that politicians change too.

You know you have been an expat in China too long when…

YOU KNOW YOU HAVE BEEN AN EXPAT IN CHINA TOO LONG WHEN:

– You find yourself crying over a menu in a western restaurant because they
serve potato salad
– You eat every kind of meat off the bone, and then spit those bones on the table
– Squatters make you dizzy, but you now believe, despite the smell, they are cleaner than western toilets
-You are tired of explaining that Africa is a Continent, not a country.
– You see nothing wrong with standing on a white stripe in the middle of a
highway while cars whiz past you at 90kph
– You don’t blink an eye when a complete stranger wants to take a photo of
you with his family
– You actually put some thought into which live snake you want cooked for
your meal
– You eat soup with chopsticks
– you use Kleenex for table napkins
– You drink warm sodas and find them refreshing
– You are accustomed to seeing people’s heads popping up and down in the VCD
you are watching
– You no longer use articles when you speak
– you bargain with the grocer over the cost of a head of lettuce
– You no longer check the expiration date on the milk you just bought.
– You buy a movie that hasn’t been released theatrically yet at home.
– You comment that the pollution “isn’t really that bad…”
– You start wearing a face mask on windy days and wonder at the “silly
foreigners” who don’t do the same
– You complain about that price difference of DVDs/VCDs/CDs bought in the
stores and on the streets
– You start to wonder if the chocolate ice cream you find in the store is
even chocolate… sure it is brown, but…
– You can’t find face lotion or cleanser that does not bleach your skin
whiter….
You have a collection of Umbrellas
-You have actually gone shopping in your pajamas
-You give a beggar a handful of fen and he gives them back
– You have trouble sleeping when you go home for a visit because it’s just
too darn quiet
– You point out foreigners to your Chinese friends even though you’re
foreign yourself.
– You know words in Chinese for which you don’t know the translation in
English
– You answer ‘China’ when people ask where you’re from
– You pick your nose, burp, fart, and scratch so much even your Chinese
friends get embarrassed
– You get a discount if you speak English, but you pay more for Putonghua (Mandarin)
– You call home and your family tell you to speak faster and stop correcting
their grammar
– You eat cake with chopsticks
– You constantly wonder if everything has been boiled long enough.
– You answer ‘So is mine.’ when people say their English is so poor
– You answer ‘Into what?’ when people say China is developing
– You convince yourself that it doesn’t matter how dirty the cooks’ hands
are, cooking will fix it
– If there are only 4 screaming children running around the classroom, you
consider it a good primary class.
– If there are only 4 students sleeping, you consider it a good middle
school class.
– If there are only 4 cell phone addicted college students messaging its a good class.
– You love tofu because there’s nothing to spit out and it doesn’t have any
taste
– You start saying things like:’ ‘I very like’
– You hold hands with others of the same sex and think nothing of it
– You avoid touching those of opposite sex like they have bird flu
– You’ve got a pre-paid ticket with a reserved seat on a train or
plane, but you still run like mad to to the get there first
– You forget that vegetable soup is actually pesticide broth
– Smoking is doing less harm to your lungs than breathing
– You’re beginning to like fruit salad and mayonnaise
— Everyone wants to be your friend – all you have to do is teach them
English for free
– Everyone wants to teach you Chinese by speaking to you in English
– Your Chinese lessons consist of 50 words your teacher wants to know in
English
– You tell people you don’t understand, so they write it for you – in
Chinese.
– Your boss thinks you’re a stupid foreigner if you let him cheat you, but
thinks you’re a bad foreigner if you don’t
– Your boss speaks really good English until you ask for more money
– You have no qualms that someone who thinks you’re stupid and gullible has
total control over your life.
– You too think that the ugliest western man always has a beautiful Chinese girlfriend.
– A hike up a mountain calls for a plastic grocery bag full of junk food.
— The more you listen to the news, the more uninformed you are
– It fascinates you that when the national news is on, your forty TV channels magically become the
same channel.
– Absolutely everything that can possibly be eaten is in some way good for
your health.
– Only five minutes of prep time for a unannounced class no longer fazes you
— Your housekeeper throws out the chicken breast you have marinating in
garlic and olive oil but organizes your empty beer bottles and cans and you understand
– You leave your laundry hanging up for more than a day its dirtier than it
was before you washed it
And my favorite:
– You actually believe you’re here to teach English

Shanghai Hunts for Expats without Work Permits

Shanghai will launch a major campaign today to catch overseas workers who are holding jobs illegally.

The monthlong inspection effort aims to make sure companies have acquired work permits for their foreign employees and those from Hong Kong, Macau and Taiwan, the Shanghai Labor and Social Security Bureau said yesterday.

Businesses that violate work rules face fines ranging from 5,000 yuan (US$617) to 50,000 yuan and will be required to complete proper documentation. Workers who lack permits could be sent home.

Though there were no estimates on how many foreigners are working illegally in the city, officials said about 60 expats were warned, fined or forced to leave the country for various reasons last year, including illegal employment.

Today’s campaign is the result of growing concern that government work rules are increasingly being violated.

“With a surging number of foreign professionals in the city, the intensive crackdown is expected to raise awareness among employers and foreigners about the need to follow the law, and it will also help us get a better idea about the size of the illegal employment situation,” said Sun Hande, director of the bureau’s employment office for overseas workers.

Shanghai had issued 92,000 work permits to foreigners from 152 countries through the end of last month. Around 51,000 foreign nationals are currently working in the city.

The city issued 18,325 permits last year, more than a fourfold increase from 2000.

The registered number of working professionals from Hong Kong, Macau and Taiwan has totaled 42,500 so far.

Foreigners and overseas Chinese can be granted a work permit for China after signing an employment contract and acquiring a work visa.

Students are banned from taking jobs here as are those who hold tourist or short-term business visas.

It is the employer’s duty to apply for a work permit for foreign staff, bureau officials said.

Routine checks by the Shanghai Labor Inspection Team found that 21 foreigners were illegally employed by 15 companies in the first half of this year.

Expats were also advised they should insist on work permits to protect their rights.

One-fourth of the 64 labor complaints filed last year by expats working in the city were rejected because the plaintiff lacked a valid work permit.

