China Country Facts

We provide comprehensive information regarding, Culture, Work life, Taxation, Visa’s & immigration, Labour Law, recruiting in your country of choice and employment contracts.

Global Expansion Made Easy for You

Expanding into China generally comes with challenges, however, partnering with us and using Employer of Record (EOR) eliminates the frustrations you could encounter.

Visas, Work Permits and Migration

China, the world’s second strongest economy and still developing is a major attraction for international expansion but, as with most countries, many people will have to organize the correct documentation when crossing borders.

Expanding into a country or hiring a workforce abroad can lead your business to great profits, but unfamiliar laws and regulations can counteract your company’s goals and plans. Few companies have these resources, or the time. At Bradford Jacobs, we want to eliminate this complicated part. By using our PEO service we can arrange all needed visas and permits including the entire application process without your physical presence.

What types of Visas and Work Permits in China are there?

To visit, for business trips or to work in China most people require documentation unless their country of origin is part of a visa free area and has an agreement with China. Different categories of visa can be applied for. Existing visas must be acceptable and valid for purpose.

For those looking to work and live in China, the first step is to have a job offer and after this there are four main documents required:

  • Foreigner’s Work Permit Notice through the State Administration of Foreign Experts Affairs’ (SAFEA) website before they can obtain the appropriate visa. This is a notification that the person has permission to work in China
  • Appropriate Work Visa (Z or R category work visa – see below)
  • Foreigner’s Work Permit which will include an ID number
  • Residence Permit will allow employees to live and stay in China

There will be quite a few documents and procedures to go through with each of the above.

Work Visas

  • Z-Visa (Work Visa) is for foreign nationals (including their families) for paid work with local companies who intend to live and work in China for longer than six months.
  • R-Visa (Talent Visa) is given to highly-skilled / qualified people or ‘Tier A talents’ and is stringently controlled through a points system. However, for the most talented foreigners, visas can be accelerated and are for five or 10 years with multiple entries allowed for maximum stays of 180 days.

Other main categories:

  • M-Visa (Business): Allows regular work-associated trips for trade and business purposes, including foreign nationals who are not paid by a Chinese corporate body or are not employed in China; and who stay less than 6 months annually (duration of each stay is from 30 to 120 days).
  • L-Visa (Tourist): Allows tourists to visit for family purposes, short stay holidays and personal matters.
  • F-Visa (Non-Commerce): Enables foreign nationals who have an invitation to travel for purposes of research, lectures, to enhance their expertise or for interaction in technology, cultural and scientific fields. Typically, valid for between 30-90 days.
  • D-Visa (Chinese Green Card): For those foreign nationals who intend to live permanently in China. It is a permanent resident identification card (ID).

How to obtain a Chinese Work Visa

First, each foreign national requires a job with an employment contract, in order to acquire the following documents to work in China:

  • Foreigner’s Work Permit Notice / Letter
  • Z Work Visa (more typical work visa)
  • Foreigner’s Work Permit
  • Residence Permit

Foreigner’s Work Permit Notice / Letter

The employer completes the application online for the employee, who sends the relevant documents electronically to the employer (notarized or authenticated as required). This takes about five days and if employee is qualified, then the original paper documentation is sent to the employer.

Submitted by the Employee

Notarized and authenticated by Chinese Embassy or Consulate, in home country, for original copies of:

  • Highest qualification/certificate
  • Police report on any criminal activity
  • Digital copy passport
  • Digital photograph on passport guidelines
  • Letter from previous company, which needs to be signed and dated and covering about two years’ experience which should include the dates and duties performed
  • Recent health certificate (six months)
  • Employment contract

Obligations of Employer

  • When employing foreigners, accounts need to be registered with the Services System for Foreigners Working in China
  • Applying for the Foreigner’s Work Permit Notice / Letter on employee’s behalf
  • Have a Business License to show they are a legal entity and can therefore employ staff. Have a company stamp for documents submitted on behalf of employees
  • Certificate of approval if required by industrial management departments’ laws and regulations
  • When employing foreigners for highly skilled posts, checking that no local Chinese candidates are suitable
  • Not pay foreign workers less than the minimum wage in the region they will be employed

Once approved, a copy of the letter will be sent to both the employer and employee – who will also receive an English copy. The applicant can then apply for the Work Visa.

The applicant will also receive a Tier allocation of A, B or C.

The Tier system depends on a number of considerations such as qualifications, age, location, experience, and salary offered. Points are awarded for each category.

  • Tier A – Top-level experts (85 points and over).
  • Tier B – Professional employees (60-85 points).
  • Tier C – Lower skilled workers (lower than 65 points). Qualification will then depend on which skills are required in China

There is also a limit on approved applications for Tier B and C.

Tax Laws

Dealing with tax and payroll from overseas is a tricky process and poses complications that demand expert guidance. China comprises more than 20 provinces, five autonomous territories and administrative regions adding to the bureaucratic challenges. With over 20 years’ experience in the front line of international payroll providers, Bradford Jacobs ensures our clients comply with every level of tax and employment law across the globe. Our ‘know-how’ is vital for foreign companies expanding into China. By using our PEO service, we will take care of the complicated legwork so that you can focus on your business goals. Bradford Jacobs’ dedicated specialists remove the burdens of worrying about these complications while you focus on building your business in a new territory.

We have made it our goal to keep track of the latest changes in tax policies to always ensure complete compliance. To keep you informed and updated too, we created this guide which includes the basic facts regarding tax regulations in China.

