China’s Handling Complaints System and its Expected Effects

Last updated: Apr 2023
Regulations Guide to WFOE Establishment, Registration & Liquidation

In 2020, China established a Handling Complaints Mechanism that will help foreign companies defend their rights in case they were violated. PTL Group specializes in company registration in China. We make sure that China company registration is done right, and is supported by extensive operational support for registered entities. This is where our knowledge and expertise really make a difference.

China’s Handling Complaints System and its Expected Effects

How many times in your China journey have you faced an outrageous nerve-racking situation? If your answer is more than once, then you are not alone. But here is some good news: In late August 2020, the Chinese authorities announced the establishment of a new Handling Complaints Mechanism, which came into effect on October 1st.

The new system is replacing several older “similar” mechanisms that were proven incompetent and definitely did not appeal to foreign companies. The new model, accompanied and backed up by the new Foreign Investment Law, is a hopeful sign for change.

The purposes

  1. To handle WFOEs complaints in a timely and appropriate manner
  2. To protect the rights and interest of WFOEs in China
  3. To unceasingly enhance the foreign business environment in China

The timing

Amid the Covid-19 outbreak and the US-China trade war, this is the Chinese way of signaling a supportive message that welcomes foreign investments and responds to the global accusation of China not being a leveled playing field.

The measures

Semi-court procedure

When foreign investors or managers feel that their rights are violated, they are able to file a complaint within one of the Handling Complaints Agencies. They will have to provide supportive documents, facts and evidence. The competent agency will have to either accept or reject the complaint within seven working days from the day of receiving the complaint.

Foreign investors who are considering starting a business China and have already shown feasibility, are eligible to file complaints too.

In the event of acceptance, the agency should resolve the case in 60 days (which can be extended if the matter is relatively complex and involves several departments).

Just like in a real court, if the complainant is not satisfied with the rejection or the way the case was handled, it is allowed to appeal to a higher-level instance. The higher-level agency will debate the original complaint, in accordance with its own rules and frameworks.

Internal supervision and ethics

One of the major changes in the new mechanism is the establishment of a Joint Committee, in the participation of local handling agencies and the Chinese Ministry of Commerce.

Also, each lower-level agency has to report to a higher-level agency on a monthly basis, on its activities over the previous month (number of complaints received, rejected, accepted and how). They are also allowed to criticize and raise recommendations to the high-level agency, which then has to inform the Joint Committee.

Once a complaint is filed, all parties involved are required by law to cooperate and engage in the matter professionally, including protecting confidentiality. An agency that abuses its power or neglects its duties will face legal sanctions.

Meaning in practice

The institutionalized Complaint Handling System is indeed a landmark in the Chinese open-door policy, and it is expected to keep improving for the benefit of WFOEs. However, the practical implementation of the system and enforcement mechanisms are yet to be clear.

At PTL Group, we specialize in registering and managing foreign-owned entities in China. Get in touch today and let us support your China operations.

Last updated: Apr 2023