By Yan Zhen

CHINA EMPLOYMENT HANDBOOK

CHINA EMPLOYMENT HANDBOOK

Article by David Cui
Attorney at Law

Employers either domestic or foreign are expected to cope with the increasingly complex legal framework that now governs China employment law. Ignorance of the law can lead to complaints and even the possibility of costly legal action. The China Employment Handbook unravels this web and brings all the relevant information together.

Written by the experienced lawyer in the field, The China Employment Handbook is a goldmine of practical, hands-on expert advice. It identifies both the legal essentials (what employers are required to do), the non-legal essentials (actions that are not legal requirements but are fundamental for effective people management) as well as how to protect both parties interests and rights. Topics include: staff recruitment, writing employment contracts, paying staff, Working hours and holidays, writing a staff handbook, personnel records and data protection, handling discipline and staff grievances, terminating employment, welfare and benefit, working with trade unions, trade secret production, secondment and individual income tax.

Staff Recuitment

Most foreign corporations choose not to directly employ local Chinese employees. Under China – PRC employment law a foreign investment enterprise such as a WFOE can enter into any employment contract with local PRC staff, An FIE may enter into employment contracts directly with PRC or non-PRC nationals and would normally deal with the settlement of salaries and other statutory benefits due to its staff directly. Under China PRC employment laws a WFOE can enter into individual labor contracts with each individual PRC employee and is required to submit the labor contracts for certification by the local labor bureau.

As to a representative office which must employ local staff through an authorized foreign enterprise service corporation such as Foreign Enterprise Service Company (FESCO). The local staff working in a representative office (RO) is technically speaking not employees of the representative office, but employees of the foreign enterprise service corporation seconded to the representative office. This peculiar feature does not carry much practical significance in terms of the actual performance of work by employees.

RO will have to enter into a contract with FESCO for the relevant PRC national to provide services to RO. The salary and other statutory benefits due to such RO personnel may be settled through FESCO which will charge a fee for handling such matters. RO and the relevant PRC national may enter into a supplemental contract regarding the details of the terms and conditions of the employment.

RO personnel may be non-PRC nationals who are employees of the foreign company but seconded to RO. A non-PRC national seconded to RO as the chief representative or an ordinary representative would continue to be employed under a foreign employment contract with the overseas employer.

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Employment of Expatriates

A foreign national seeking employment in China and applying for the visas and permits must:
• be at least 18 years of age and in good health;
• possess the necessary professional skills and job experience required for the intended position;
• not have a criminal record;
• have an employer;
• hold a valid passport, or other international travel document which can serve in lieu of a passport; and There are four steps to employment of a foreign national in China.
1. Obtaining an employment permit
The employer must first file an employment application with local labor authorities in accordance with the Regulations for Employment of Foreign Nationals in China, and the Regulations for Employment of Taiwan, Hong Kong and Macao Residents on the Mainland. A foreign national may only be recruited after the employer is licensed.
Since provincial and local labour departments have considerable autonomy in employment matters, procedures vary from region to region. It is important to bear this in mind when preparing to work in China.

For representative offices in China, there is no need to apply for an employment permit in hiring a foreigner as its chief representative. The employer must, however, seek approval from the appropriate approval authority in China. The authority will issue a working card for the employee and based on this the employee can apply for an employment visa.

2. Obtaining an employment visa
Upon approval and issuing of an Employment Permit, of the P. R. China for Foreign Nationals, the authorized organization shall issue a verification notice and a permit. The foreign national then shall apply to a Chinese Embassy or Consulate General abroad for the work visa against the permit, verification notice and an effective passport.

3. Obtaining an employment certificate
The enterprise shall apply to the local labor authorities to get an employment certificate for the foreign national against the permit, the employment contract signed with the foreign national and an effective passport within 15 days after the foreign national enters China.
The validity of the employment certificate will be restricted to the region as specified by the local labour department.

4. Obtaining a residence permit
A foreign national who has already an employment certificate shall apply to the public security authorities for a residence permit against such a certificate. In case of employment of Taiwan, Hong Kong and Macao residents, the enterprise shall report to local labor authorities and receive an employment certificate upon their approval. A Taiwan, Hong Kong and Macao resident who have already been approved to work in Chinese mainland shall apply local public security bureau for a temporary residence against the employment certificate within 30 days of entering China.

Employment restrictions
Laborers shall not be discriminated against in employment, regardless of their ethnic community, race, sex, or religious belief. China’s National Labor Law forbids employers to hire workers under 16 years of age and specifies administrative review, fines and revocation of business licenses of those businesses that hire minors. Laborers between the ages 16 and 18 are referred to as “juvenile workers” and are prohibited from engaging in certain forms of physical work including labor in mines.

Employers must also implement occupational health and safety programs in the workplace, and conduct regular physical examinations for employees in hazardous occupations.

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Writing employment contracts,

Before both sides sign the employment contract, either party should talk to a lawyer. It would cost you a lot less to avoid the problems by getting a lawyer to review it in the first place as they can comment on what IS in the contract rather than what MIGHT be in.

Term of Contract
In China, the term of an employment contract is either fixed term, flexible term or taking the completion of a specific amount of work as a term. In case an employee has worked in the same organization for ten years or more and the parties involved agree to extend the term of the employment contract, the employee has the right to ask for a contract without a fixed term.
Form and Main Clauses
All job agreements in China must be made in writing, not orally. The latter is not legally binding under the PRC Labor Law. Please beware that, under China law, the employee still have powerful employee contract rights even without a written contract conditioned that he/she has the evidence to prove the employer’s payment on a regular basis or the timecard which can also be considered to be a contract.

The contract in writing generally contains the following clauses:
Required clauses: term of a labor contract, work assignment, labor protection and working conditions, labor remuneration, labor discipline, conditions for the termination of the labor contract and liabilities for the violation of the labor contract;

Agreed clauses: probation term, business secrets, training, modification of contact and so on;

Specific agreement: agreements on post, confidentiality, training, retirement, lay-off and lengthy holiday.

Collective Conract
The staff of an enterprise may conclude a collective contract with the enterprise on matters relating to employment remuneration, working hours, rest and vacations, occupational safety and health, insurance and welfare. It is not a mandatory requirement for foreign investment enterprises to sign such contracts and which do not replace individual contracts, but provide a framework that must be observed in the individual contracts.

Language
The contract may be signed in a Chinese and a foreign language version, but in case of discrepancies, the Chinese version controls. Only the Chinese version can be registered.