Overview of Taxes in China

  • Residents’ Annual Individual Income Tax: Seven tax bands 3% to 45%; Taxable income from CNY 36,000 (€4,857, US$5,625) to CNY 960,000 (€130,000, US$150,000) Non-residents’ Monthly Individual Income Tax: Individual Income Tax for non-residents on remuneration and royalties is calculated on a monthly basis; Seven tax bands 3% to 45%, with a taxable income from CNY 3,000 (€404, US$468) to CNY 80,000 (€10,795, US$12,500) Business Income Tax: Individuals’ income from privately-owned businesses, as sole proprietors and in partnerships is liable to progressive rates of taxation.
  • CNY 0 to 30,000 (€4,047, US$4,687): 5%
  • CNY 30,000 to CNY 90,000 (€12,144, US$14,062): 10%
  • CNY 90,000 to CNY 300,000 (€40,480, US$46,875): 20%
  • CNY 300,000 to CNY 500,000 (€67,462, US$78,125): 30%
  • Over CNY 500,000: 35%
  • Social Insurance Taxes: All Chinese employees and foreigners holding a work permit must contribute to social insurance programs, which finance funds for pensions, medical and maternity, unemployment, work related health and injury. Contributions from employers and employees vary between provinces, territories, and major cities. As a guide, the rates for Shanghai in 2021 are:
    • Pension – 8.0% (employee), 16.0% (employer)
    • Medical and Maternity – 2.0% (employee), 10.5% (employer)
    • Unemployment – 0.5% (employee), 0.5% (employer)
    • Work-related injury – 0% (employee), 0.16% to 1.52% (employer)

Capped at monthly salary of CNY 28,017 (€3,780, US$4,377)

  • Corporate Income Tax (CIT):
    • Standard rate: 25%
    • Qualifying new high-tech enterprises: 15%
    • Qualifying software enterprises: 10%

Reduced rates apply to various categories depending on the policies of provinces, territories, and cities.

  • Value Added Tax: Rates vary between goods and services 3%, 6%, 9% and 13%
  • Withholding Tax (WHT): Rates for dividends, royalties and interest are applied according to the treaties with relevant countries.

China Individual Tax – Single, Married

Chinese nationals or foreigners working in China must pay Individual Income Tax (IIT). Foreigners or companies domiciled for more than 183 days in a calendar year are taxed on their worldwide income. Concessions apply for foreigners who reside in China for 183 days a year but not for more than six consecutive years. Non-residents for IIT purposes are generally taxed only on income sourced in China. Further complications arise from taxable income being divided into nine categories which can attract different tax rates. The categories include:

  • employment wages and salaries
  • labor services
  • author’s pay and other royalties
  • income from a business
  • interest, dividends and profits
  • rental income from transferring property.

Salaries, labor services, author’s remuneration and royalties are grouped as ‘comprehensive income’ on tax returns. Adding to the complexity, any ‘incidental’ income not categorized is also liable for taxation. Married couples are taxed individually and must each file returns.

Residents’ Annual Individual Income Tax:

  • CNY 0 to 36,000 (€4,857, US$5,625): 3%
  • CNY 36,000 to 144,000 (€19,430, US$22,500): 10%
  • CNY 144,000 to 300,000 (€40,474, US$456,875): 20%
  • CNY 300,000 to 420,000 (€56,670, US$65,625): 25%
  • CNY 420,000 to 660,000 (€89,050, US$103,125): 30%
  • CNY 660,000 to 960,000 (€130,000, US$150,000): 35%
  • Over CNY 960,000: 45%

Individual Income Tax for non-residents on remuneration and royalties is calculated on a monthly basis.

Non-residents’ Monthly Individual Income Tax:

  • CNY 0 to CNY 3,000 (€404, US$468): 3%
  • CNY 3,000 to CNY 12,000 (€1,620, US$1,875): 10%
  • CNY 12,000 to CNY 25,000 (€3,373, US$3,906): 20%
  • CNY 25,000 to CNY 35,000 (€4,723, US$5,468): 25%
  • CNY 35,000 to CNY 55,000 (€7,420, US$8,593): 30%
  • CNY 55,000 to CNY 80,000 (€10,795, US$12,500): 35%
  • Over CNY 80,000: 45%

Employee Social Insurance Taxes:

  • Pension: 8.0%
  • Medical and Maternity: 2.0%
  • Unemployment: 0.5%
  • Capped at monthly salary of CNY 28,017 (€3,780, US$4,377

China Individual Tax Rules

  • Individual Income Tax (IIT) has nine categories
  • Salaries, labor services, author’s remuneration and royalties are grouped as ‘comprehensive income’ on tax returns
  • Other individual categories cover dividend interest, property leases or transfers and ‘incidentals’
  • Employees can make their own return, with deductions, to the authorities or leave it to their employer
  • Employees making their own IIT return take full responsibility for errors or omissions
  • Withholding tax is applied on a cumulative basis, increasing as income increases during the year
  • Individuals are classified as a tax resident if they live in China for 183 days in a calendar year
  • IIT returns must be submitted between March 1 and June 30 of the following year
  • Married couples are taxed individually and must each file returns
  • From January 2022 expats will lose the right to claim certain deductions, therefore increasing the percentage of their taxable income

Indirect Taxes

Value Added Tax has four rates of 3%, 6%, 9% and 13% in addition to categories that are either exempt or zero-rated. They apply on mainland China with Hong Kong and Macau exempt.

  • The standard rate of 13% applies to the majority of goods and services
  • Reduced tier of 9% covers such as entertainment, restaurants and catering services, postal services, and transportation
  • Further reduced rate of 6% applies to financial, insurance and IT services, consultancy, construction, and maintenance
  • Exported products and some exported services are zero-rated

Entity Set Up

Global expansion into China generally means that you need to set up an in-country entity. However, by partnering with us you create the possibility to bypass this process and utilize our expertise. By using our PEO service, we take care of the complicated paperwork. Expanding into a new country is always an adventure, but we believe this adventure should be exciting instead of frustrating and time-consuming. Therefore, we have been supporting companies in over a hundred countries with their expansion plans.

In this guide, we will share which documents you need to establish an entity in China, but also where you will need to register your business address and company’s name. We will also break down the advantages and disadvantages of setting up an entity in China.

How to set up a China Subsidiary

First, choose the company type. Typically, foreign companies planning their move into the dynamic Chinese economy opt for opening a limited liability company in the form of a Wholly Foreign-Owned Enterprise (WFOE) or a Foreign-Invested Enterprise (FIE). Opening a branch or a representative office is another option. Incoming investors should research and select which region and cities are best suited to their expansion plans and business activities, particularly in reference to enterprise zones and free trade areas. The subsidiary is a legal entity entirely independent of the parent company and is incorporated in China as a local company. Various documents and procedures must be completed to set up the subsidiary. The application process is undertaken by a Foreign Enterprise Services Company (FESCO) – another complication.

