China: Operating a Business

In this page: Legal Forms of Companies | The Active Population in Figures | Working Conditions | The Cost of Labour | Management of Human Resources

Legal Forms of Companies

Wholly foreign-owned enterprise (WFOE): Number of partners: One juridical person or one or more shareholders.
Entity owned 100% by foreign interests that have the same rights as a local company.
Capital (max/min): Minimum varies according to the sector of activity.
Shareholders and liability: Limited to the amount of contributions.
Equity Joint Venture (EJV): Number of partners: Minimum of one Chinese entity and minimum one foreign entity.
Capital (max/min): No minimum capital required, but at least 25% must originate from foreign investors.
Shareholders and liability: Limited to the amount of contributions.
Co-operative Joint Ventures (CJV): Number of partners: Minimum of two partners: one Chinese entity and one foreign entity.
Capital (max/min): No minimum capital required.
Shareholders and liability: Limited to the amount of contributions.
Foreign Investment Joint Stock Company (JSC): Number of partners: Minimum two partners.
Capital (max/min): Minimum capital needed: CNY 5 million if domestic capital, CNY 30 million if foreign capital.
Shareholders and liability: Each shareholder contributes the same amount to the share capital and is linked to the company by its share of the share capital.
Holding: Number of partners: Minimum one partner.
Capital (max/min): Minimum capital USD 30 million.
Shareholders and liability: Each shareholder contributes the same amount to the share capital and is linked to the company by its share of the share capital.

Business Setup Procedures

Setting Up a Company	China	East Asia & Pacific
Procedures (number)	4.00	7.25
Time (days)	8.50	29.73

Source: The World Bank - Doing Business, Latest data available.

The Competent Organisation: Ministry of Commerce
For Further Information: Doing Business: China, to learn about procedures to start a business in China

Financial Information Directories

Dun & Bradstreet - Worldwide directory with financial information on businesses

Kompass China - Business directory for China

Recovery Procedures

Principle
Minimum Debt-to-Capital Ratio Triggering Liquidation
Bankruptcy Laws: Company bankruptcy laws
The law on bankruptcy is being reshaped in China. It is difficult to be declared as bankrupt. To be declared as bankrupt, equities must be negative.
Reorganization and Rehabilitation Laws: Company bankruptcy laws

The Active Population in Figures

	2018	2019	2020
Labour Force	785,986,113	783,981,188	770,950,792

Source: International Labour Organization - ILOSTAT, Latest data available.

	2017	2018	2019
Total activity rate	76.12%	76.02%	75.88%
Men activity rate	82.91%	82.85%	82.76%
Women activity rate	68.93%	68.78%	68.57%

Source: International Labour Organization - ILOSTAT, Latest data available.

For Further Statistics: China Statistics
For Further Information About the Labour Market: ILO, International Labour Organisation

Working Conditions

Opening Hours
Legal Weekly Duration: 40 hours
Maximum Duration: 8 hours per day with a maximum of 44 hours per week on an average. Not more than additional 36 hours per month.

Working Rest Day: Two-day weekend (Saturday and Sunday off)
Paid Annual Vacation
Retirement Age: The retirement age is 55 for women and 60 for men.
Child Labour and Minimum Age For Employment: More than 15 years for the industry. For other sectors, children can work at 13-14 years under certain conditions.
Informal Labour Market: Moonlighting is estimated at 18.5% of national workers and 72.5% of foreign workers.

The Cost of Labour

Pay

Minimum Wage: The minimum wage varies across the provinces. Currently, the highest monthly minimum wages are in parts of Guangdong, Jiangsu, and Zhejiang provinces, which have all surpassed the RMB 2,000 (US$289) mark. Shanghai continues to have the highest minimum wage in China, at RMB 2,480 (US$358) per month, followed by Shenzhen and Beijing, both at RMB 2,200 (US$318) per month. Among the lowest minimum wages are those in some rural areas: Liaoning (1,120 RMB/US$162), Hunan (1,130 RMB/US$163) and Anhui (1,150 RMB/US$166).