Employee’s Negotiation Tips

If some of the phrasing is confusing, the employees are advised to ask your company what certain things were when you are going to sign. It is employer’s responsibility to disclose what their contract implies and made it in writing. If they lie or mislead you then you have a case against them. Though, if they are a good company they would be more than happy to clarify the contract with you.
In addition, if you (employee) do wish to make a change to the contract and not want to reject their offer be sure to do the following. Say that you are continuing to consider their offer and are not rejecting their offer but you wish to suggest the following change… Doing this ensures that you have legally protected your position by not rejecting their offer, but can still “suggest” changes to the contract without the contract becoming null and void before you even sign it.

Probationary Period

The purpose of set up a probationary period is to enable the employer to decide whether the worker is suitable before he/she is taken on staff.
This is not mandatory in China. Employers may require a probationary period. The term of the probationary period varies in correspondence with the term of the contract, but the maximum probationary period shall not exceed six months. If a contract term is less than one year, the probationary period is one month. If the term ranges from one year to three years, the probationary period would be no more than three months. The longest period will be six months if the contract is more than three years. During this period, either employers or employees may terminate the contract.

According to Chinese Law, a separate probationary contract will not be valid, and in the event of a dispute, this type of contract will be treated as a formal contract of employment.

The enterprise may terminate its contract with an employee who does not meet requirements during the probationary period.

Invalid Labor Contract and Its Effect
A labour contract concluded in violations in laws or administrative decrees, or by resorting to such measures as cheating and intimidation is considered invalid. An invalid labor contract shall have no legal binding force from the very beginning of its conclusion. The invalidity of a labour contract shall be confirmed by a labor dispute arbitration committee or a people’s court.

Where a part of a labor contract is confirmed as invalid and where the validity of the remaining part is not affected, the remaining part hall remain valid.

In accordance with the Measures Governing Compensation for Losses Resulting from Violation of Labor Contract Stipulations of the Labor Law of PRC (Enacted as of May 10, 1995), if the employing unit is responsible for invalid or partially invalid labor contracts, the employee under which shall be entitled to the compensation for the losses.

Liability Provisions under China Labor Law
The Labor law generally emphasizes civil liability for breach of contract as and incentive to compliance with contractual obligations in place of administrative sanctions. In the law, disciplinary violations are treated as a breach of contract, entitling the employer to terminate the employee (Article 25), rather than as a violation of administrative regulation. The employer may no longer prevent a worker from quitting by refusing permission, but may sue the worker and/or his new employer for damages.
The employer and the employee may agree to stipulate the compensation or damages clause in the labor contract to remedy the losses brought by either party’s violation.

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Compensation

In the event that either party breaches any of the provisions of this Contract and this results in the other party incurring losses, the party in breach shall be liable to compensate the other party for the corresponding losses;

Damages
If the employee terminates the contract earlier, other than as provided in law or clauses of the contract, the employer shall have the right to claim a certain amount of money as damages.
Please do understand that there are breaches and material breaches each which allow different remedies, therefore both sides should specify clearly and specific about the definition or scope of the breach and the damages or compensation thereof.

Implementation Rules of Shanghai Employment Contract
Regulation of Shanghai Municipality on Labor Contract adopted by the Session of the Stand Committee of the Shanghai People’s Congress, came into effect on May 1st, 2002. In late April, 2002, the Shanghai Administration of Labor and Social Security issued the Notice on Several Issues regarding Implementation of Shanghai Municipality Employment Contract Regulations (the “Notice”) to clarify and interpret the Regulations.

Jurisdiction and Majors
The Regulation provides the details for the conclusion, performance, alternation, dissolution and termination of the labor contracts within the Shanghai area.

Definition of Employer and Employee
According to the Notice, “employers” subject to the Regulations include all types of for-profit enterprises, sole proprietorships, incorporated and unincorporated non-profit organizations (the “employer”) and all government agencies in Shanghai municipality.
Domestic workers, professional insurance agents, full-time students who work on a part-time basis, and those who provide independent services are not protected under the Regulations.

It should be noted that although the regulation is ambiguous on its applicability to the contracts involving non-PRC citizens or those from Hong Kong, Macau and Taiwan, the Regulation shall deserve the attention due to the special mandatory nature of Labor Contract Law of PRC rather a kind of contract under the Contract Law of PRC.

Confidentiality and Business Secret
The regulation also provides that the labor contract parties can include confidentiality clause in their labor contracts or reach secret information agreement separately.

Penalties
For laborers who are in breach of the service period or trade secret, the penalties can be imposed.

Formation and Workers type
Besides, the regulation also stipulates that the labor relationships shall be established as long as the obligation has been performed in spite of the conclusion of the labor contracts. Special articles for non-fulltime worker, in other words, worker by hours have been included in the regulation.

Paying Staff
The Labour Law provides a minimum wage requirement, which is determined at a provincial level. For example, as of 1 July 2004, the hourly minimum wage for part-time workers is RMB6.8 (including all social insurance contributions) in Beijing and RMB5.5 (excluding all social insurance contributions) in Shanghai. However, these municipalities only regard employees who work not more than 4 hours each day as part-time workers. By way of comparison, the monthly minimum wage for full-time workers is RMB545 (excluding all social insurance contributions) in Beijing and RMB635 (excluding all social insurance contributions) in Shanghai.
The 1993 Regulations on Minimum Wages in Enterprises (amended in October 1994) require all provinces, autonomous regions, and directly administered municipalities to set minimum wage standards and report them to the Ministry. Employers that fail to meet these standards may be ordered by the Chinese Ministry of Labor and Social Security (MOLSS) and/or its local counterpart to pay the outstanding remuneration and penalty in the amount of 100% to 500% of the outstanding remuneration to its employees. This is substantially more than under the Old Regulations, which provided for more lenient penalties (i.e., 20% to 100% of the outstanding remuneration). Employers must also deduct and withhold employee individual income tax, social security and related payments. Its purpose was to protect workers from market forces that would drive the income of the lowest paid workers below a fair and decent level.
It is worth noting that wages in China in theory are subject to “collective bargaining” between representatives of employers and employees (at least in cases where the labor union so requests, provided that the company has commenced business operations). The employer should also hear the labor union’s opinion in the board of directors before making any resolution on personnel-related matters such as wage levels.
The mandated minimum wages are formulated by the relevant local authorities and vary from location to location.

