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The Top Three Tips You Need to Know While Sourcing in China

June 17, 2021

Based on our observations, more than one fourth of the startups run by foreigners in China are in trade industry or related to trade. However, not everyone can make good money, some of them even went to bankruptcy. The following tips are summarized based on our analyze of the cases we dealt with:

1. Due diligence

Though the term “due diligence” is self-explanatory, we still want to emphasize its importance.

Please note that no matter how the sellers or brokers introduce themselves on their website, business card or their flyers, you actually know nothing about them. You need to do your homework: ask them to provide you with the copy of their business license or their company name in Chinese, and check it on the government database: National Enterprise Credit Information Publicity System (国家企业信用信息公示系统). Also, you can check the company’s information on two APPs, which are Qichacha (企查查) and Tianyancha (天眼查). Most of the information the two APPs provide are similar, both APPs provide VIP service for paid users if you need more detailed information. If you understand Chinese language or if you have any Chinese friends, you will find these very helpful. Or you may hire a PRC lawyer to do the due diligence for you. The main purpose of doing it is to make sure you are dealing with a legitimate company instead of a fraudster.

instead of doing QC after the goods arrive at the destination, do it before the shipment to find the possible issues early

2. A forceable purchase contract

China court barely enforce judgment made in other jurisdiction. Choose to file lawsuits in China court and file for property preservations before or during the lawsuits will make sure the judgment in favor of you could be executed. That’s why we suggest most of our clients to select China as the jurisdiction in the event of any dispute arise. Our second suggestion is: try to find an English-speaking Chinese lawyer to help preparing an bilingual agreement. Why? because local lawyer know what happened in practice and they are aware of the newest change in court if finally a lawsuit is inevitable. They can provide more practical suggestions that the overseas lawyers can’t. In one word, their job ensure the contract’s enforceability. You may check our post: Tips on Preparing OEM Contract with China Factory for more information.

3. QC before shipping

Despite all the above-mentioned efforts, you still have to undertake the quality inspection seriously, as more than one third of the trade disputes are quality disputes. Our suggestion is: instead of doing QC after the goods arrive at the destination, do it before the shipment. The reason is simple: in international trade, all issues are more easily to be solved before you make the payment than after. If possible, do it during the manufacturing process and then once more before shipment, especially where the quality or type of the raw material is very important to the quality and function of the manufactured product. You need to make sure the raw material and the process are up to required standards before the shipment instead of finding out that something went wrong in the last minute.

bilingual contract, due diligence, quality control

A Chinese Green Card Holder’s Story

May 27, 2021

Chinese Permanent Residency, called as Chinese green card, is said to be the most difficult PR to be granted in the world (you may check our post: Chinese Green Card, Are You Qualified? for more information). However, Mr. Benjamin from Belgium (now living in Shanghai) is one of the lucky people. The following is his story, shared with us via a Q & A form in Wechat.

Q1: Why do you want to apply for a green card?

A1: Having a stronger legal basis in China, residence not tied to my job;

Most of my assets are in China and in CNY, those aren’t easily quickly liquified and difficult to convert to foreign currency simply because the value is too high(apartment, car, etc…), the only way to convert these is through grey area channels which is not an acceptable risk, while the green card does make it easier to convert to foreign currency(same limits as Chinese nationals), the biggest advantage is that it isn’t necessary to sell as I can legally retire in China;

Having a Chinese spouse, my wife is Chinese, and my son is Belgian, the green card gives a much more healthy legal balance.

Q2: Do you have any concern before doing so?

A2: The time commitment for getting all the necessary documents;

The initial step to apply with the PSB can be a bit intimidating(they are actually super helpful and friendly);

The financial commitment(easiest way prove funds is to lock 200k CNY in a bank account for 1 year with a certificate from the bank that the money is locked in a 1 year time investment);

The very low success rate.

Q3: By concern, I mean were you worried that such identity will set any restriction on your life or your freedom to move around.

A3: In that regard I didn’t have much reservations. There were at the time a lot of myths(I think, cannot substantiate this) about the Chinese government going as far as interviewing every neighbour you have ever lived near to inside China. There is a certain kind of fear mongering also regarding your traceability but I found this mostly to be either nonsense, or not something that couldn’t be done with the passport as well. I had at that point decided that while China may not be an open democracy, it certainly isn’t repressing ideas in ways that Western media likes to describe. I actually feel that individual freedom(provided you don’t engage in illegal activities) is better then in many other countries.