Procedures include:

  • Verify and prepare to register the unique name of the company
  • Obtain a registration certificate for a new company from the State Administration for Industry and Commerce (AIC).
  • Provide details of the owners, nationality and location of the parent company and the planned activities of the subsidiary, with feasibility report
  • Appoint management board, which can comprise foreigners or Chinese nationals
  • Open business bank account and deposit minimum share capital, if applicable, and which will depend on local regulations or decisions from the State Council (not required in free trade zones)
  • Apply for a business license at the State Administration for Market Regulation (AMR), usually through a local office, which is a legal requirement for all Chinese companies
  • Provide and register Articles of Association with the AMR
  • Certain foreign investor information may need to be registered with the Ministry of Commerce (MOFCOM)
  • Register with the State Tax Administration to run payroll, income tax, VAT, and business taxes

What you need to set up a China Subsidiary

  • Articles of Association from the parent company with a statement of its intention to open a subsidiary in China, translated into Chinese by an accredited authority
  • Confirmation from the State Authority for Industry and Commerce that the proposed company name is unique in China
  • Registration certificate for a new company from the State Administration for Industry and Commerce (AIC)
  • Business license from the State Administration for Market Regulation (AMR), usually applied for through a local office and legally required for all Chinese companies
  • Provide any requested foreign investor information to the Ministry of Commerce (MOFCOM)
  • Proof that minimum share capital, if required and dependent on province and sector, has been deposited in a business account
  • Obtain permits and licenses specific to area of operation, such as pharmaceuticals, automotive and construction sectors for example
  • Register with the State Tax Administration to run payroll, income tax, VAT, and business taxes

Benefits of setting up a China Subsidiary

Specific advantages for a foreign company opening a subsidiary in China include not being responsible for the subsidiary’s debts or liabilities. Also, the foreign parent company’s financial statements and accounts do not need to be presented to Chinese authorities, while the subsidiary can operate using the local currency of exchange, the RMB. The subsidiary can operate under a different company name from the parent company and can pursue separate business interests and conclude its own contracts. The liability of the subsidiary’s shareholders is limited to their investment in shares. Subsidiaries operate under Chinese law in the same way as local companies and pay an Enterprise Income Tax (EIT) on corporate income at 25%. Other rates of 5%, 10% and 20% can apply to advanced technology companies and small enterprises. Tax-resident enterprises are taxed on their worldwide income. Shareholders are liable for income tax on dividends paid by the subsidiary from net profits.

Through its subsidiary, the parent company has the advantage of exploring the Chinese market and further afield among other Far East and Pacific Rim nations.

Other benefits for a subsidiary:

  • Easier to obtain regulatory approvals, loans and finance and enter into contracts with other Chinese and Asian companies
  • More impact with clients and suppliers, as subsidiaries imply more permanency than branches
  • Employees feel there is more stability and job security than from being with a branch
  • In the wider commercial sense, opening a subsidiary makes a statement of a company’s commitment to expanding into foreign economies, in this case the opportunities offered by the Asian economy

Chinese Subsidiary Laws

The over-riding legislation applying to all companies is the Company Law of the People’s Republic of China (PRC). Wholly Foreign-Owned Enterprise (WFOE) limited liability companies and Foreign-Invested Enterprises (FIEs) have been governed by the Foreign Investment Law 2019 (FIL) as of January 1, 2020. The FIL brings in new laws for organizational structure and operating procedures. These replace regulations that were previously codified under three separate pieces of legislation. China’s Company Law does not set minimum levels for share capital. This is decided at provincial level based on company size and sector of operations. The Securities Law of the PRC also imposes rules on shareholders, directors, and management in terms of corporate governance. Guidelines for a Wholly Foreign-Owned Enterprise and Foreign-Invested Enterprises:

  • Registration and Documentation
  • Before registering, select a unique company name and designate a finance officer.
  • Obtain approval from the Ministry of Commerce and State Administration of Industry and Commerce, to receive a business license. Branch offices, which remain wholly owned by the parent company, need not register with the Ministry of Commerce.
  • Obtain business license from the State Administration for Market Regulation (AMR), usually applied for through a local office. This is a legal requirement for all Chinese companies.
  • Articles of Association from the parent company with a statement of its intention to open a subsidiary in China, translated into Chinese by an accredited authority.
  • Confirmation from the State Authority for Industry and Commerce that the proposed company name is unique in China.
  • Registration certificate for a new company from the State Administration for Industry and Commerce (AIC).
  • Registration with the relevant local Social Insurance Bureau and Housing Fund Bureau.
  • Registering employees’ contracts with the tax and social security authorities.
  • If employing foreigners, accounts need to be registered with the Services System for Foreigners Working in China along with applications for Foreigner’s Work Permit and the Notification Letter prior to employees applying for their work visa.
  • Registration certificate for a new company from the State Administration for Industry and Commerce (AIC).
  • Provide any requested foreign investor information to the Ministry of Commerce (MOFCOM).

Accounts and Taxation

  • Register with the State Tax Administration to run payroll, income tax, VAT, and business taxes.
  • China’s Company Law does not set minimum levels for share capital. This is decided at provincial level based on company size and sector of operations.
  • Subsidiaries operate under Chinese law in the same way as local companies and pay Enterprise Income Tax (EIT) on corporate income at 25%. Other rates of 5%, 10% and 20% can apply to advanced technology companies and small enterprises.
  • EIT returns must be filed quarterly and annually, with VAT returns files monthly.
  • Tax-resident enterprises are taxed on their worldwide income.
  • Shareholders are liable for income tax on dividends paid from the subsidiaries’ net profits.
  • Filing annual employee tax returns between March 1 and June 30 of the following year, in Chinese and with accounts in local currency, the yuan.

Management

  • A limited liability company can have between one and 50 shareholders, who generally have no personal responsibility for the debts or liabilities of the subsidiary.
  • Shareholders or directors of foreign subsidiaries are not required to hold annual general meetings, although one director’s meeting a year is normal.
  • Amendments to the Articles of Association must be approved by more than two-thirds of shareholders.
  • A director or executive director, general manager and supervisor are required.

Take a faster route into the Chinese economy

The cost-effective and time-saving alternative to the expensive and lengthy process of establishing your subsidiary in China is to work alongside a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs. We have over 20 years’ global experience and our in-country specialists will steer you through the complexities of setting up operations by locating and onboarding new local employees, then ensuring compliance with all employment and tax regulations. You retain day-to-day control of your staff – who are in place and operational within days rather than the months it could take to incorporate a legal entity. There is no reason for international borders to stand in the way of your international expansion. Contact us today for more information!

