China Regulatory Updates – Protecting SME Interests

September 9, 2020
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Over the past couple of weeks, the Chinese government has rolled out a series of new regulations and measures aimed at supporting SMEs’ operation in China. Some of these are already in place and others are still being clarified by local authorities.


New Measures for the Service Industry

China is set to ease the assimilation of foreigners in the service field by putting in place several new measures, such as:

  • Exploring the integration of work permit and work-type residence permits
  • Expanding the scope of qualifications required for technology import/export
  • Setting up the permanent ROs in China of the foreign patent agencies
  • Allowing foreigners to hold senior positions in companies such as legal advisers.

These new measures (and other positive regulatory developments yet to be outlined) will be implemented in 28 pilot areas across China, with major cities such as Beijing, Shanghai, Shenzhen and Guangzhou included.

NOTE: This statement is a declaration of intent on a national level. It has not yet been implemented by provincial governments. We are expecting to see how and in what form the directives will be implemented by the local authorities.

Read more about these new steps


Protection of Small and Medium Enterprises Payment Ordinance

This is of extreme relevance to any company dealing with, or depending on government projects and other large corporations. Entities of this kind tend to exploit their power to deliberately delay payments, which then affect the entire market and causes harm, especially on SMEs. SMEs that suffer from such unfair clauses might get short of cash and even go bankrupt. This is most common in the automotive industry, where big enterprises often ignore or overlook payment terms.

In order to promote timely payment for SMEs, organizations, institutions, and large enterprises which purchase goods or services from SMEs, buyers are now obliged to provide payment within a pre-determined length of time, which starts from the day that the goods or services were delivered.

Any other payment terms or methods should be documented in the contract. In the event of any delays in payment, the buyer is liable to pay an overdue interest to the SME and is required to publicize the numbers and amount of overdue payments.

The new regulation will take effect on September 1st.

Read more about the new regulation


Rule to Handle Foreign Firms’ Complaints

Subsequent to the ratification of the new Foreign Investment Law, a mechanism to handle and settle foreign companies’ complaints will be established. In order to protect WFOEs (Wholly Foreign-Owned Enterprise) and investors’ legal rights and interests, the new rule has broadened the scope of complaints that can be raised by them. Foreign companies will now be allowed to approach agencies to handles their complaints as well as being able to report to government units.

The new regulation will take effect on October 1st.

Read more about the new system

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