Employing in China

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Expanding into
China

Expanding to countries such as China – which is characterised by a productive and robust workforce, multifaceted employment and tax laws, a strong infrastructure network, and leading sectors in agriculture, energy, manufacturing, mining, and services – can bring both excitement to the possibilities, but also significant stress to ensuring the entity with the country’s rigorous legal structures and laws.

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China flag

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Global Expansion is a step to make for any business, regardless of your goal. But the opportunities that can come with an expansion can be stimulating as well as intimidating and confusing, especially when you consider all of the registration procedures that need to be done and the documentation required.

Going at it without the proper support can increase the costs, time and risks involved.

The legwork and potential red tape can be worked through more efficiently and cost-effectively with the support of a Professional Employer Organisation (PEO) such as Bradford Jacobs, primarily through our Employer of Record (EOR) framework.

It can be best utilised when businesses are just beginning their expansion process and require more information before incorporating an entity and fully establishing themselves in that market.

Country EOR Guide - Bradford Jacobs

Download our Guide to China

Learn all about expanding into China and see what we can do to make your expansion easier.

Download our Guide to China

Learn all about expanding into China and see what we can do to make your expansion easier.

Country EOR Guide - Bradford Jacobs

Hiring Staff
in China

Hiring Staff
in China

The Main Sectors of the Chinese Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

Manufacturing is by far the biggest industry in China accounting for 46.8% of the country’s GDP which is attributed to China’s intense investment in its heavy industries.

China is the world’s number-one producer of cement, steel, and chemical fertilizers. Of the ten largest steel producers in the world, six are based in China with the country’s annual steel production of 683 million tons being the highest in the world. China also has the largest cotton textile output of any country with textile manufacturing accounting for 10% of the country’s gross industrial output.

China is the third largest producer of automobiles in the world behind the US and Japan with the annual automobile export being estimated to be $70 billion. Manufactured products account for about 94.3% of China’s $2.09 trillion total exports which include automobiles, ships, locomotives, textiles, fertilizers, and electronics.

The mining is among the major industries in the Chinese economy. The industry annually injects billions of dollars into the country’s GDP.

China’s gold production has been increasing in recent years and has doubled in the past decade. Most of China’s gold deposits are found in the eastern part of the country, in the Liaoning, Henan, Fujian and Shandong provinces. Most of the gold produced in China is consumed locally as China is the world’s fourth largest gold consumer. The local gold consumption in China is equivalent to 9.2% of the global gold consumption. Coal mining is another important sector in China’s mining industry.

For more information – download our free country guide here

Agriculture is another major industry in China’s economy with the country being both the largest consumer and producer of agricultural products in the world.

China can feed its enormous population (estimated to be equivalent to 20% of the global population) despite having only 15% of its land is suitable for cultivation. For comparison, China has 30% more agricultural production than the United States despite having 15% less cropland area.

About 300 million people work in China’s agricultural industry, the majority of whom are small-scale farmers. The most important crop produced in China is rice which is cultivated on millions of acres of land. The country which was traditionally known for its aquaculture is also the largest producer of poultry, eggs, and pigs.

Energy is an important pillar of China’s economy and is one of the country’s largest industries. China is the leading country in electricity production since 2011 when the country’s production exceeded that of the United States. China’s annual electricity production reached 5,920 Tw-h in 2016. Most of the country’s electricity is produced from coal, a mineral that China has in plenty, with the third largest coal reserves in the world.

Hydropower is the second-most important electricity source in China, accounting for 20.1% of the total electricity production in 2016. However, the country is grappling with the problem of lacking a unified national grid system for proper distribution of the electricity.

The vast size of the country is also a problem due to voltage drops experienced as electricity is transmitted across long distances.

China’s services sector represents more than 54% of the economic output in 2020. To put this in comparison, in 2010, the services industry represented slightly more than 44% of GDP. Consumption of goods is a major factor and driver of growth, representing more than 39% of China’s GDP in 2020. Those goods include jewelry, home appliances, garments, autos, office supplies, and furniture.

However, China’s retail sales jumped by more than 13% from January to November 2021, versus the same period one year earlier. Retail sales represent consumer spending within the economy. In comparison, the United States posted retail sales of 18.2% from November 2020 to November 2021.

The Main Sectors of the Chinese Economy

The country focuses on the following key sectors, which all have a significant impact on the country’s economy:

Manufacturing is by far the biggest industry in China accounting for 46.8% of the country’s GDP which is attributed to China’s intense investment in its heavy industries.

China is the world’s number-one producer of cement, steel, and chemical fertilizers. Of the ten largest steel producers in the world, six are based in China with the country’s annual steel production of 683 million tons being the highest in the world. China also has the largest cotton textile output of any country with textile manufacturing accounting for 10% of the country’s gross industrial output.

China is the third largest producer of automobiles in the world behind the US and Japan with the annual automobile export being estimated to be $70 billion. Manufactured products account for about 94.3% of China’s $2.09 trillion total exports which include automobiles, ships, locomotives, textiles, fertilizers, and electronics.

The mining is among the major industries in the Chinese economy. The industry annually injects billions of dollars into the country’s GDP.

China’s gold production has been increasing in recent years and has doubled in the past decade. Most of China’s gold deposits are found in the eastern part of the country, in the Liaoning, Henan, Fujian and Shandong provinces. Most of the gold produced in China is consumed locally as China is the world’s fourth largest gold consumer. The local gold consumption in China is equivalent to 9.2% of the global gold consumption. Coal mining is another important sector in China’s mining industry.