The Market

China is the world’s second strongest economy, with the world’s largest population of one-and-a-half billion occupying the planet’s fourth largest country in the area. The figures are huge and so is the potential. Establishing a presence in China also opens the route further into the Far East and Pacific Rim. Unlocking this potential, however, comes with challenges for foreign companies which underlines why Bradford Jacobs’ global expansion is essential. Plus, in addition to the state laws, compliance with employment, payroll and tax laws vary between provinces and autonomous regions. There are speedier and more cost-effective alternatives to launching a subsidiary, with Bradford Jacobs opening the door to a hassle-free route into China.

Work alongside our Professional Employer Organisation (PEO) recruitment specialists, then utilise our Employer of Record (EOR) in-country experts to handle every challenge that comes with entering the China economy. Employers can depend on our in-depth knowledge of China and how to navigate the smoothest passage to success. Here we have set out some basic summaries of what you need to make the transition into the Chinese market, whichever sector you operate in.

Starting a Business in China

China expects a nominal Gross Domestic Product (not adjusted for inflation) of 15.6 trillion US dollars for 2021 compared with US$20.5 for the United States of America, but the World Bank predicts a faster growth rate for China over the US. China’s exports reached a record high in 2021, driving a US$535 billion surplus and building on US$2.5 trillion of exports in 2020, which made it the world’s largest exporting nation outside the European Union bloc. Raw minerals processing including metals, fuel, coal, and fertilizers are at the heart of China’s industrial base along with manufacturing machinery, textiles, and armaments. Innovative entrepreneurs have seen many Chinese companies become global leaders, such as Alibaba and Tencent.

The World Bank’s ‘Ease of Doing Business’ report ranked China 27th out of 190 nations in 2020 (up from 31st), and fifth for enforcing contracts. China is comfortably in the top 50 for dealing with construction permits, obtaining electricity and registering property. Ease of paying taxes is the only category where China slips out of the top 100.

Companies must stick to strict procedure when starting a business. These include:

  • Verify and prepare to register the unique name of the company
  • Obtain a registration certificate for a new company from the State Administration for Industry and Commerce (AIC)
  • Provide details of the owners, location of the parent company and the planned activities of the subsidiary, with feasibility report
  • Appoint management board, which can comprise foreigners or Chinese nationals
  • Open business bank account and deposit minimum share capital, if applicable, and which will depend on local regulations or decisions from the State Council (not required in free trade zones)
  • Apply for a business license at the State Administration for Market Regulation (AMR), usually through a local office, which is a legal requirement for all Chinese companies
  • Provide and register Articles of Association with the AMR
  • Certain foreign investor information may need to be registered with the Ministry of Commerce (MOFCOM)
  • Register with the State Tax Administration to run payroll, income tax, VAT, and business taxes

Beyond registering the company, employers must also deal with employment terms, payroll, establishing tax schedules and ensure employees’ contracts include guaranteed benefits and allowances for such as sick leave, maternity allowances and termination and severance agreements.

Expanding Business into China

Foreign companies planning expansion into the Chinese economy will quickly realize they need to embark on extensive research before drawing up a business plan for the new territory. A detailed blueprint will have to answer many critical questions. Will staff be migrated across the world or recruited in-country? Who will handle payroll? How will your company deal with issues surrounding tax law, social security contributions, termination and severance, entitlements, and benefits? In China, these questions are complicated by having to deal with state authorities and those at provincial and territorial level who can make their own rules and regulations. Partnering with Bradford Jacobs, from the consultation stage onwards, will access our know-how on the Chinese economy and how it works; its manufacturers, distributors, where to find business support, production facilities and offices and where to locate the best qualified staff for your sector. We will also know who your competitors are. This is the simple alternative. By partnering a Professional Employer Organization (PEO) and Employer of Record (EOR) such as Bradford Jacobs, companies can plot a time-efficient and cost-effective path to locating and employing staff in China.

China Business Facts

  • Capital city – Beijing
  • Population – 1.447 billion
  • Regions – there are 31 provinces, municipalities, and autonomous regions
  • Official languages – main Chinese dialect is Mandarin. Other major dialects include Yue (Cantonese), Min, Gan, Xiang (Hunanese), Kejia and Hakka
  • Economy and world ranking – according to the International Monetary Fund China ranks 2nd in nominal GDP with US$15.6 trillion. For ease of doing business, China ranks 27th in the world.
  • Leading sectors by revenue – construction, real estate, mail-order and online shopping, software development and internet
  • Main exports – largest exporter in the world. Includes: electrical machinery, computers and telephones, household and hi-tech goods, plastics, vehicles, textiles, and clothing
  • Main imports – includes electrical equipment, mineral fuels and oil, computers, optical, medical, and technical apparatus
  • Main trading partners – EU, USA, South Korea, Japan, and Australia
  • Government – republic, socialist and communist, one-party state
  • Currency – Chinese Yuan

Advantages and Challenges of the China Market

Advantages of expanding into the Chinese market include:

  • Economy: China is a rapidly growing economy with GDP averaging annual increases of between 7% and 10%
  • Consumerism: China has the world’s largest population, close to 1.5 billion, with increasing income levels pointing towards a potential ‘middle class of 500 million with spending power by 2022
  • Demographics: The urban middle class is expected to account for 70% of the population by 2030, with the increased demand for luxury goods and enhanced lifestyle drawing the rural population into the cities
  • Global Profile: Innovative entrepreneurs have seen many Chinese companies become global leaders – an encouragement for multinationals to see China opening up as a market for their own expansion

Challenges of expanding into the Chinese market include:

  • Bureaucracy: State and provincial ‘red tape’ make China a potentially troublesome market to enter
  • Culture: Adjusting to a workplace and social environment vastly different to most other countries, especially those of the west. The Chinese language also presents barriers
  • Restrictions: Foreign involvement in the Chinese market is regulated by sectors being categorized as ‘encourage, restricted or prohibited’. Sectors on the prohibited list cannot be accessed by Foreign Direct Investment (FDI) partnerships or takeovers
  • Access: Despite the prospect of growing consumerism people’s buying habits are difficult to predict or assess, particularly where government encourages domestic products and producers
  • Labor: The demand for highly trained, professional staff remains ahead of supply

Limited Company / Subsidiary or Branch in China

International companies targeting China for expansion will generally choose a private limited liability subsidiary, known either as a Wholly Foreign-Owned Subsidiary (WFOE) or a Foreign-Invested Enterprise (FIE). Subsidiaries and branches have differences in how they are registered and operate. Key points are:

Main characteristics and registration procedures of a subsidiary:

  • They have independent legal status from the parent company
  • The parent company is generally free from responsibility for any debts or liabilities of the subsidiary
  • Subsidiaries can have a totally different name from the parent company, pursue independent business activities and form their own contracts
  • Obtain a registration certificate for a new company from the State Administration for Industry and Commerce (AIC)
  • Provide details of the owners, nationality and location of the parent company and the planned activities of the subsidiary, with feasibility report
  • Appoint management board, which can comprise foreigners or Chinese nationals
  • Open business bank account and deposit minimum share capital, if applicable, which will depend on local regulations or decisions from the State Council (not required in free trade zones)
  • Apply for a business license at the State Administration for Market Regulation (AMR), usually through a local office, which is a legal requirement for all Chinese companies
  • Provide and register Articles of Association with the AMR
  • A limited liability company subsidiary can have between one and 50 shareholders

Main characteristics and registration procedures of a branch:

  • Branches are an extension of the parent company and are not a separate legal entity, with the parent company responsible for any debts or liabilities of the branch
  • A branch has the same name as the parent company and follows the same business operations
  • Branches do not need share capital
  • A branch has a representative or agent acting with powers granted by the parent company
  • The parent company submits Articles of Association and full details of the owners
  • Register with the State Tax Administration
  • Apply for mandatory licenses and permits
  • Open a business bank account for local currency transactions
  • Obtain the company seal for the branch

Expert guidance is vital when weighing the options between a subsidiary and branch in China. There is an alternative route – one that is quicker, stress free, cost effective and will have you up-and-running in days rather than weeks or even months. Bradford Jacobs will locate top talent for your company. Once you select your new employee our Employer of Record (EOR) specialists will handle every aspect of employment law, including payroll and tax.

Contracts

A successful business largely depends on its employees. By creating working contracts that include the right terms and benefits there will be no misconception and the perfect work-life balance can be created. At Bradford Jacobs, this is our aim, and we support companies in over a hundred countries with creating compliant and balanced labour contracts. Our team keeps track of Chinese laws and regulations daily to be duly aware of updates that can be implemented in working contracts. By using our PEO and EOR service we can provide compliant labour contracts for employees in China, including local benefits.

To support your plans, we made this guide including the basics of employment contracts in China. After reading this guide you will know everything about the conditions, laws, and benefits to include in a Chinese employment contract.

How do you hire Employees 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. These considerations come into play during the first stages of hiring and onboarding, when employers are drawing up contracts with their new employees. Once Bradford Jacobs’ Professional Employer Organisation (PEO) recruitment networks have located the best talent for your company, we step in to handle this crucial element of recruitment.

Labour Contract Law regulations 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. Other issues must be dealt with before companies onboard their new staff. These involve:

  • Registering with the State Taxation Administration (STA)
  • Registering with the local Social Insurance Bureau and Housing Fund Bureau to activate accounts for your employees
  • Registering employees’ contracts with the tax and social security authorities
  • Opening a business bank account
  • If employing foreigners, accounts need to be registered with the Services System for Foreigners Working in China along with applications for Foreigner’s Work Permit and the Notification Letter prior to employees applying for their work visa
  • Outsourcing the recruitment and hiring process through Bradford Jacobs’ Professional Employer Organization (PEO) network will give you the security that our in-depth know-how can deal with all these potential problems. Guarantee a trouble-free move into your new territory by trusting our Employer of Record (EOR) services to handle every aspect of payroll compliance.

Types of Employment Contracts in China

All full-time employees who are contracted to employers are covered by China’s Labor Law and the Labor Contract Law. Written contracts are essential and for legal safeguards should be translated into Mandarin if originally drafted in a foreign language. In addition to individual contracts specifying terms of employment, benefits and compensation, employers are advised to publish or display in the workplace their disciplinary policy. The absence of a policy may make it difficult to terminate employment on the grounds of misconduct.

The main types of contracts, as governed by the Labor Law and Labor Contract Law, include:

  • Open-ended or Indefinite Employment Contracts: These contracts are for continuous employment without stipulating any end date.
  • Fixed-term employment contracts: This applies where the employer and employee agree an end date for the contract. If an employee continues to work after the contract expires, by default they are then on an open-ended contract. Similarly, if the employer fails to institute a written contract within a year, a full-time contract applies. After an employee completes two fixed-term contracts the employer should agree to an open-ended contract if the employee requests.
  • Specific Project Employment Contracts: These expire on completion of a specified project.
  • Probation Periods in Employment Contracts: Trial periods are commonly included in employment contracts, with time limits, and they can only be used once with the same employee. Probationary periods are restricted to one month for contracts of less than 12 months, two months for contracts between one and three years and six months for contracts exceeding three years.

The Labour Contract Law applies mandatory rules to contracts. These include:

  • Employers must provide a written contract for full-time employees within one month of their first day at work, or risk having to pay double after the month expires
  • Contracts should be in Chinese and, if necessary, translated into a foreign language by officially accredited translators
  • Contract types can be open-ended and indefinite; fixed term with an agreed end date; tied to a specific project
  • The contract must contain details of the employee’s ID, home address
  • Basic terms of employment should cover location and role responsibilities, rights and working conditions, details of compensation, severance and disciplinary procedures, any provision for probationary periods
  • Employer and employee should have copies of the contract and agree any amendments in writing

Collective Bargaining Agreements and Collective Contracts:

The All-China Federation of Trade Unions (ACFTU) is the sole legal representative of workers in China. Implementing collective agreements varies between provinces and administrative cities. Businesses can conclude collective contracts with their relevant trade union or workers representatives if they have no trade union. Individual contracts can improve terms of a collective contract but cannot undercut them.

What Employment Laws exist in China?