Q4: Talking about success rate, did the PSB mentioned that you are lucky, because there are quota for each category of application, or anything similar?

A4: Regarding the success rate, when I received my PR card I was congratulated and welcomed as a Shanghainese person, never heard about luck, or quota to fill(this again floats around when people discuss these things but I haven’t actually seen any evidence proving that theory).

Q5: From which source you know about green card?

A5: I knew about the existence through my wife.

Q6: Who have helped you during the procedure?

A6: I get quite a bit of help from the PSB, I feel they get some gratification out of successful applicants and I was very pleasantly surprised by their willingness and even support for my individual case. I’m very grateful towards those people.

I get a lot of help from the Belgian consulate, without them it would have been virtually impossible, there have been times that the consul general himself had to write additional letters to clarify certain matters.

Q7: What’s the most difficult part in this procedure?

A7: It’s actually reasonably straightforward IF, all the documents that are expected are obtainable, there is a lot of variance in how this is done by country, some things are pretty hard to obtain;

If you are from Belgium for example, some years ago they decided to abbreviate everything after the second first name on the passport, this was causing me the biggest problems, ultimately I managed to resolve them but it required interference from the department of justice in Belgium and the consulate general in Shanghai. For the Chinese government, I had essentially 5 names, for the Belgian government I only have 1, the unabbreviated one. This part could have not been advanced without direct pressure from the consulate on the DOJ, and even then it was a grey area.

Q8: What impress you the most?

A8:The call that I was expected to go to the PSB for the inauguration ceremony and accept my green card in two days, that was quite surreal.

Q: Haha, did your wife went there with you?

A: Yes we both went there and I was dressed up in a suit for the occasion, the newspaper was also there and took pictures and shared some excerpts from our different stories.

Q9: How long did it take in total?

A9: From the application date, exactly 6 months. To prepare for the application together with the Shanghai PSB add another month or two.

Q10: Any tips you want to share with other applicants?

A10:There are no shortcuts, you may find yourself tired of the application procedure and want to give up, persistence is key here. If you continue to produce every piece of paper they require of you, no matter how “silly” you may think they are, I actually think you stand a reasonable chance of obtaining the PR. Also, ensure you work closely with the people from your local PSB, they can help you a lot, all applications are eventually sent to Beijing where they will not know you or your background(this may be different for expats stationed in Beijing), and make a decision based on the information they have in front of them. If any of that information is incorrect, or otherwise incomplete you can expect to be rejected.

Q11: Thank you Benjamin for sharing with us your story, I love it and I love your positive comment on China.

A11: I loved the experience actually. I don’t like how western media tries to paint China as some third world country with people that are repressed. It’s just not true, all countries have their problems but some people make really stupid comments or do half work. That’s disappointing but that’s how most media works–looking for clicks and attention.

Chinese green card, Permanent residence

How to Avoid Employment Disputes during the Probation Period?

May 21, 2021

According to the opinions on issues relating to the implementation of the Labor law of the PRC given by the former Ministry of Labor, “the purpose of the probation period is for mutual inspection and choice by the employer and the employee and should not be more than six months.” The opinion also states: “The probation period shall be included in the duration of the labor contract.” This means, employees in the probation period are also protected by the labor law. Companies should learn about the legal provisions relating to the probation period to avoid any legal disputes and pay special attention to the following:

The term of the probation period

Article 19 of the Labor Contract Law of PRC stipulates: Where the term of a labor contract is above three months but less than one year, the probation period thereof shall not be more than one month. Where the term of a labor contract is above one year but less than three years, the probation period thereof shall be less than two months. With respect to a labor contract with a fixed period of above three years or without a fixed period, the probation term thereof shall not be in excess of six months.

An employer can only stipulate one probation period with the same worker.

No probation period may be stipulated in a labor contract with a period to complete prescribed work or a labor contract with a fixed period of less than three months.

The probation period shall be contained in the terms of labor contract. If only the probation period is stipulated in a labor contract, it shall be untenable and the said period shall be the term of the labor contract.

