2024 China Market New Compliance Requirements,Policy Orientation

  • Impact and key points of the newly amended Company Law
  • Initiative of MOFCOM to relax restriction on foreign   investment

  • Latest guidelines on achieving high-quality financial development

  • Optimization of social security declaration processes

  • 5 new measures to facilitate the smooth entry of foreign individuals

  • How compliance efforts can contribute to the profitability of businesses



Impact and Key Highlights of the Newly Amended Company Law


On December 29, 2023, the newly amended China's Company Law was endorsed and will take effect on July 1, 2024. It primarily focuses on Optimization of Corporate Governance Structure, Improvement of Shareholder Contribution System and Standardization of Company Deregistration Procedures, will comprehensively impact the daily compliance practices of both domestic and foreign entities. The following is a brief analysis of the key Impact on Foreign-Invested Entities. 2023年12月29日,中国新修订的公司法被通过,并将于2024年7月1日起施行。新修订的公司法主要聚焦于公司治理结构优化、股东出资制度完善、规范公司注销程序等方面,涵盖了对中资及外资企业日常合规实践的影响。以下是修订要点对外资企业的影响的简析:


- Foreign-invested entities can more flexibly select their legal representatives, may opt not to establish a board of supervisors, and have the option to set up an audit committee to exercise the power of the board of supervisors as needed 外资企业可以更灵活地选择法定代表人,可不设监事会或监事,并根据需要设置审计委员会行使监事会的职权。
- Enhanced shareholder responsibilities, stipulated that the subscribed capital of a limited liability company must be fully paid within five years of establishment 规定了有限责任公司认缴出资额需在成立五年内缴足,强调股东对出资的义务
- The scope of subscribed capital methods has been expanded to include non-monetary assets such as equity and right of credit. 扩大了认缴出资方式范围,包括股权、债权等非货币资产。
- The standardization and streamlining of deregistration procedures facilitate the more convenient dissolution or deregistration. 注销程序的规范化和简易化,有助于外资企业更便捷地解散或注销

- A new provision has been added to establish liability for compensation when the liquidator fails to fulfill liquidation obligations resulting in losses. 新增了清算义务人怠于履行清算义务造成损失的赔偿责任。

Suggestions for Businesses: Overall, these key revisions aim to enhance the efficiency and transparency of corporate governance, provide clearer guidance for the compliance practices, such as tighten capital contribution rules to prevent financial risks. Closely monitor of these changes in day-to-day operations and make compliance adjustments in accordance with the new regulations correspondingly are suggested. 对企业的建议:总体而言,这些修订要点旨在提高公司治理的效率和透明度,强化股东的责任意识,为企业的合规实践提供更清晰的指导。企业在日常经营中需密切关注这些变化,根据新规定进行相应的合规调整。

In the first week of 2024, hundreds of companies have already advertised, some with a reduction in registered capital from RMB300 million to 35 million as shown in above screenshot. There are also instances of new companies with registered capital ranging from RMB10k to 100k. Source: Sina

The wave of capital reduction has emerged, and it is important to note that the public announcement period for capital reduction is 45 days. Plan early to ensure timely disclosure is suggested. For matters involving multiple regulations, companies may consider seeking professional support from legal advisors, accountants, etc., to ensure compliance. 减资的浪潮已经出现,注意减资公告期为45天,企业应及早规划,确保按时公示。对于涉及法规较多的事项,企业可考虑寻求法律顾问、会计师等专业支持,以确保操作合规。


The Ministry of Commerce 2024 Relax China Market Access


The National Conference on Commerce was held in Beijing on January 7-8, with an emphasized goal to build the 'Invest in China' brand in 2024, relax market access and strengthen services for foreign investment, continually enhance top-notch business environment and steadily expand openness. It also outlined plans to enhance the functions of various types of zones, including national-level economic and technological development zones, free trade pilot zones, and the service industry pilot demonstrations zones. 1月7-8日,全国商务工作会议在京召开,会议强调2024年要打造“投资中国”品牌,放宽外资准入,强化外资服务保障,持续建设国际化一流营商环境,稳步扩大制度型开放。并将深入实施自贸试验区提升战略,深化服务业扩大开放综合试点示范,提升国家级经济技术开发区等各类园区功能。



The Latest Orientation of High-Quality Financial Development


On January 16th, the Special Seminar on Promoting High-Quality Financial Development commenced at the Central Party School, with President Xi Jinping's speech highlighting key points. These include outlining the crucial elements for building a financial powerhouse, such as constructing a modern financial system, strengthening financial security, increasing openness, and reinforcing financial risk prevention. President Xi emphasized the importance of coordinated regulation, combining rule of law with ethical governance, combating financial crimes, and fostering China's financial culture. This seminar, focused on finance, is the first in 25 years since 1999, providing guidance for the development of China's distinctive financial system. 1月16日,推动金融高质量发展专题研讨班在中央党校开班,习近平主席讲话的关键亮点包括提出构建金融强国的关键要素,包括现代金融体系建设、加强金融安全、提高对外开放,以及强化金融风险防范。并强调协同监管、法治德治结合,打击金融犯罪,推动中国特色金融文化培育等。这是自1999年以来时隔25年再次以金融为主题的研讨班,为中国特色金融发展指明了方向。