Payment Time and Means
Wages shall be paid monthly to laborers themselves in the form of currency. The wages paid to laborers shall not be deducted or delayed without justification. Enterprises should pay monthly wages in cash to their workers at least once a month. Workers employed on an hourly or weekly basis may be paid daily or weekly. Enterprises should pay temporary staff or project-based staff immediately after they have completed their job according to the relevant agreement or contract.
Welfare and benefit
The employing unit and laborers must participate in social insurance and pay social insurance premiums in accordance with the law. Employers must pay living subsidies and provide medical treatment allowances for all PRC employees. Employers and employees must also participate in the PRC social insurance system for unemployment, old age pensions, medical treatment, work-related injuries and maternity care. In addition to these mandatory subsidies, employers may also introduce incentive schemes such as bonuses or allowances. These schemes must be paid out of an employee bonus and welfare fund which is created from the employer’s after-tax profits.
For example, both employers and employees must contribute to a workers’ pension fund. The employer is required to contribute 20% of a staff’s monthly salary, while the employee contributes 8% of his or her monthly pay; similar payments are made to medical insurance schemes with employers forking out the larger share. But such contributions vary from region to region. Foreign firms tend to provide more generous medical plans than their local counterparts to attract staff and both employers and employees also contribute to a national scheme set up to help the jobless.

Working hours and holidays
China practices an 8-hour workday, 5 days a week, a 40 hour work week working hour system. (Article 36: The state shall practice a working hour system under which laborers shall work no more than eight hours a day and no more than 40 hours a week on average) (as of May 1, 1997)
Restrictions apply to overtime work. The employing unit may extend working hours due to the requirements of its production or business after consultation with the trade union and laborers, but the extended working hours for a day shall generally not exceed one hour; and such extended hours shall not exceed three hours a day and only under the condition that the health of the laborer is guaranteed. However, the total extension in a month shall not exceed thirty-six hours.
This means that overtime work should never exceed three hours a day, making the longest legal shift permitted 11 hours. It is illegal to work more than 9 overtime hours a week. That caps the longest legal workweek allowed at 49 hours.
Under the PRC Labor Law, generally overtime pay is to be 150% of the normal base wage, 200% for work on non-holiday rest days when substitute rest cannot be arranged, and 300% for work on public holidays.

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Employees’ leave
The statutory holidays are provided in the PRC Labor Law, including New Year’s Day, Lunar New Year’s Day, International Workers’ Day, National Day and other public holidays as provided in the PRC laws and regulations.
Employees are only entitled to annual leave after one year’s service with the same employer. The amount of annual leave varies according to work obligations, qualifications, and other factors, but normally does not exceed two weeks a year. Employees are also entitled to home leave if they are required to live away from their spouse or parents. Employees visiting their spouse are entitled to 30 days home leave per year. Home leave to visit parents is either 20 days per year or 20 days per four years, depending on whether the employer is married.
China has a 5-day week system, and Saturday and Sunday are not included as working days.

Employment termination
Employment termination is complicated in the PRC and employers should exercise caution when sacking employees. You should also have a proper knowledge that it is not very easy to terminate or suspend any employee if you conclude the contract with him/her which is to assume that everyone coming to work for you will someday have to be terminated. Therefore keep track performance in a standardized way is a must for you to have in mind always.
1. No notice is required if an employment contract is terminated during the probation period and the employee has failed to meet employment requirements, or if an employer can demonstrate that the employee has seriously violated the employer’s rules and regulations or has committed other offences, engaged in graft or is charged with a crime.
2. Employers are required to provide 30 days’ notice prior to dismissing employees or terminating labour contracts. Under PRC Labour Law, an employer cannot dismiss an employee without a cause. To terminate an employment contract under the PRC Labour Law, an employer must demonstrate that the laborers can neither take up their original jobs nor any other kinds of new jobs assigned by the employer after completion of medical treatment for their illnesses or injuries not suffered during work; No agreements on a alteration of labor contracts can be reached through consultation between and by the parties involved when major changes taking place in the objective conditions serving as the basis of the conclusion of these contracts prevent them being implemented; that an employee is “incapable of performing a job and remaining unqualified even after training or moved to another post” and under circumstances which employer experiencing serious economic difficulties, the employer can lay off workers after he has solicited the views of the enterprise trade union and has submitted report to the labor authorities; workers cannot be terminated simply to improve productivity and efficiency. Employers however must give priority to laid-off employees if they recruit again within six months after a layoff.
3. An Employer Shall Not Rescind a Labor Contract If : 1) an employee suffers from an occupational disease or a work-related injury and has been confirmed as being totally or partially unable to work; 2) an employee suffers from an illness or injury for which medical treatment within a stipulated period is allowed; 3) a female employee is pregnant, on maternity leave or within the stipulated period for nursing.
4. Employers may indicate in the contracts certain circumstances under which they can terminate the contract as long as they don’t violate the statutory provisions.
FIE employers are required to pay an employment severance payment when the employment contract is terminated. One month’s wage is payable to a departing employee for each completed year the employee has worked.

Under China – PRC employment Law generally provides that the WFOE may terminate the direct relationship with thirty days of notice and specifically defined cause. Termination in China for less than cause subjects the employer to legal action in a very fluid legal environment. Termination of a FESCO engagement also requires thirty days of notice.