China’s far-reaching labor laws cover all businesses and economic entities and the individuals who have employment relationships with them. All full-time employees should have written contracts with their employers, but even if no formal contract is in place the employment relationship can be considered to be legally in place. Employment legislation is mainly based on the following laws, codes, and statutes:

  • The Labour Law establishes the framework for employment relationships, although legal requirements are not pulled together under a single piece of legislation.
  • The Labour Contract Law details responsibilities and obligations of employers and employees, in addition to the terms for implementing and ending employment relationships. It is supplemented by the statute on Implementing Regulations of the Labour Contract Law, which goes into detail on contract requirements.
  • The Trade Union Law dictates how trade unions and workers’ committees are established and organised and how they must operate. The law states that 25 or more employees in a company must be permitted to form an Enterprise Trade Union (ETU), a component of the All-China Federation of Trade Unions (ACFTU), which is the only trade union allowed in the country.
  • Once an ETU is formed the employer must contribute 2% of employees’ wages to the ACFTU, in part to fund education and vocational training for their staff.
  • The Mediation and Arbitration of Disputes Law lays down how labor tribunals deal with employment disputes. Under Article 2 it covers disputes over working hours and breaks, vacations, social insurance, other benefits, workplace health and safety and remuneration for workplace illness or injury.
  • The Minimum Wage Provisions Act establishes the framework for minimum wages, which vary between provinces, territories and administrative cities and authorities. Under the Labor Law, the relevant authorities must record the minimum rates with the State Council. The Act allows for rates being adjusted according to living costs, average wages, and local economic development. Rates are enforced by local labour authorities.
  • Paid Annual Leave Regulations apply rules on statutory paid leave for employees.
  • Other regulations can be imposed by the Ministry of Human Resources and Social Security, other ministries, commissions, and State Councils.

Companies extending their operations into China need a total understanding of employment and contract laws. Bring Bradford Jacobs’ expertise into the equation with our comprehensive understanding of Chinese laws and regulations. The global reach of our Professional Employer Organisation (PEO) specialists is matched by in-country Employer of Record (EOR) platforms that ensure a smooth entry into the Chinese economy.

Benefits

Happy and satisfied employees make your business thrive and lead to even better profits. However, the specific benefits for employees in China might not all be familiar to you yet. By using our PEO and EOR service we can provide compliant labour contracts for employees in Malta including local benefits. When expanding your company’s presence in a new country, you need to ensure compliance both in your employment contracts and benefit guarantees. These involve social security contributions, sick leave, health insurance, and unemployment, to name a few. In China, benefits are guaranteed by national legislation as well as collective agreements with trade unions or workers’ councils. Our guide will explain what benefits and employee compensation are guaranteed, and what can be modified, for any employer who wishes to expand their business into China.

What are the Employee Benefits in China?

Foreign companies’ responsibilities when hiring in China stretch beyond complying with contract laws. Workers’ benefits are also strictly applied in China. For example, social insurance alone comprises legally required benefits covering retirement pensions, medical care, unemployment insurance and disability insurance plus maternity entitlements.

Guaranteed benefits in other categories under China’s Labour Law include:

  • Minimum wages (set at provincial level)
  • Holiday entitlement
  • Working hours
  • Termination, dismissals, severance, and compensation
  • China’s Labour Law and Labor Contract Law stipulate that all full-time employees must have written confirmation of all entitlements in their contract.

This illustrates that the responsibilities of foreign companies reach further than simply complying with tax, social security, and payroll regulations. Failure to comply with specific regulations applying to benefits and entitlements runs the risk of fines and sanctions. It is vital that employers have a firm grasp of what is guaranteed for their employees, as this will affect the employer-employee relationship. This is where Bradford Jacobs steps in to point you in the right direction, drawing on over 20 years’ experience as a Professional Employer Organisation (PEO) and Employer of Record (EOR).

What Compensation Laws exist in China?

China’s far-reaching labor laws cover all businesses and economic entities and their employees. Employment legislation is mainly based on the following laws, codes, and statutes:

  • The Labour Law is formulated in line with the Chinese Constitution to protect the rights of workers and regulate their relationship with employers. The Labor Law creates the framework for employment relationships, although regulations are not codified under a single piece of legislation.
  • The Labour Contract Law details responsibilities and obligations of employers and employees, in addition to the terms for implementing and ending employment relationships. It is supplemented by the statute on Implementing Regulations of the Labour Contract Law, which goes into detail on contract requirements
  • The Mediation and Arbitration of Disputes Law covers how workers’ rights and compensation are protected by labour tribunals dealing with employment disputes. Under Article 2 it covers disputes over working hours and breaks, vacations, social insurance, other benefits, workplace health and safety and remuneration for workplace illness or injury
  • The Minimum Wage Provisions Act establishes the framework for minimum wages, which vary between provinces, territories and administrative cities and authorities. Under the Labour Law, the relevant authorities must record the minimum rates with the State Council. The Act allows for rates being adjusted according to living costs, average wages, and local economic development. Rates are enforced by local labour authorities

Paid Annual Leave Regulations apply rules on statutory paid leave for employees

Other regulations can be imposed by the Ministry of Human Resources and Social Security, other ministries, commissions, and State Councils The requirement for employers to respect employees’ rights stretches further than simply complying with tax and payroll procedures. Regulations apply to such as minimum wages, maternity allowances and benefits, holidays, sick pay, and severance payments. Drawing up contracts is tricky enough, but in China it is vital for employers to be up to speed with responsibilities to their staff over benefits, compensation, and minimum requirements. Do not take the risk of paying penalties for ignoring these responsibilities.