Labor Contract Law of PRC has made strict provisions regarding termination of labor contracts by the company

The salary level during probation

Article 20 of the Labor Contract Law of PRC stipulates that the wages of employees during the probation period shall not be lower than the minimum wage for the same position in the same company or 80 percent of the wage stipulated in the labor contract, and shall not be lower than the minimum wage standard at the place where the company is located.

The termination shall be in line with the law.

Article 39 of the Labor Contract Law of PRC stipulates that if an employee is proved to be ineligible for employment during the probation period, the employer may terminate the labor contract. You may review this article for more information: How to Fire an Incompetent Employee Properly?

Therefore, in order to legally terminate the labor contract during the probation period, the company should pay attention to the following aspects:

Work out the legal and specific recruiting conditions. There shall be no violation of the mandatory regulations, such as non-discrimination of employment based on sex, age and marital status etc.
Recruiting conditions should be published in advance. The company should not only let employees know, but also keep evidence as proof thereof. The company may choose to do one of the following:
a）When recruiting, show the employees the recruiting conditions and job descriptions, and ask for acknowledgement;
b) Before the establishment of employment relations, send a letter of employment to the employee to express the recruiting conditions and job descriptions, and ask for acknowledgement thereof;
c) Expressly state the requirements of employment in internal regulations or labor contracts, and show the internal regulations to the employees as an annex before the signing of the labor contract.
There should be evidence showing that the employees are unqualified. The decision of whether an employee qualified or not should be done based on objective assessment instead of subjective feelings. Therefore, it is very important for the company to set up and improve a strict evaluation system. Quantifiable assessment is highly recommended. If it is impossible to quantify the assessment in certain sectors, then relevant staff should be organized to conduct the evaluation to ensure a fair result.
Dismissal during the probation period. Please take note that a company must assess the performance of the employee during the probation period and serve the employee with the final decision by the end of the probation period. Some companies choose to start the assessment after the probation period, as a result, they actually give up their chance to dismiss any unqualified employee during the probation period.

Tips:

Labor Contract Law of PRC has made strict provisions regarding termination of labor contracts by the company. In most employment disputes，the burden of proof is on the company. Therefore, the company must do all the above-mentioned procedures in strict accordance with the law, and must keep the appropriate record of each procedure as evidence. Actually, these two steps are pretty important for the company in all disputes.

employment law, Labor law, probationa period, termination of employment

Can I Send Money I Made From my Company in China Home

March 30, 2021

One of the most frequently asked questions from our clients is:” Can I send money I made from my company in China home or transfer to another country? “Of course, it is allowed. Article 21 of the Foreign Investment Law of the People’s Republic of China clearly stipulates: ” A foreign investor may, according to the law, freely transfer in or out its contributions, profits, capital gains, royalties of intellectual property rights, lawfully acquired compensation or indemnity and so on within the territory of China in Renminbi or a foreign currency”( for more information, please visit our previous post: Implementation Regulation on Foreign Investment Law of the PRC

Now let’s see the relevant rules regarding how to expatriate profits. According to the identity of the investors–foreign nationals or foreign companies, the rules could be different.

If the shareholders are foreign nationals

According to the current policy of the State Administration of Taxation of PRC regarding to individual income tax (” IIT”): “Foreign nationals are temporarily exempted from individual income tax for the dividends they obtained from the company they directly invest in. ” It means the foreign nationals can expatriate their dividend to their home country without paying IIT.

If the shareholders are foreign companies

Enterprise income tax must be paid as follows:

I. Submit the application

Article 37 of the Enterprise Income Tax Law of PRC stipulates that the income tax payable on dividends obtained by overseas companies shall be withheld from the source so that the payer (i.e. the company in which it invests directly) shall be the withholding agent. The tax shall be withheld from the amount payable or due by the withholding agent each time it is paid or due.

If the Chinese company intends to remit profits to its headquarter, it must submit the following documents to the bank:

1. Written application.

2. Resolutions on the distribution of profits by the shareholders’ meetings or boards of directors (or the resolution on the distribution of profits by partners) in connection with the repatriation of this profit.

3. Audited financial statements.

4. Tax certificates issued by the competent tax department (e.g., hard copy or electronic copy of external payment Tax filing form).

how much tax I have to pay before I send money I made from my company in China home and what's the procedure?