Often Overlooked Points
There are a lot of important points that the investor usually overlooked and running the risks of violation and penalties thereof after they executed the contract with the employee. The following are the key points that foreign investor should have in mind:
1) China practices an working term of 8-hour workday, 5 days a week, a 40 hour work week;
2) There is a daily quota limitation;
3) No Forced Overtime/Overtime Strictly Limited to Nine Hours a Week/ Legal Work Week Capped at 49 hours;
4) All Overtime Work Must Be Paid at a Premium;
5) After one year, all workers are entitled to paid annual vacations;
6) Detaining Workers Wages, Fines or Mandatory Deposits is Illegal;
7) Companies Must Join and Pay into Social Security;
No Discrimination Against Women;
9) The Right To Organize Independent Unions;
10) Every Worker Has the Right to a Written Work Contract.
In addition, you should also take into account the accuracy of an applicant’s CV conduct physical examinations of new employees.
Resignation
Although the labor contract has the clause on the length of service period, China’s laws grant employees the right to resign. The Constitution of China protects the laborer’s right to work, which should include both the right to establish labor relations and the right of terminating such relations. Article 31 of the Labor Law of the People’s Republic of China, which came into effect on January 1, 1995, establishes the right to resignation of laborers. It specifies the conditions for premature termination of labor contract as: (1) To notify employing unit 30 days in advance; (2) to notify the employing unit in writing; (3) to notify the employing unit without having got the consent of the unit; (4) a laborer shall pay default fines to the employing unit if the labor contract has the provisions on responsibilities for the breach of contract by terminating labor contract in advance. But if the labor contract does not contain provisions on the responsibilities for the breach of earlier termination of contract, it shall run the risk of being regarded as the employing unit having given up the demand for default fines and the laborer needs not to pay default fines.
In addition, employees can resign without notice during the trial employment period, or at any time when the enterprise has violated the labor contract and encroached the lawful rights of the employees under Chinese law as follows:
• where no notice is required: the employer has ‘coerced’ workers with violence, threats or illegal restrictions on personal freedom;
• where the employer fails to pay wages or provide working conditions as agreed to in the labor contract; or
• at any time during his/her probation period.

Labor Dispute Settlement
According to the China Labor Law and Regulations, whenever a labor dispute arises between a worker and an enterprise, either party may apply to the labor dispute mediation committee at the enterprise for mediation. If the mediation fails or if neither party wants mediation, then they may apply to the local labor dispute arbitration committee for arbitration.
Generally speaking, arbitration and litigation are the most helpful ways to settle labor disputes. The parties involved in the dispute can apply to the labor dispute arbitration committee for arbitration within sixty (60) days from the date the dispute arises. The Labor Dispute Arbitration Committee will arbitrate the case and issue an arbitration award. However, this award is not final. If the relevant parties fail to agree to the arbitration award, they can file a lawsuit on the case to the relevant People’s Court, which will then make a final decision on the case. In China, the two parties involved in the dispute are not allowed to file lawsuits directly to the People’s Court. They must apply for arbitration first.

Burden of proof
To prevail in a civil case, the general rule is that “he who asserts must prove”, i.e., the burden rests with the plaintiff (the party bringing the action).

There are some exceptions to this rule, one of them is the rule in labor dispute resolution due to the great disparity between employee and employer in terms of related strength.

The Interpretation on Several Questions Concerning the Application of Law in Trying the Cases of Labor disputes promulgated by the Supreme People’s Court of PRC states the burden of proof of just discharge, suspension, reduce remuneration and the calculation of employee’s term of employment for cause shall be on the employer.

Therefore, the burden of proof of good cause for leaving work shall be on the employee, and the burden of proof of misconduct shall be on the employer.
Writing a staff handbook
From an employer’s perspective, the handbook should only contain provisions that are going to help the employer with respect to employment issues. In China, however, according to law, the administrative authority exercises tight control over the termination and suspension of employment contract. So an employee can not be fired at any time without cause which is much different from the practice of western countries. There should not also provide that the handbook can be modified or amended by the employer at any time and for any reason.
It certainly could be a problem for an employer to include provisions in a handbook that don’t reflect actual conditions of employment or that may impose unintended duties or obligations on the employer. (Believe it or not, this happens all the time when employers simply decide to copy over and use a “canned” set of policies and procedures they have taken from somewhere else without making sure that the handbooks conform in all respects to their particular business operations.)

An employee handbook will usually include:
• Working hours and days and break times
• Overtime rules
• Sick days and sick leave policies
• How sick leave is accumulated
• Health and other benefits
• Official paid holidays
• Vacation policies How vacation time is accrued and rules as to how and when employees can take it
• Procedures for specific work duties
• Dress codes
• Safety and hygiene rules
• A statement that the handbook “has been passed by the worker’s congress with due procedures” which means such handbook could be incorporated into the employment contract as part of it.
It’s extremely important to have employee handbooks drafted by or at least reviewed by legal counsel periodically in order to make sure that they comply with applicable law and take into account that might not be so obvious.
It should also be noted that you should present each new employees with an employee handbook on their first day on the job, you won’t accidentally overlook anyone and have the employee sign and date a statement that he or she has received the handbook. That way, you can prove at a later date that the employee had the information in the handbook.
Harassment and Discrimination Claims
Up to now, China does not have the specific law on harassment and discrimination in workplace however its top legislature is now formulating the Law on the Protection of the Rights and Interests of Women. In which sexual harassment will be expected for the first time be recognized as a crime and become punishable by law; also according to the draft amendment, no one shall be allowed to subject women to sexual harassment and all work units shall take measures against sexual harassment in working places.
Nevertheless it is still difficult to define exactly what constitutes sexual harassment a problem with which governments all over the world have struggled.
China employment Legislation
The “Labor Law of the People’s Republic of China” effective from 1 January 1995, PRC Trade Union Law, promulgated on 28 June 1950 and revised on 3 April 1992 and 17 October 2001, are the principal Chinese labor laws.
Supplementary laws have also been issued for particular aspects of employment, including:
• The Regulations on Labour Management in Foreign Investment Enterprises (the Labour Management Regulations), adopted in 1994;
• The Regulations of the State Council Governing Working Hours for Workers, adopted in 1995; and
• The Provisional Administrative Measures on Wage Incomes of FIEs, adopted in 1997.
China labor law governs all employment relationships: it covers all forms of business organization, encompasses both blue-collar and white-collar occupations and applies equally to companies owned by domestic interests and employers which are affiliates of foreign companies.
Labour practices vary between regions as provincial and local labour departments have fairly wide discretion in handling local labor matters.
Trade Secrets Protection
In order for business information to qualify as a trade secret, the information must:
1. not be generally known or ascertainable through legal methods;
2. provide a competitive advantage or have economic value; and
3. be the subject of reasonable efforts to maintain secrecy.
Which generally include: product formula, survey methods used by professional pollsters, recipes, a new invention for which a patent application has not yet been filed, marketing strategies, client lists, manufacturing techniques, computer algorithms, etc.
During the course of business, you may have to disclose your business secrets to your employees. What happens when you have a disloyal, untrustworthy, and dishonest employee? The employee may know your secrets. Is there anything that you can do to stop that employee from disclosing your secrets to others?
The best way to protect yourself is to have the employee sign a nondisclosure agreement (sometimes called a disclosure agreement or confidentiality agreement) before you disclose any secrets. If someone signs a nondisclosure agreement and later uses your secret without authorization, you can sue for damages.
Nondisclosure agreements vary in format. Generally, they contain these important elements:
 Definition of what is and what isn’t confidential information;
 Obligations of the receiving party, and
 time periods.