Consult China Briefing's 2020 minimum wage guide for more information.
Average Wage: The average monthly salary was 8,452 yuan ($1,228.38) in 37 major cities during the second quarter of 2019, with Beijing, Shanghai and Shenzhen all topping 10,000 yuan.
NB: the average wage varies according to the provinces.
Other Forms of Pay
Pay For Overtime: Increase of 150% if the worker is requested to work more.
Increase of 200% if an additional rest day cannot be granted.

Social Security Costs

The Areas Covered

Pension, medical, maternity, unemployment and work-related injury insurance schemes are provided.

Contributions

Contributions Paid By the Employer:

Contributions vary across the country and for different schemes. China’s Social Security System consists of 5 mandatory insurance schemes (pension fund, medical insurance, industrial injury insurance, unemployment insurance, and maternity insurance) and a housing fund (only applicable to Chinese employees). In Beijing, the employer's share of social insurance contributions amounts approximately to 27.8% to 29.5%:

Pension 16%
Medical expenses 10%
Unemployment 0.8%
Maternity 0.8%
Work-related injury 0.2% to 1.9%

Contributions Paid By the Employee:

Contributions vary across the country and for different schemes. China’s Social Security System consists of 5 mandatory insurance schemes (pension fund, medical insurance, industrial injury insurance, unemployment insurance, and maternity insurance) and a housing fund (only applicable to Chinese employees). In Beijing, the employee's share of social insurance contributions amounts approximately to 10.2%:

Pension 8%
Medical expenses 2%
Unemployment 0.2%
Maternity 0%
Work-related injury 0%

Management of Human Resources

Recruitment

Method of Recruitment: Recruitment is done more and more through Internet. But announcements in the newspapers are the most used means for the job offers. Numerous trade fairs are also organized and are a good means to recruit. Recruitment campaigns in the universities are also organized. The most prevalent method of recruitment is the interview. Certain companies must also pass technical or English tests. The psychological tests are not used in China, however role playing, simulations or group interviews are becoming more and more common.
Recruitment Agencies: List of the Top Recruitment Agencies in China
Recruitment Websites: ChinaHR.com
Zhaopin.com
51job.com

The Contract

Type of Contract: Legal provisions govern work contracts and collective agreements, but may be supplemented by individual negotiations. Formalities regarding employment contracts and recruiting conditions are strict, while dismissal constraints are rather flexible. There are 3 types of contracts: permanent contracts, fixed term contracts and project-specific contracts.

Breach of Contracts

Retirement

At the age envisaged, not before.

Necessity for all the projects to submit a business plan subject to approval by the competent authorities.

Dismissals

An employee can be dismissed if he has demonstrated during his trial period that he was not qualified for the post, when he violates the company rules, when he causes great loss to the company because of professional misconduct. A dismissal is also accepted when the employee after a long illness cannot resume his job again or another job in the company, if the employee is inefficient even after training, or if no arrangement is possible between the parties on a change of contract.

Other Possible Methods

Dismissals.

Labour Laws

Doing Business: China, to obtain a summary of labour regulations that apply to local entreprises

Dispute Settlement

Conciliation Process

Cases of Dispute: Conflicts between employer and employee on the non respect of the labor law.
Legal Framework: In the event of dispute between the employer and employee, the parties can have recourse to mediation or arbitration, present the case before the Court or come to a mutual arrangement. During a mediation or an arbitration if one of the parties has an objection to the resolution, it can proceed to the Court for a lawsuit. Many contracts prescribe arbitration by the China International Economic and Trade Arbitration Commission (CIETAC). For contracts involving at least one foreign party, offshore arbitration may be adopted.
Procedure: Employment law

Judicial Structures

Legal Framework: Employment Law
Competent Legal Body: People's court

Social Partners

Social Dialogue and Involvement of Social Partners: While worker protests and work stoppages occur regularly, the right to strike is not protected by law. China has not ratified core International Labour Organisation conventions on freedom of association and collective bargaining. The enforcement of existing labour regulations is reportedly insufficient. The only trade union recognised by the Chinese Communist Party is the All China Federation of Trade Unions (ACFTU). As independent trade unions are illegal, some claim that the ACFTU can be an effective voice for workers.

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