II. Audit by bank

Upon receipt of the above-mentioned materials, the bank will conduct an audit in accordance with related provisions of the Company Law of PRC. The main audit requirement is that the company shall make up for the previous year’s losses in line with the Company Law and laws and regulations related to foreign investment.

The bank will check for any losses in past years and if make-up of the losses is reflected in their financial statements. The related provisions are as follows:

1. When the company distributes its profits for the current year, 10 percent of the profits shall be withdrawn and included in the company’s statutory provident fund. If the cumulative amount of the company’s statutory provident fund is more than 50 percent of the registered capital of the company, it may no longer be withdrawn.

2. If the statutory provident fund of a company is not sufficient to make up for the losses of the previous year, it shall make up the losses with the profits of the current year before withdrawing the statutory provident fund, and only the profits after the company makes up the losses and withdraw the provident fund shall be distributed.

3. If the profits are distributed to the shareholders before the company makes up its losses and withdraws the statutory provident fund, the shareholders must return the profits distributed in violation of the laws, to the company.

4. The profit realized by the company in the current year, together with the undistributed profit at the beginning of the year (or minus the undistributed deficit at the beginning of the year), is the profit available for distribution. The shareholders may distribute dividends in proportion to their capital contribution, except where the Articles of Association provides otherwise.

III. Tax rate

Article 4 of the Enterprise Income Tax Law of the PRC stipulates that: the income tax rate for direct investment by overseas companies is 20%.

However, the Regulations on the Implementation of the Enterprise Income Tax Law of the PRC stipulate that overseas companies may be subject to enterprise income tax at a reduced rate of 10% on the above-mentioned income. It means, the dividends paid by domestic resident enterprises (including domestic and overseas listed enterprises and non-listed enterprises) to their shareholders – overseas companies shall be subject to an enterprise income tax rate of 10%. In addition, tax on dividends obtained in accordance with the tax treaty (arrangement) may be charged in accordance with the provisions of the tax treaty.

Useful website:

THE PEOPLES’S BANK OF CHINA

enterprise income tax

What to do When an Employee Illegally Terminates a Labor Contract?

March 29, 2021

The Labor Contract Law clearly stipulates the procedures for employers and employees to terminate the employment contracts ( you may visit our post: Can a Company Fire an Employee Who Failed to Tell the Truth? for more information ). In addition, the law provides specific legal liability (paying compensation to an employee) for employers when they terminate labor contracts illegally. However, it does not specify what legal liability employees should bear if they fail to terminate labor contracts in accordance with the law.

According to the Labor Contract Law, if any employee want to terminate a contract, he must notify the employer in writing 30 days in advance (three days in advance during the probationary period), unless it’s the situation provided in Article 38 of the Labor Contract law, where any employee is forced to work by acts of violence, threats of violence, general threats or by illegally limiting his/her personal freedom, or is forced to perform dangerous operations which may endanger his/her personal safety under illicitly commands or forces of the employer, the employee may immediately discharge the labor contract without informing the employer in advance.

However, some employees refuse to terminate the employment relationship in line with the law. They quit their job at short notice and are unwilling to do anything to help with the transition to a new employee…such behavior badly affects the company and could harm them financially or reputationally.

In response, some companies come up with countermeasures. For example, employees are required to pay a one-month salary as payment in lieu of notice if they do not give a 30 days’ notice to the employer to quit, or the company may refuse to go through the severance procedures for the employee or refuse to pay salary if the employee refuse to handover his/her work cooperatively.

But is it legal to do so? Definitely not!

First of all, the ” payment in lieu of notice” is not a legal concept, but rather a common practice in the Labor Contract Law. The employer is required to “pay one additional month’s wages” to the employee under certain circumstances, however this provision applies only to the employer not the employee.

Secondly, Article 25 of the Labor Contract Law stipulates that an employer may not require any employee to pay any penalty, unless the employer has provided special technical training or signed a non-competition agreement with the employee. Requiring an employee to pay a ” payment in lieu of notice” is in effect a disguised penalty payment, which is in violation of the mandatory provisions of the law and thus invalid.

Then, can the company suspend the separation procedures or withhold wages on the grounds that the employees have not resigned in line with the laws and regulations and have not handled the work handover properly?