You should also get in the habit of having all employees, consultants, independent contractors and potential business partners routinely sign confidentially agreements if they may receive or have access to any of your company’s trade secrets.
In addition, during the course of business, you may have to disclose your business secrets to your employees. But what happens when these employees leave your company? They know your secrets and there is nothing stopping them from telling others. By requiring your employees to sign a non-compete agreement, employees must agree not to work for a direct competitor for a certain amount of time after leaving your company. The theory behind this is that after a certain amount of time, your trade secret may no longer be valuable or will have changed as your business advances.

However, in China, there are restrictions imposed on enforcing non-compete agreements against employees such as the length for non-compete and the compensation thereof.

In China, there is protection against disclosure of a trade secret which imposes liability on the enterprises who employ the persons with confidentiality agreement not expired. Article 10 of the Unfair Competition Law, prohibits business operations from engaging in any of the following acts:
1. obtaining the trade secrets of any rightful party by theft, inducement, duress, or other illegal means;
2. disclosing, using or allowing others to use the trade secrets of any rightful party obtained by illegal means; or
3. disclosing, using or allowing others to use trade secrets in breach of an agreement or the confidentiality requirements imposed by any rightful party.
There is also third-party liability. Third parties who obtain, use, or disclose business secrets that they knew or should have known to have been infringed by any of the methods in (1)-(3) above, will be deemed to have infringed the trade secrets of the rightful party.

In case of a suspected infringement of one’s trade secrets, there are both judicial and administrative actions which can be undertaken to enforce one’s rights.
The infringed party can institute proceedings in one of the people’s courts to seek compensation for damages under Article 20 of the Unfair Competition Law. In cases where damages cannot be reliably calculated, the amount of profits obtained by the infringing party can be used as the basis for the compensation claim. In addition, expenses and fees arising from investigating and obtaining evidence of the infringement can also be included in the claim for damages.

For administrative enforcement for infringement of one’s trade secret, the offices of the Administration for Industry and Commerce (AIC) above the county level will, after an investigation and determination of wrongdoing, order the infringer to cease its infringing acts and impose a civil fine of at least RMB10,000 but less that RMB200,000. If the infringer does not comply with the cessation order, a fine of more than twice and less than three times the amount of the value of goods sold will be imposed. All decisions of the Administration for Industry and Commerce may be appealed to the people’s courts.

While the most important point to protect your right is take self protection measures from the very beginning to ensure that an employee will not steal, copy or disclose confidential information, the employer should be sufficient to establish that the material in question was deemed to be confidential and adequate measures had been established for its protection. That determination is essential if one is to effectively undertake any type of enforcement action against an infringer of one’s trade secrets.

If an employee has departed your company by reason of resignation or termination and gone to work with a competitor, then the first step to take is to give immediate notice to the new employer of the employee’s continuing obligation to not disclose your trade secrets. This can be accomplished by sending a registered letter to the new employer, indicating that the new employee has knowledge of trade secrets, the general subject matter of the trade secrets, an explanation of the legal basis for the employee’s obligation to maintain secrecy (for example, a Non-Disclosure agreement), and that by virtue of the foregoing, the trade-secret owner may have a cause of action against the new employer.

For Third Party Liability to arise, the new employer must know, or have reason to know, that its new employee had access to trade secrets and may be about to breach a confidential relationship.

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Personnel records
The right to fire is becoming more and more restricted because of the inherent nature in China laws that favor employees. These days, more and more workers who feel they have been unjustly discharged or forced to quit have filed employment-related suits and courts are increasingly taking the employee’s side.
The best way to “win” a lawsuit for employers is to avoid it in the first place. By keeping in mind some basic management and interpersonal rules, many of these rules are also useful in establishing your defense — that you had a good reason to fire your employee — if it turns out that the worker does sue you, after all.
Under china law, the employer can revoke labor contracts should any one of the following cases occur with its laborers: (1) When they are proved during probation periods to be unqualified for employment; (2) When they seriously violate labor disciplines or the rules or regulations of the employer; (3) When they cause great losses to the employer due to serious dereliction of duties or engagement in malpractice for selfish ends; (4) When they are brought to hold criminal responsibilities in accordance with law.

As the China labor law does not define clearly what is to be unqualified, serious violation, dereliction or malpractice for the revocation, therefore, the safest way to fire someone, from a legal standpoint, is to be sure that you have a valid, nondiscriminatory business reason for the action, and that you have enough documentation to prove it. Your documentation must be created in the normal course of business, before you fire the person which includes fair work rules and policies just like a company handbook but it must be the reasonable rules your business requires, a performance feedback system

It’s important to remember that workers (and courts) are more likely to perceive a firing as “fair” if your employees have had plenty of notice about what conduct and performance you expect from them which are very clear and specific. It’s also important that workers receive regular feedback about their job performance, and that they are warned whenever you find that they are not living up to expectations, investigate the “last straw” incident thoroughly. It should be also noted that the using of progressive disciplinary measures in your rules must be enforced fairly otherwise it would be useless. For legal purposes, you must apply your rules equally to all your employees, if you hope to rely on them.
The last but not least, before the fire, you are required to solicit the opinion of the trade union of your company which had been the concern of the hearing judge.
Secondment arrangement

“Secondment Contract” means the contract to be entered into between the Company and Party B (or any of its Affiliate(s)) for the secondment of certain employees by Party B (or such Affiliate(s)) to the Company.

Due to the internal policies of foreign investment enterprises (FIEs) and their foreign parent companies, the difficulties in understanding PRC employment law and how it operates, as well as to avoid the business tax and withhold tax, a number of FIEs structure their employment of foreign nationals in China by way of secondment.
From the perspective of PRC law or the law of the country from where the person seconded, the dual legal conflicts and inconsistencies could cause more problems as the employment contract and the labor disputes arise thereof shall be governed and interpreted by Chinese relevant law and regulations which means that a foreign employment agreement cannot prevent the PRC law from applying if the expatriate will be working in the PRC for more than three months.
To avoid that risk, a PRC company may employ the foreign national directly and to state PRC law as the governing law in the employment agreement. In the meantime, detailed arrangements and entitlements could be structured in line with the foreign parent’s HR policy or the PRC company’s HR policy.