2023 Q3 top 10 industries of the QFII Increased holdings, source from:eastmoney

According to data from the China Securities Regulatory Commission, in 2023, a total of 81 institutions were approved for Qualified Foreign Institutional Investor (QFII) status, covering 15 countries, regions, and international organizations globally. Although slightly less than the 118 approved in 2021, the increased number of QFII approvals reflects growing confidence among foreign investors, contributing to the high-quality development of China's capital market. 中国证监会数据显示,2023年共有81家机构获批合格境外机构投资者(QFII)资格,范围覆盖全球15个国家、地区和国际组织,获批数量仅次于2021年的118家。有关专家表示,QFII获批数量的上升反映出境外投资者的信心,有利于中国资本市场实现高质量发展。


Five New Measures to Streamline the Entry of Foreign Nationals

The latest measures to facilitate the entry of foreign nationals into China officially implemented by the National Immigration Administration from January 11, include: 1. Relax visa application requirement for foreign nationals coming to China; 2. Enjoy 24-hour direct transit without undergoing border check procedures at nine major airports in cities, including Beijing, Shanghai; 3. Allow foreign nationals in China to handle visa extension, renewal, and reissuance locally; 4. Allow foreign nationals in China requiring multiple entries and exits to apply for a re-entry visa; 5. Simplify the documentation for visa applications by foreign nationals in China. These measures aim to continuously optimize the policy for the entry-exit, and residence of foreign nationals, facilitating their arrival in China for business, study, tourism, and other matters. 国家移民管理局1月11日起正式施行的便利畅通外籍人员来华渠道的最新措施:1、放宽来华外籍人员申办口岸签证条件、2、外籍人员在北京首都机场等枢纽空港口岸24小时直接过境免办查验手续、3、在华外籍人员可就近办理签证延期换发补发、4、在华外籍人员需多次出入境可申办再入境签证、5、简化在华外籍人员签证申办材料。这些措施旨在持续优化外籍人员入出境和停居留政策环境,不断畅通外籍人员来华经商、学习、旅游、探亲等渠道。


Optimization of Social Security Declaration Process


Beginning in 2024, an optimization and adjustment in the process of declaring and paying social insurance contributions come into effect. Contributions from employers and flexible employees to basic endowment insurance, unemployment insurance, basic medical insurance, etc., will now be independently declared and paid directly to the tax authorities. This streamlined approach unifies the declaration and payment of social insurance matters, providing contributors with an automated calculation and declaration service through the information system. 2024年起,社会保险费申报缴纳流程优化调整为由缴费人自行向税务部门申报缴费,这一调整针对的具体缴费人范围包括两类,一是用人单位;二是灵活就业人员缴纳的职工基本养老保险费、失业保险费、职工基本医疗保险费等。此举措将申报和缴费两个社会保险事项统一为向税务部门办理,通过信息系统为缴费人提供“智能化”自动计算、申报服务。


How does compliance contribute to the corporate profit


Data indicates that despite the incomplete recovery of travel and goods trade due to factors such as the pandemic and geopolitical conflicts, global division of labor is deepening. Factors driving global development include the rise of digital industries, with multinational digital enterprises like Microsoft, Meta, Google, Tencent, Alibaba becoming key features in the prospects of globalization. In the post-pandemic era, China's significance as a crucial endpoint market and key node in the supply chain is increasingly prominent. Multinational companies are localizing efforts in China to consolidate market positions, while diversifying supply chains and establishing manufacturing centers in other regions to meet global demands, thus to enhance business resilience against economic and geopolitical fluctuations. 数据表明,尽管受疫情、地缘冲突等因素影响下的旅行和货物贸易未完全恢复,全球化分工仍在深化。推动全球化发展的因素包括数字产业的崛起,微软、Meta、谷歌、腾讯、阿里等数字跨国企业成为全球化前景的关键特征。在后疫情时代,中国作为终端市场和供应链关键节点的重要性日益凸显,跨国公司在中国进行本地化努力,致力于巩固市场地位,同时实施供应链多元化,在其他地区设立制造中心以满足全球需求,并提升抵御经济和地缘政治波动的业务能力。


Manufacturers Move Back to China as uncertainties and weakened demand, Source from: Lianhezaobao

At this point, compliance is essential for the stable and long-term development of both domestic and foreign entities. However, pain points in compliance practices include the impact of export control policies on global layouts, inefficient compliance functions, inconsistent objectives, and shortages of funds and talent. The solution lies in establishing a resilient supply chain, clarifying compliance workflows, setting common goals and specialized talent training. Top managements are suggested to closely follow the latest policy orientation, support the establishment of a compliance culture, thus contribute to the company's profits by reducing legal risks, improving efficiency, and exploring market opportunities. Effectiveness assessments can be conducted through audits, KPIs, risk assessments, ensuring the participation of all employees, and promoting the sound development while ensuring compliance. 此时,做好合规工作是中外企业行稳致远长远发展的必要条件,然而合规实践中的痛点包括全球布局受出口管制政策影响、合规职能效率低下、目标不一致、资金、人才匮乏等等。解决之道在于建立弹性供应链、明确合规工作流程、制定共同目标并培养专业人才等等。企业高层应密切关注最新政策导向、支持建立合规文化,通过降低法律风险、提高效率和拓展市场机会为企业贡献利润。而有效性考察可采用审计、KPIs、风险评估等方式,确保全员参与,实现合规的同时促进企业稳健发展。

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