Obviously this is impossible as well.

company may provides specifically how to calculate the loss caused by the employee who illegally quits the job in the labor contract

The Labor Contract Law clearly stipulates that the company must pay the wages of its employees in full and on time. In addition, Article 50 of the Law also stipulates: “The employer shall issue a certificate of termination at the time of termination of the labor contract, and shall, within 15 days, handle the procedures for the transfer of files and social insurance relations for the employees.”

Obviously, it’s the company’s obligation to finish all severance procedure in the prescribed time limit for the employees, and to make timely and full payment of employee wages in accordance with the labor contract. Otherwise, the company has to bear relevant responsibility as a consequence.

However, it is not saying that the company can do nothing when the employees quit their job illegally. Article 90 of the Labor Contract Law stipulates that “the employees shall be liable for compensation if they terminate the labor contract in violation of the provisions of this Law, or in violation of the obligation of confidentiality or non-competition stipulated in the labor contract and in the end, cause losses to the employer.” 』　

In addition, Article 4 of the Measures on Compensation for Violation of the Provisions of the Labor Law relating to Labor Contracts also stipulates that:

Where an employee rescinds the labor contract in violation of the relevant provisions or the stipulations of the labor contract, causing any loss to the employer, the employee shall compensate the employer for the following losses:

1. Expenses paid by the employer for the recruitment and employment of the employee;

2. Training expenses paid by the employer for the employee, unless otherwise agreed upon by both parties;

3. Direct economic losses caused to the operation of the employer; and

4. Other compensations stipulated in the labor contract.

Therefore, it is highly recommended that the company provides specifically how to calculate the loss caused by the employee who illegally quits the job referenced in the labor contract, such as the cost for employer issuing a recruitment post, wages and benefits for the replacement employee, as well as some of the subsidiary or benefits provided by the company to employees.

If similar provisions are made in the company’s internal regulations, it is important to ensure that these internal regulations are publicly discussed and adopted by the employees or the employees’ congress.

Useful website:

Ministry of Human Resources and Social Security of the People’s Republic of China

employment contract, teminate contract

Can my Ex-employer Use my Portrait in Marketing Material?

March 20, 2021

Amy started working at XYZ Hotel on 15 October, 2007. In August 2008, XYZ Hotel filmed a four-minute video for decoration and publicity use, which included a total of 15 seconds of close-up footage and 5 seconds of vision footage of Amy receiving guests at the hotel reception. The video was then circulated on television in the hotel lobby, and no agreement was made between the two parties on the issue of Amy’s portrait in the disputed video.

On 14 October 2011, Amy’s employment contract expired and she left XYZ Hotel. On 16 December, 2011, Amy filed a lawsuit against XYZ Hotel. In her pleadings，Amy complained that XYZ Hotel had been playing the video with her images in the hotel lobby for profit for more than three years without her consent. She therefore requested:

1. XYZ Hotel immediately stop violating Amy’s portrait right; stop playing advertisements containing Amy’s portrait,

2. XYZ Hotel compensate Amy for economic losses of 30,000 yuan, and emotional damages of 30,000 yuan.

XYZ Hotel's continued use of Amy's portrait had no legal basis as there was no longer an employment relationship.

The court of first instance held that natural persons enjoyed their rights to portrait. The right to portrait is the right of a natural person to reproduce, use or permit the use of his or her own portrait. Infringement of the right to portrait must contain three constitutive elements: i) the use of portraits, ii) without the consent of the right holder to the portraits and, iii) no justification for the unauthorized use if portrait.

When the video was produced, Amy was an employee of the hotel; the scene in the video is therefore closely related to her position meaning that the use of Amy’s portrait by XYZ Hotel was justifiable as it had a certain rationality and necessity which is determined by the employment relationship between the two parties. The argument by XYZ Hotel that Amy was performing her duties as an employee of the hotel was accepted.

However, after Amy’s departure, XYZ Hotel’s continued use of Amy’s portrait had no legal basis as there was no longer an employment relationship. It was therefore not in line with the authenticity of the publicity of their service. It could mislead people regarding the employment relationship between the two parties, causing a mental burden on Amy. XYZ Hotel had not made a clear agreement with Amy on the use of her portraits, nor did XYZ Hotel prevent the illegal use of her portraits for news reporting, scientific and cultural education, or any other social or public interests. In conclusion, XYZ Hotel’s behavior had gone beyond the scope of reasonable use and should be found to have violated Amy’s portrait rights since Amy’s departure.

