China’s Ministry of Commerce (MOC) recently announced the establishment of a new blacklist of “unreliable entities”, compromised of foreign companies and individuals that “seriously damage” the interests of domestic firms.
What exactly does the “Unreliable Entity List” mean for your company if it is doing business in China? How can you reduce the risk of being deemed unreliable and being banned from conducting business in China? What to pay attention to before company registration in China in order to avoid being listed?
According to the official announcement, China’s Ministry of Commerce is setting up a mechanism to locate foreign companies, organizations and individuals who do not comply with trade legislations, violate contracts and prohibitions, harm the legitimate interests of Chinese companies, or pose a security threat to China.
It seems that the blacklist will mostly target foreign companies that conduct commercial operations in China and will not necessarily seek companies that invest or only manufacture within China.
Not complying with laws and regulations can ruin a company, especially in a Chinese business setting. However, we often meet foreign companies who neglect the process of supervision and control over their company in China. This generally occurs, not right after starting a business in China, but when the company develops and grows, and the challenges become more complicated without a local professional agent within the company who is constantly updated with all the changes and regulations in China.
Establishing this list arises from China’s growing desire to strengthen enforcement of the illegal activity of foreign companies, so it is essential to pay attention to the expanding scope of enforcement, as Dan Harris writes in the China Law Blog.
In the current situation, we strongly recommend that any foreign company operating in China, conducts an Operational Audit covering all aspects of their activity in China.
The Operational Audit that PTL Group provides is a proven tool that helps you assess your subsidiary’s business practices, reveal operational risks, improve transparency, analyze managerial effectiveness, and examine legal, accounting and HR compliance.We offer an independent evaluation of your Chinese operations. Based on the evaluation, we provide an analysis-based report with specific recommendations and a suggested action plan to improve your business in China.
Our clients know that the operations PTL Group preforms bring peace of mind to operating a business in China. In the changing world of laws in China, we rely on local knowledge updated daily, and on an experienced team, making sure our customers meet all official requirements.
Read our Management Tips for China-Based Business Owners and check here if you need an Operational Audit of your Chinese Office.