Compensation, entitlements, and benefits

  • Minimum Wages: There is no over-riding national minimum, leaving individual provinces, territories, and municipal authorities to set their own rates and record them with the State Council. In August 2021 Beijing, for example, increased the monthly minimum from CNY 2,200 to CNY 2,320 (€313, US$362). Shanghai already had the highest monthly minimum of CNY 2,590 (€350, US$404). Thirteen provinces also increased minimum wages – Heilongjiang, Hubei, Jiangsu, Jiangxi, Ningxia, Shanxi, Shaanxi, Tibet, Xinjiang, Zhejiang, Shandong, Jilin, Hainan, with the prospect that more would follow this trend.
  • Sickness Benefit: Benefits range from 60% to 100% of salary with paid sickness leave up to 24 months covering illness and non-work-related injuries. For under six months’ sick leave an employee with less than two years’ unbroken service receives 60% of salary, climbing to 100% for employees with more than eight years’ continuous service. For sick leave exceeding six months, employees with less than 12 months’ service receive 40% of their salary, between one and three years 50% and between three and six years 60%. Illness or injury must be certified by a doctor or hospital.
  • Working Hours and Breaks: Under the Labor Law and Employee Working Time Regulation the standard working week comprises 40 hours and eight daily, typically from Monday to Friday. Working days are usually between 8am and 6pm with up to two hours for lunch. There are regional variations. There is no statutory legislation covering rest breaks during the working day or minimum free hours between working days although employees are entitled to at least one free day.
  • Overtime: Working hours exceeding eight a day are overtime and employees receive 150% of their normal pay. Saturday or Sunday work is paid at twice the normal salary, while work on public holidays earns three times the usual pay. Maximum overtime is three hours per day and 36 a month. The Comprehensive Working Hours System allows employers to contract workers to 10 hours day before overtime begins but requires official approval from employment authorities. The Flexible Working Hours System, with Labor Council approval, precludes high-earning managerial and executive staff from overtime pay.
  • Paid Vacations: Paid leave is mandatory, strictly limited to the total number of years employed, not necessarily with the same employer. Holidays must be taken in the current year and unused vacation cannot be carried forward. Holiday benefits begin after employees have worked continuously for 12 months. The entitlement is five days’ paid leave for between one- and 10-years’ total employment: 10 days for between 10 and 20 years and 15 days for over 20 years.
  • Maternity Benefit: Funded by the Maternity Insurance Fund and administered by the relevant Social Security Bureau for the province, territory, or municipal authority. Benefit is calculated from the employee’s average monthly salary and those of all employees over the previous year. The higher amount is taken, but usually capped at three times the average salary in that Bureau’s jurisdiction, excluding Beijing or Shanghai where there is no limit. Employers who fail to contribute to the fund must pay the employee themselves.
  • Maternity / Paternity and Parental Leave: As there is no mandatory national minimum for maternity leave, the International Labor Organization standard applies of 98 days with 15 days pre-natal and 83 days after the birth. Provinces may allow for more. Guangdong allows an extra 80 days: Henan and Hainan a total of 190 days and Heilongjiang and Gansu 180. Extra allowances can apply in the case of difficult births or miscarriages. Similarly, paternity leave may vary between regions with the mandated national minimum being 14 days paid leave. There is no national policy on childcare / parental leave.
  • Termination and Severance: All employees are covered by laws on termination. Employers can summarily dismiss an employee for misconduct as defined by law or may be allowed in some circumstances to terminate with 30 days’ notice or payment in lieu. However, if the employer has not displayed a disciplinary policy, it can be problematic to dismiss for misconduct. Trade unions must be informed of unilateral dismissals. Termination is prohibited or restricted in the case of pregnancy, work-related illness or injury and cumulative sick leave depending on seniority. Employees who have worked for the same employer for more than 15 years and are within five years of statutory retirement age cannot have their employment terminated.
  • Notice Periods: Terminating employment is covered by China’s Labor Law and Contract Law and should be written into the employment contract. However. Under certain circumstances, the employer can give 30 days’ written notice (or one month’s salary) prior to termination. Notice is not required in cases of misconduct, but union consultation may be involved.

Top Talent

Hiring the right talent in China to expand your company can result in a thriving business with numerous opportunities. However, the recruitment process can be complicated when you have no physical presence in China yet. Our PEO and EOR service can be the solution for your company. Recruitment can be a tricky business, especially when a company is venturing into unfamiliar countries and exploring new markets. This is the perfect occasion to bring in a specialist to oversee the process for you. Bradford Jacobs’ benchmark platforms as a Professional Employer Organization (PEO) have worldwide reach and include a total understanding of the challenging complexity and potential of the Chinese economy and employment market. You can trust Bradford Jacobs to put the brightest talent in place for your company.

Our comprehensive knowledge of all Chinese employment sectors and understanding of the culture and customs guarantee an untroubled transition. Look through our guide to familiarize yourself with everything an employer needs to know about the recruitment process in China.

The Recruitment Process in China

Foreign companies recruiting in China to expand their operations will encounter significant differences with their experience of hiring in other countries. For example, contracts must be put in place by a legal entity in the country or China’s Labor Law may not apply. As a result, regulations tend to push companies towards forming a subsidiary, typically a Wholly Foreign-Owned Enterprise (WFOE) as a limited liability company.

Ahead of the recruitment process, bear in mind:

  • April-May is a good time to source candidates, after any annual bonuses have been paid
  • Check the candidate is not held to a ‘no competition’ clause by their previous employer
  • International recruitment agencies cannot hire to fill temporary positions
  • Recruitment is the first stage of making your company operational and competitive in China. It is vital to know where to locate the finest talent to be a perfect fit for your company’s international expansion plans.

Foreign companies opening a legal entity subsidiary must follow strict procedures to register and onboard employees.

Procedures include:

  • Before registering, select a unique company name and designate a finance officer
  • Decide on a business structure, with Wholly Foreign-Owned Enterprises being the typical choice
  • Obtain approval from the Ministry of Commerce and State Administration of Industry and Commerce, to receive a business license. Branch offices, which remain wholly owned by the parent company, need not register with the Ministry of Commerce
  • Registering with the State Taxation Administration (STA)
  • Registering with the local Social Insurance Bureau and Housing Fund Bureau to activate accounts for your employees
  • Registering employees’ contracts with the tax and social security authorities
  • Open a business bank account
  • If employing foreigners, accounts need to be registered with the Services System for Foreigners Working in China along with applications for Foreigner’s Work Permit and the Notification Letter prior to employees applying for their work visa

Additional requirements are necessary to put your new recruit on the payroll, including:

  • Advising on creating employment contracts
  • Investigating for special expatriate status and researching any tax-free allowances or double tax treaties
  • Reconciling federal, provincial, territorial, and municipal taxes to assess for refunds or extra payments
  • Calculating employees’ monthly salary payments
  • Creating payment schedules for wages, issuing pay slips, and remitting taxes and social security payments to the authorities
  • Filing annual employee tax returns between March 1 and June 30 of the following year, in Chinese and with accounts in local currency, the yuan
  • Completing personal income tax returns for employees, if required

Legal Checks you can make on Employees in China

  • Scope: Questions that can be asked during interviews are in theory governed by the Civil Code, but in practice are rather vague. However, some definite restrictions apply to female applicants, who cannot be asked about marriage or pregnancy status, with fines of up to 50,000 yuan (€6,768, US$7,814) for breaches. China has strict protocols on where information is obtained regarding individuals’ privacy and data, although these have not been brought together under a single code and this can lead to difficulties for employers. But there are also helpful resources. The Ministry of Education’s national database allows employers to check higher education qualifications at the China Higher Education Student Information and Career Center (CHESICC) website.
  • References: Prospective employers should have applicant’s written consent before contacting a previous employer.
  • Criminal Record: If verification is necessary for a particular role, only the candidate should apply for a Non-Criminal Record Certificate. If the employer asks an agency to obtain the information this could violate privacy laws.
  • Discrimination: At neither interview stage nor employment itself can employees be discriminated against on grounds of ethnicity, religious beliefs, or gender.
  • Recommended: Check the applicant has required visas, permits to live, and work in China.