Regarding compensation, the court did not support Amy’s claim for economic loss because she failed to prove the reasonableness of this claim. However, since the infringement of XYZ Hotel is sufficient to cause Amy pain and suffering, the court was in favor of her claim for compensation for emotional damage. In light of the circumstances of the case, the court determined that the appropriate compensation would be 2,000 RMB

XYZ Hotel argued that the purpose for playing the disputed video was for publicity and not for profit. They insisted that the use of the portrait is not illegal and decided to appeal the decision.

After the hearing of the court of 2^nd instance, the appellate court held that: the main dispute in this case is whether the appellant’s act of playing the video is an infringement of the Respondent’s – Amy’s – portrait rights and whether it should bear the corresponding legal responsibility. In this case, XYZ Hotel is an operational hotel, and its production and broadcast of the promotional video was carried out for its profit-making purposes.

Secondly, the disputed video was produced during Amy’s tenure at XYZ Hotel. Amy cooperated with XYZ Hotel in producing the video which was indeed in line with her duties as an employee of XYZ Hotel but, as the employer, XYZ Hotel should have known that after the employment relationship is terminated and the employee leaves the company, the company does not have the right to play the video which includes the employee’s portrait. This would constitute an infringement on Amy’s portrait rights. The original judgment was therefore not improper and the appellate court dismissed the company’s appeal and upheld the original judgment.

civil rights, employment law, portrait rights

What the Law Says Regarding Estate During Marriage?

February 20, 2021

Generally speaking, marriage means a combination of two people’s lives, including their assets. Let’s see what the Civil Code of the PRC (hereinafter “Civil Code”) says regarding the estate of couples.

I. What is a joint estate?

According to the Civil Code, the following estate acquired by a husband or wife during the marriage will be treated as joint estate, if it’s not provided by the couple otherwise.

a. Remuneration for labor services, such as salary and bonuses;

b. Proceeds of business operation, investment or intellectual property rights;

Of course, the moral right of any intellectual property rights belongs only to that specific person. However, the couple instead of just the husband or wife will be the owner of any investment in security or fund, or any equity share in a company, even if only the husband or wife is the shareholder listed in the company registration agency and he/she is the only one who operates this business.

c. Property inherited or donated, unless it’s been made clear that the property only belongs to the inheritor or the beneficiary by the deceased or donor.

A common example is, if one set of parents paid for the real estate (wholly/partly), unless they clearly stated that the payment is a gift only to their son or daughter, the payment they made will be treated as a gift to the couple and thus, a joint estate.

Another common example is, if the husband or wife inherited a real estate in line with the law, the inherited real estate will be deemed as a joint estate, unless his/her parents made it clear in the will that only their son/daughter will inherit the real estate.

e. Other property which should be treated as joint estate.

It is provided by the Civil Code that the husband and wife has equal right to dispose the joint estate, regardless of how much revenue the husband or wife brings to the family.

II. What is a personal estate?

Despite the above mentioned provisions, the Civil Code acknowledges the existence of personal estate and provides that the following estates are personal estates：

a. All personal property before the marriage;

b. Financial compensation obtained by the husband or wife for a personal injury;

c. Property inherited or donated during the marriage, and the deceased or donor had determined that only the husband or the wife is the inheritor or beneficiary;

d. One party’s daily necessities (such as the items one uses in his daily life or job, e.g., laptop, books, clothes and jewelry etc.; and

e. Other property which should be treated as personal estate.

It is provided by the Civil Code that the husband and wife has equal right to dispose the joint estate, regardless of how much revenue the husband or wife brings to the family

III. What about a joint debt?

Debts incurred jointly by the couple are joint debts. Further, any debts incurred by the husband or wife, if it’s acknowledged by the other party or if the purpose of the debts is to meet the needs of the family’s daily life then such shall be deemed as joint debts.

However, any debt incurred by either spouse in his or her own name, and the amount of the debt goes beyond what is needed for the family’s daily life shall not be deemed as a joint debt.

Moreover, any debt incurred through gambling or due to drugs is not a joint debt.