Agriculture is another major industry in China’s economy with the country being both the largest consumer and producer of agricultural products in the world.

China can feed its enormous population (estimated to be equivalent to 20% of the global population) despite having only 15% of its land is suitable for cultivation. For comparison, China has 30% more agricultural production than the United States despite having 15% less cropland area.

About 300 million people work in China’s agricultural industry, the majority of whom are small-scale farmers. The most important crop produced in China is rice which is cultivated on millions of acres of land. The country which was traditionally known for its aquaculture is also the largest producer of poultry, eggs, and pigs.

Energy is an important pillar of China’s economy and is one of the country’s largest industries. China is the leading country in electricity production since 2011 when the country’s production exceeded that of the United States. China’s annual electricity production reached 5,920 Tw-h in 2016. Most of the country’s electricity is produced from coal, a mineral that China has in plenty, with the third largest coal reserves in the world.

Hydropower is the second-most important electricity source in China, accounting for 20.1% of the total electricity production in 2016. However, the country is grappling with the problem of lacking a unified national grid system for proper distribution of the electricity.

The vast size of the country is also a problem due to voltage drops experienced as electricity is transmitted across long distances.

China’s services sector represents more than 54% of the economic output in 2020. To put this in comparison, in 2010, the services industry represented slightly more than 44% of GDP. Consumption of goods is a major factor and driver of growth, representing more than 39% of China’s GDP in 2020. Those goods include jewelry, home appliances, garments, autos, office supplies, and furniture.

However, China’s retail sales jumped by more than 13% from January to November 2021, versus the same period one year earlier. Retail sales represent consumer spending within the economy. In comparison, the United States posted retail sales of 18.2% from November 2020 to November 2021.

Commercial Laws in
China

Foreign companies hiring employees in China must operate within a strict framework of legislation that provides comprehensive safeguards for the workforce. Trade union and collective agreements may also apply at the contract stage. Once staff have been sourced, interviewed, and selected, international companies must register employees with the Social Security Bureau, their local Housing Fund, and the State Taxation Administration.

  • State Taxation Administration – The State Taxation Administration of the People’s Republic of China have a number of responsibilities, including drafting tax laws, regulations, and detailed implementing rules; providing advice on the making of tax policies; making joint efforts with the MOF to report and instruct on implementation measures; interpreting tax laws and policies in the process of enforcement and reporting afterwards to the MOF for record-filing.
  • The Ministry of Human Resources and Social Security – The Ministry of Human Resources and Social Security of the People’s Republic of China is a ministry under the State Council, which is responsible for national labour policies, standards, and regulations and managing the national social security. This includes labour force management, labour relationship readjustment, social insurance management and legal construction of labour.

Labour Contract Law regulations that apply to all contracts include:

  • Providing a written contract for full-time employees within one month of first day at work, with the risk of having to pay double salary after the one-month limit
  • Contracts should be in Chinese and translated into a foreign language by legally accredited organizations, or risk being legally invalid
  • Details of the employee’s confirmed address and ID number
  • The terms of employment
  • Location and obligations of the role
  • Employees’ rights and working conditions
  • Terms for compensation, severance, and any disciplinary procedures
  • Any probationary period must be included. If the contract is between three and 12 months, the trial period cannot exceed one month; two months for between a one and three-year contract and six months for over three years
  • Employer and employee should keep a copy and any changes must be agreed by both parties

If the employer fails to provide a fixed-term contract within a year of the employee starting work, it defaults to an open-ended contract.

Commercial Laws in
China

Foreign companies hiring employees in China must operate within a strict framework of legislation that provides comprehensive safeguards for the workforce. Trade union and collective agreements may also apply at the contract stage. Once staff have been sourced, interviewed, and selected, international companies must register employees with the Social Security Bureau, their local Housing Fund, and the State Taxation Administration.

  • State Taxation Administration – The State Taxation Administration of the People’s Republic of China have a number of responsibilities, including drafting tax laws, regulations, and detailed implementing rules; providing advice on the making of tax policies; making joint efforts with the MOF to report and instruct on implementation measures; interpreting tax laws and policies in the process of enforcement and reporting afterwards to the MOF for record-filing.
  • The Ministry of Human Resources and Social Security – The Ministry of Human Resources and Social Security of People’s Republic of China is a ministry under the State Council, which is responsible for national labour policies, standards, regulations and managing the national social security. This includes labour force management, labour relationship readjustment, social insurance management and legal construction of labour.

Labor Contract Law regulations that apply to all contracts include:

  • Providing a written contract for full-time employees within one month of first day at work, with the risk of having to pay double salary after the one-month limit
  • Contracts should be in Chinese and translated into a foreign language by legally accredited organizations, or risk being legally invalid
  • Details of the employee’s confirmed address and ID number
  • The terms of employment
  • Location and obligations of the role
  • Employees’ rights and working conditions
  • Terms for compensation, severance, and any disciplinary procedures
  • Any probationary period must be included. If the contract is between three and 12 months, the trial period cannot exceed one month; two months for between a one and three-year contract and six months for over three years
  • Employer and employee should keep a copy and any changes must be agreed by both parties

If the employer fails to provide a fixed-term contract within a year of the employee starting work, it defaults to an open-ended contract

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