Basic Facts on Hiring in China

Hiring staff for expansion into China involves compliance with a strictly regulated framework of employment laws and regulations that apply at federal level, but which may vary in different provinces, territories, and municipal administrations. Companies stretching their global reach into China must conform to basic requirements on hiring, including:

  • Employers must provide a written contract for full-time employees within one month of their first day at work
  • Contracts should be in Chinese and, if necessary, translated into a foreign language by officially accredited translators
  • Contract types can be open-ended / indefinite; fixed term with an agreed end date; tied to a specific project
  • The contract must contain details of the employee’s ID, home address
  • Basic terms of employment should cover location and role responsibilities, rights and working conditions, details of compensation, severance and disciplinary procedures, any provision for probationary periods
  • Employer and employee should have copies of the contract and agree any amendments in writing

After hiring and onboarding, employers must be aware of other considerations:

Minimum standards apply to such as sick leave, minimum wages, working hours, maternity allowances, paid vacations, termination, and severance, notice periods and social insurance payments. Other rules regulate workplace discrimination. But these minimums have added complications in China as they can vary between provinces, territories, and municipal administrative areas. To hire employees, companies must follow strict procedures to set up a legal entity in China to run their own payroll. These include:

  • The employer or agent must register the employee with the Social Security Bureau and local Housing Fund
  • Registering with the State Taxation Administration
  • Applying any special expatriate status and research tax free allowances – note taxation laws on allowances for foreigners will change after January 2022
  • Calculating monthly salary and creating pay slips
  • Submitting wage tax returns and social insurance registration
  • Corresponding with involved parties
  • Creating annual accounts and year-end statements
  • Creating payment schedules for wage tax, social insurances, and net wages
  • Payroll records must be kept for at least five years

Work Culture

To succeed in business in China, it is vital for both employers and employees to have a strong understanding of the business culture.

As a global PEO (Professional Employment Organization) it is our goal to be familiar and updated with the business culture in the country we work with and in. By sharing our knowledge about Chinese work culture, we want to support your global expansion plans. Therefore, we will address all the aspects of the work culture in China to start your expansion well-informed.

Work Culture in China

China’s economy is the second largest in the world and, according to the International Monetary Fund (IMF), it is continuing to develop. The population of one-and-a-half billion has a growing consumer base which attracts multi-nationals and an increasing level of expansion from international companies establishing a foothold.

The IMF predicted a nominal Gross Domestic Product of 15.6 trillion US dollars for China by the end of 2021 compared with US$20.5 for the United States of America, but the World Bank predicts a faster growth rate for China over the US.

China’s exports reached a record high in 2021, driving a US$535 billion surplus and building on US$2.5 trillion of exports in 2020 which made it the world’s largest exporting nation outside the European Union bloc. Raw minerals processing including metals, fuel, coal, fertilizers are at the heart of China’s industrial base along with manufacturing machinery, textiles, and armaments.

The potential is huge. But so are the challenges of operating in this huge market – and not simply those surrounding compliance with employment, payroll and tax regulations imposed by the state, provinces, and territories.

Chinese work culture demands major adjustments for most incoming foreign companies. Operating successfully will depend on making those adjustments. Chinese people take a philosophy of focused, hard-working diligence all the way from the schoolroom to the workplace. Respect for their family members is very much the philosophy that is applied to their working lives.

It is time to ‘get down to business’ so here are a few tips on taking the right steps; and avoiding the pitfalls!

  • Language: China’s business language is Mandarin; taking an interpreter to a business meeting is advised
  • Contact: If exchanging emails, keep language simple and direct. Clever or funny remarks may be ‘lost in translation’
  • Business Meetings: ‘Respect’ is the key world for business dealings, both in personal interaction and operating within strict company hierarchies. The most important person will enter the meeting room first and introductions will continue in that order. Avoid embarrassing exchanges at all costs
  • Negotiations: Building trust is another vital element in developing the business relationship as part of the negotiating process
  • Punctuality: It is always best to be on time!
  • Greetings: These usually begin with formal introductions to the most senior members of the company, but small talk about family is also an important element in building the relationship. Foreigners should be ready to respond to the question: What do you think of China?’ This is all part of ‘guanxi’ … building connections and networking to build a platform of trusted contacts
  • Business Cards: Present them as if offering a gift, with both hands. A Chinese translation on one side will be appreciated. Exchanging cards is an important part of the process
  • Dress Code: Play safe and dress formally for initial meetings. Big corporations and state organizations may stay formal whereas, in common with many western countries, hi-tech operations are often informal
  • Sealing the Deal: It is vital to have worked out who are the decision makers from your business meetings
  • Entertaining: It is usual to conduct business in a restaurant over lunch or dinner. Entertaining plays a central role in conducting business in China and is part of creating a harmonious relationship
  • Gift-giving: Something small and thoughtful will be a talking point and a good way of breaking the ice

Chinese Minimum Wage

There is no over-riding national minimum. However, individual provinces, territories and municipal authorities are expected to revise their own rates every few years and record them with the State Council, reflecting local conditions.

In August 2021 Beijing, for example, increased the monthly minimum from CNY 2,200 to CNY 2,320 (€313, US$362). Shanghai already had the highest monthly minimum of CNY 2,590 (€350, US$404).

Thirteen provinces also increased minimum wages – Heilongjiang, Hubei, Jiangsu, Jiangxi, Ningxia, Shanxi, Shaanxi, Tibet, Xinjiang, Zhejiang, Shandong, Jilin, Hainan, with the prospect that more would follow this trend.

Provinces and territories regularly adjust minimum levels to reflect changes in the cost of living and other economic factors.

Probation Period in China

Probation or trial periods are generally included in an employee’s work contract, for instance:

  • 3 months – 1 year: 1 month or less
  • 1 – 3 years: 2 months or less
  • No fixed term contract: 6 months or less

There is no probation for contracts less than three months or for part-time workers, or for a fixed-term contract. Only one probation period is allowed per employee. Chinese Labor Law states that employees cannot be summarily dismissed without good reason during their trial period. During the trial period, the employees’ wages shall be at least 80% of the contracted salary or 80% of the company’s set wage for the job and no less than the minimum wage set by the local authority.

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