IV. Is a property agreement during the marriage valid and enforceable?

Despite the above mentioned provisions, the couple can sign a property agreement to stipulate how to manage all estates during the marriage. Examples of property agreements:

All estates before or during the marriage belong to the person who owns or earns them,
All estate before or during the marriage belong to the couple jointly, or
Part of the estate is owned by the couple jointly while the other part of the estate belongs only to the husband or wife.

Though the property agreement is binding to the couple, it won’t be binding to any third party, such as the creditor to the husband or wife, unless the creditor knows the existence of such property agreement in advance.

Why so?

Usually, people assume that either husband or wife is a member of the family. The reason they agree to lend money to the husband or wife, is that they assume the family (not just the husband or wife) has the capability to pay it back. The property agreement between the couple is something people are usually unaware of, either the existence of it or its content. So it’s unfair to the creditor if the couple refuses to return the money by using the property agreement as a defense and the court won’t be in favor of this argument.

Divorce in China-What Options You Have?

You may visit the website of Ministry of Civil Affairs of the People’s Republic of China to know more information

marriage, personal estate

Make a Legally Binding & Enforceable Will in China

February 9, 2021

Before starting to discuss this topic, let’s see if a will made by a foreigner in China is enforceable at all.

Article 31 of the Law of the People’s Republic of China on the Application of Laws to Foreign-related Civil Relations states: “For the format of wills, the laws of the land covering the testator’s regular residence or the location where the death occurred, the laws of the home country or the laws of the place in which the wills are conducted shall apply and such wills shall be valid.”

By regular residence, we refer to the place the testator has stayed for more than one year after leaving his/her home country. So as long as the testator has stayed in China for more than one year, he/she can prepare a valid will in line with the Chinese Inheritance Law which will be enforceable in the future, as long as some specific requirements are met.

I. Civil capacity of the testator.

First in the list of requirements is the civil capacity of the testator, which means the testator must be of legal age and sound mind.

II. Witnesses

As in most other jurisdictions, at least two disinterested witnesses must be present at the signing of the will, unless it’s holographic will. Disinterested means that they’re not beneficiaries under the terms of the will, or have no interest in the estate. Of course, the witness must also have the civil capacity to be such or his civil capacity is not limited. In addition, the witness need to be capable to witness, for example, a blind man cannot be witness to a will.

According to the Civil Code of the PRC, if there are more than one will exists, the most recent one will prevail

III. Different types of will:

1. Holographic will

A holographic will is one prepared entirely in the testator’s handwriting. As the entire will is handwritten by the testator, it’s not easy to forge and as such a witness is not required. As long as the testator signed it at the very end of the will and clearly states the date he signed it, a holographic will is valid.

2. Will written by another person

For such a will, at least two witnesses are required to be present. One of the witnesses will write the will on behalf of the testator and then, all witnesses and the testator shall sign their name at the very end of the will with the date it is signed clearly stated too.

3. Printed will

A printed will means the entire will is printed instead of handwritten by the testator or someone else. The law provides a stricter requirement for a printed will to be valid. A printed will needs to be signed by the testator and at least two witnesses on each page of the will with the date it is signed.

4. Video or audio will

A video or audio will shall be valid if it’s witnessed by at least two people and the identities of all concerned (names or portraits) and the exact date of the recording clearly stated. However, with today’s technology it’s not so difficult to edit a video or audio and to change the content, so the credibility of the video or audio will is usually an issue.

e. Nuncupative will

In an emergency situation, a testator may make a nuncupative will, meaning a will made orally. A nuncupative will shall be witnessed by two or more people. In addition, once the emergency situation no longer exist and the testator is able to make a will in writing or any other form, this nuncupative will becomes null and void.

IV. Which shall prevail if more than one will exists?

According to the previous Civil Law of the PRC, a notarized will shall prevail if more than one will exists. It means that if anyone wants to withdraw or change a notarized will, the only option is to have a new one notarized as well. Considering the complicated procedure involved, it makes it pretty difficult to change a notarized will. So the legislature makes a change in the Civil Code of the PRC (current law) and provides that the most recent one will prevail.

You may visit the following website to check more information:

Ministry of Justice of the People’s Republic of China

civil law of the PRC, inheritance law, Will