Of course, there are a number of other points should be paid attention such as Residence, Personal income tax, Taxable presence risk, and Compliance obligations which could avoid or mitigate potential risks in the commonly adopted secondment arrangements identified above. It is important that employers work together with their lawyers to benefit from the employment of expatriates in China and avoid the risks of being stuck in the law of two or more jurisdictions.

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Individual income tax

For people working in China, the taxable income is the balance of their monthly income after deducting RMB 1600 for personal expenses.
If you are employed from outside China, the taxable income is the balance of their MONTHLY income after deducting RMB 4,000. The income from the wage and salary will be taxed at the progressive rates ranging from 5% to 45%.
Monthly Salary Tax Rate Quick Calculation Deduction

RMB5,000 – 20,000 20% RMB375
20,001 – 40,000 25% RMB1,375
40,001 – 60,000 30% RMB3,375
60,001-80,000 35% RMB6,375
80,001-100,000 40% RMB10,375
RMB100,000 + 45% RMB15,375

If you derive income and work in the mainland for over 183 days, you are liable to individual income tax in China.
Certain income of foreign workers is eligible for individual income tax concessions. They are housing allowance, meal allowance, removal expenses, travel allowance, language training fees and children’s education expenses, etc. If all these eligible expenses are included in the salary payment without separate receipts income tax concessions will not be granted.
Any foreign individual who resides in China consecutively or accumulatively for not more than 90 days (or 183 days for those from countries that have signed tax treaties with China) in a tax year is exempt from individual income tax if his wage or salary is not paid or borne by his employer in China and is not borne by resident establishment or permanent venue of his employer in China.

We believe the important threshold for foreign residents liable to individual income tax (IIT) is the number of days staying in the mainland which is 183 for tax treaty nations with China. Using multiple or splitting the employment contract for an expatriate cannot help minimize the income tax liability. We would advise that in order for the company to comply with China IIT laws they should consult the tax professionals.

When you said tax year (or calender year), it means from January 1st to December 31th.
If you are employed by a Chinese company with a permanent base of operation in the mainland your income are liable to individual income tax irrespective of the length of period of working in China and how the income are paid.
Some people have made up really high housing costs to bring down taxes owed. Word is that the authorities may audit housing contracts, and cross-check them with market rates. The claim for housing allowance should broadly comensurate with the staff’s status in the company and its size and prestige. Also the amount of claim should not deviate much from the market value of the property in one particular area or district. Clearly all the valid evidence and documents should be produced to support the claim.
If you foreign company has a fixed office base of operation in China you are liable to individual income tax irrespective the number of days of stay in the mainland. Otherwise the 183 days rule will apply. The period of stay in China will be counted on the actual number of days basis.

Trade Union
trade union membership
Under the revisions of the Trade Union Law passed on October 27, 2001, all employees have the right to join the All China Federation of Trade Unions (ACFTU), the country’s sole trade union run by the ruling Chinese Communist Party. No organizations or individuals may prevent their employees in China from organizing or joining a trade union, regardless of nationality, profession, religion, race, sex or education level. And all enterprise trade unions with more than twenty-five members are now obliged to have a trade union committee. Where there are workers, there should be trade unions for them. This is the principle that drives the ACFTU, who believes trade unions are not only for employees of state-owned enterprises, but also for migrant workers and employees from foreign-funded and private enterprises.

China’s Trade Union Law stipulates two ways for the establishment of trade unions: One is a request from employees on a voluntary basis, and the other is a suggestion from the trade unions at a higher level. Trade unions in the upper level of the national union hierarchy are authorized to send union officials to enterprises and help them establish trade unions. Enterprises have no right to interfere in the process.

As to the restrictions on trade unions, Trade Union Law actively prevents the formation of independent trade unions, while establishing the legal basis of the trade union monopoly held by the ACFTU subordinating local trade unions to the Constitution of Trade Unions of the PRC, securing the legal-political subordination of trade unions to the ruling Party and ideology.
Rights of a trade union member
According to article 3 of ‘General Principles’ of the Constitution of Trade Unions, Trade union members enjoy the following rights:
1. To elect, to be elected and to vote.
2. To criticize any trade union organization and personnel, to demand the removal or replacement of any union personnel, and to supervise the trade union work.
3. To make criticisms and suggestions concerning problems in the state and social life and to demand that trade union organizations accurately convey them to the departments concerned.
4. To demand that trade unions give them protection when their legitimate rights and interests are infringed upon.
5. To enjoy the preferential treatment provided by trade union-run undertakings in the fields of culture, education, sports, tourism, convalescence and recuperation; to enjoy various awards given by trade unions.
6. To participate in the discussions on trade union work and issues of concern to workers and staff members at union meetings and through trade union-run newspapers and journals.
Trade unions do have a right to be consulted on significant issues of operation and management, including the design of new facilities and processes and in the implementation of safety systems. The Trade Union Law also contains many provisions requiring unions to safeguard workers rights to ‘democratic management’ (e.g. Articles 5, 6, 19, 23, 35-3.
Furthermore, Both the Trade Union Law and the Work Safety Law give extensive powers to unions to ensure that standards are met (Trade Union Law Articles 21-26, Labour Safety Law Article 52). These provisions typically give unions the power to complain of a violation, and require the employer to investigate the compliant and make amends if a violation has occurred, If an employer refuses to do so, the union can refer the matter to local authorities. Unions have legal capacity and can sue in their own right.

On the foreigner membership, if a foreigner employed in China in accordance with the legal procedures (RULES FOR THE ADMINISTRATION OF EMPLOYMENT OF FOREIGNERS IN CHINA), then, the Trade Union law will apply which meant that he is entitled to join the trade union of the entity in which he works with if he is legally allowed by the China competent authority.

