Foreign investors and companies in China will be affected by new laws and legislations, which will come into effect starting on January 2024. It is important that investors, as well as enterprises, in different industries and sectors familiarize themselves with these latest legislative changes.
On January 1, 2024, several new laws and regulations were implemented. Some of these may affect business and everyday life. The following are laws, regulations, or national standards that have special interest for foreign investors:
Administrative Reconsideration Law, effective since January 1, 2024
China’s legislature released an updated version of the Administrative Reconsideration Law, which aims to make administrative review the primary method for resolving disputes between private individuals and government agencies, reducing reliance on court litigation.
The 2023 revised version essentially aligns with the Administrative Litigation Law, governing similar aspects of litigation against government agencies.
The amended law expands the scope of cases eligible for administrative review, among them governmental compensation; judgments on work-related injuries; and abuse of administrative power affecting market competition.
Cases previously settled through the Administrative Litigation Law are now reviewable, aligning the two legal frameworks.
The new law introduces compulsory administrative review before court proceedings in specific scenarios, enhancing uniformity across the country. Procedural changes mirror those in administrative litigation, emphasizing oral expression of opinions and introducing a mandatory hearing for disputes of significant
importance or complexity. This evolution aligns administrative review procedures more closely with litigation, improving fairness and transparency in dispute resolution.
Decision of the Standing Committee of the National People’s Congress on Revising the Civil Procedure Law (CPL), effective January 1, 2024.
This update introduces key changes to civil procedure regulations, signaling an important development in China’s legal arena.
The latest amendment includes aspects of civil litigation involving foreign entities, aiming to address perceived inequities faced by Chinese companies abroad, especially in the realms of foreign trade and investment.
This amendment will have a significant influence on foreign-invested enterprises (FIEs) and multinational companies (MNCs) operating within the country.
The new CPL expands the jurisdiction of Chinese courts over foreign-related civil cases, presenting potential implications for foreign entities engaged in business with Chinese counterparts. This expansion increases the likelihood of Chinese companies initiating legal proceedings in local courts.
For foreign companies navigating this legal landscape, several strategic measures become crucial.
Understanding and leveraging international treaties, such as bilateral investment treaties (BITs) and free trade agreements (FTAs), can provide protective frameworks for investors and companies, offering clear dispute resolution mechanisms, often favoring arbitration in neutral international forums.
Strong dispute settlement clauses in contracts with Chinese entities should be prioritized. Foreign companies should clarify precise delineation of jurisdiction and preferred dispute resolution methods in advance to facilitate potential resolution of legal conflicts in Chinese courts.
Measures for the Administration of the Registration of Formula Foods for Special Medical Purposes (FFSMP), effective January 1, 2024, introduced by the State Administration for Market Regulation (SAMR).
The implementation of FFSMP seeks to strengthen China’s food safety network and align it with international standards. The regulatory updates focus on areas such as infant formula registration and health foods. This shows the country’s commitment to modernizing its regulatory system.
Companies and producers in this sector should understand the key changes and implications of these regulations. Proactive preparation and meticulous compliance are essential, considering the comprehensive nature of the new measures.
Import Export Tariffs (2024), effective since January 1, 2024
In an effort to boost high-quality development, advance openness, and expedite the establishment of innovative patterns, China plans to change import and export tariffs on specific goods in 2024.
By lowering import tariffs, China aims to encourage the use of advanced materials and equipment within its domestic industries.
The 2024 Tariff Adjustment Plan reduces tariffs on key resources such as lithium chloride and fuel cell components, supporting the growth of related industries. It also aligns with the government’s focus on clean energy and sustainable technologies, contributing to a more environmentally friendly economic development.
According to China’s economic agenda set during the 2023 Central Economic Work Conference, the country plans to bolster domestic consumption and attract foreign investment in 2024.
The adjusted tariff system is a key element to reach these goals, benefitting both local and foreign businesses. Overall, these tariff changes
are part of China’s strategy to secure supply chains, promote technological innovation, and participate actively in global industrial restructuring and free trade networks.
Foreign companies operating in the import and export business to China should keep informed and updates on the latest changes, as they may significantly impact their operations and opportunities in Chinese consumer markets.
Amendment to the Company Law, effective July 1, 2024.
The Standing Committee of the National People’s Congress (NPC) adopted an amendment to the China Company Law, which introduces substantial changes in areas such as corporate governance, capital contribution, liquidation process, management responsibilities, corporate information disclosure, corporate bonds, corporate litigation, and registrations, among others.
The new version of the Company Law will affect companies in China – both old and new – providing more flexibility in areas such as share issuance and corporate structure while strengthening the protection of shareholder rights.
Similarly, the new law will have a significant impact on the compliance obligations and risks associated with the performance of the duties of directors, supervisors, and senior management in key positions (DSMs).
The new legislation improves several areas of corporate governance, including the capital contribution system, shareholder rights, and corporate registration and liquidation systems, among many other areas.
China’s adoption of the New Company Law comes at a time when the international market environment is changing fast and becoming more competitive. China has continued its process of promoting reform and opening to foreign and domestic investments.
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