Relevant China laws and regulations do not expressly prohibit the double trade union membership if the foreigner and his employer abide by the China trade union law and other relevant laws and regulations.
Other issues
Except the abovementioned, the followings would be worthwhile attended for foreign investor’s success in China:

 Under China’s Trade Union Law, enterprises pay the outlay for labor unions, which is equivalent to 2 percent of the total wages of employees, not the number of workers who join the trade union, with 60 percent repaid to employees in a form of welfare, and 40 percent submitted to trade unions at higher levels and the enterprises are also required to provide facilities and working place for the trade unions carrying out works.
 Some local governments put too much emphasis on the growth of GDP and don’t pay enough attention to the protection of workers’ rights and interests so when they negotiate with the foreign investors about the investment, they may make some commitments which violate the trade union law or other relevant laws and regulations, therefore, a lawyer should be consulted for avoiding any future troubles.
 Currently, it appears that the ACFTU pushes for better access to multinational corporations in the face of its declining influence;
 It wouldn’t be surprising in the Chinese environment, where strikes are forbidden and the official labour grouping actively supports the government’s efforts to block the rise of independent unions. So the trade union could be good partner in your business operation if you deal with this issue properly.
 Unions in enterprises and organizations with more than 200 members should elect one full-time chairperson, according to Trade Union law.
 Any organization or individual that, in violation of the provisions of Articles 3 and 11 of the Union Law, obstructs the workers’ and staff members’ from joining or organizing of trade unions in accordance with law or the effort made by trade unions at higher levels to assist and guide the workers and staff members in establishing trade unions shall be ordered to by the administrative department for labor to make rectification; if it refuses to do so, the said department may apply to the people’s government at or above the county level for solution; where grave consequences are caused as a result of the use of such means as violence and threat in obstruction and thus a crime is constituted, criminal responsibility shall be investigated according to law.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

David Cui
Lawyer

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Sponsor Link: DaCare Executive Search (China)
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Big bucks in China’s software industry

By Dan Ilett

Published: Wednesday 26 July 2006

Amid China’s tech boom, how is software shaping up? It might not receive the attention that internet- and even mobile-related sectors get but, finds Dan Ilett, the industry is addressing its challenges.

You commonly hear two phrases in China’s technology world: “there’s so much opportunity here” and “this is the new Silicon Valley”.

Whether there’s truth in either will be seen over time but China’s software industry – spanning indigenous software vendors, overseas arms of foreign companies and outsourcing operations, for example doing application development for users in China and overseas – is certainly growing at phenomenal speed.

China throws people at software because it’s so cheap to do so. The real problem though is that the Indian companies are coming.

— David Lewis, VP of corporate development, Worksoft
There are more than 13,000 companies producing software in China. In 2000, they exported $400m-worth of software but by 2005 that figure had grown to $3.6bn. It is set to jump again to $12.5bn by 2010, according to China’s Ministry of Information Industry.

David Lewis, VP of corporate development for Worksoft, a software outsourcing company, says: “China throws people at [software] because it’s so cheap to do so. The real problem though is that the Indian companies are coming.

“But they themselves have problems. There are cultural issues between Indians and Chinese and there’s a good deal of protectionism – not to the same extent as Japan has had but that’s a key issue people are overlooking.”

Some predict that just as the Chinese government has protected Chinese banks, the same will happen in software.

IBM, a large overseas player, has approached the market by putting Chinese people in charge of its operations. Lewis says Infosys is the only Indian company to have embraced the same approach.

Worksoft produces software for the likes of Citibank, EDS and Microsoft and also sells into Japan’s financial services sector.

According to the China Software Industry Association, China is the largest overseas software producer for Japan – a near-shore coding shop, if you like. Beijing alone did $150m worth of coding for Japan in 2005 and that figure is expected to grow by 50 per cent per year. Almost 4,000 Japanese-speaking software engineers are now required to meet the growing demand.

Yet, at first glance, China seems to have an abundance of qualified software engineers.

Read all about it…

Yu Bin, head of the Zhongguancun Software Association in Beijing, says: “International companies are getting in to China to develop their software. There are a lot of students who graduate in China – about three million every year, one-third of whom would be IT students.”

Bin says antivirus and ERP software companies – covering areas such as payroll, HR and manufacturing systems – are hot right now. Government figures also point to education and tax as growth areas.

And software companies argue that although there are a large number of IT graduates, finding the people with the right skills is proving difficult.

Worksoft’s Lewis adds: “The universities here blow away Indian universities. But in India they do more training. It’s still a young industry here. It still has to grow up but it will grow faster than India.

Another hurdle is creativity. Lewis believes the Chinese government is taking a risk by homing in on “what’s making big bucks” now rather than looking to the long term. He would also like to see a greater spirit of teamwork among the Chinese software engineers.

Cheng Peng, an academic from Tsinghua University – one of China’s most prestigious – agrees that a lack of creativity and innovation is holding back the software economy.

He says: “Innovation is so poor here. We can earn a lot of money from doing things like coding and having our own businesses but fundamentally the IT economy is something we can’t get yet because we’re not innovating. There’s a lack of real thinking. Everyone’s trying to break into a market – they just can’t do it without innovating.”

And analysts argue software engineers are taking advantage of an environment that allows them to change companies every few months.

Sage Brennan, MD at analysts Pacific Epoch, says: “In software China has a great chance but the main issue is project management skills. Chinese engineers are great at getting tasks done. But they have few skills in management – they just don’t have much experience.

“We’re starting to see companies get past the 50-person mark. We’re not seeing many 4,000-person software engineering companies, though – not like India, for example. If you can get high-quality managers and middle managers then that’s easier but people don’t manage teams very well. Not yet.”

China’s future in software clearly looks bright – though not without its issues.

China’s MNCs pick local managers over expats

YINCHUAN (CHINA): Yong Wu, 40, heads a foreign invested factory that produces over a million tyres a year, most of which is sold worldwide. He is in charge of 3,000 workers toiling in three assembly lines.

Yong draws a salary of 6,000 yuan or Rs 30,000 a month. A third of his income goes towards mortgage on his house in Yinchuan, capital of the remote Ningxia province in west China. Zou Guanghui, his deputy, runs one of the assembly lines with 916 workers. Zou earns 4,000 yuan or Rs 20,000.

Yong and Zou are among the hundreds of low-profile wonder boys – as foreign investors sometimes describe them – who have become the darlings of these investors. These reliable managers are one of the many reasons why there is an almost endless flow of foreign investment into China’s manufacturing sector.

Most of them earn about 20% of the salaries claimed by expat managers. And usually do not have sophisticated management degrees. But they exhibit an ability to efficiently manage vast armies of workmen.

Recent years have witnessed a huge growth in the number of Chinese managers being employed by foreign companies, who used to mostly rely on expatriate managers till the mid-90s.