So, while 2012 was quiet on the foreigners’ HR and labour law landscape, 2013 is underpinned by two new laws seeking to further regulate employment of foreigners in China. Our firm’s recent presentation to a sold out audience on this topic for the Australian Chamber of Commerce, Shanghai in July, reflects the interest in how foreigners can now be employed in China.

It is undoubtedly important to be well versed on the new law’s probable effect on Australian businesses in China and it is positive to see businesses grappling with this area.

The New Law

The law is formally titled The Exit-Entry Administration Law of the People’s Republic of China came into force on July 1, 2013. This legislation replaces two previous laws – the Foreign Entry-Exit Law of China and the Citizen Exit-Entry Administration Law of China. The former law concerns foreigners’ entry and exit in China and the latter regulates Chinese Nationals’ entry and exit in China.

Now, these two laws are repealed and placed into one, more efficient document while adding some completely new laws not found in the old statutes. The need for new legislation is probably justified because the two previous laws were both enacted in the late 1980s. Nowadays, there are more than 15 times the amount of foreigners entering and exiting China when compared with the 1980s. This necessitates further regulation provided for by the new legislation.

We will seek to give guidance on some of the more significant, interesting and new aspects of the legislation.

China “Green Card” System

There are provisions in the new laws for what our firm has dubbed the China “Green Card” System. A foreigner who has made an outstanding contribution to China’s economy may be granted Permanent Residency. The Central Government needs to provide more information on how this provision will be implemented. If the Central Government drafts further guidelines, Australians who are Old Hands and may have been in the country for a long time, for example, may be able to obtain benefit from such system. This may be of particular significance for Australians nearing retirement age (normally 50 years for females, 60 years for males) and wish to continue working in China. To be able to obtain PR through this system would be of significant benefit to such people. We must wait and see what the material effect of this provision actually is.

Highly Qualified Foreigners

Foreigners who are “highly qualified” and in “short supply” will be able to apply for a unique visa (Type R). Here, the legislative intent is to attract expert foreigners to come and work in China in fields with shortfall in expertise in China. However, the legislation provides no definition for the term “highly qualified foreigner”. Again, the Central Government will need to provide further guidelines to see the practical effect of this provision.

Visa Classification Adjustment

The new law expands the visa types from 8 to 12.

The table below details the previous visa classification system and the system under the new law.

Those responsible for processing foreign visas in an Australian business in China should take heed in applying for the correct visa to avoid unnecessary delays.

Foreign Student Working Arrangements

Foreign Students studying in China may benefit from the new legislation. To mitigate foreigners working on incorrect visas in China the new legislation indicates that there may be scope for foreign students to work lawfully under a visa whilst studying in China.
Presently, the Central Government is drafting guidelines concerning how these provisions will be implemented.

Penalties and Prevention

Unlawful Employment

There new law’s provisions for unlawful employment in China are quite clear.
Employment in China without a valid work visa is unlawful. Working for a company whilst your work visa attributes you working for another company is illegal. Such breaches can fetch a fine, detention or both. Whoever illegally employs foreigners can be fined and any illegal income flowing from the illegal employment may be confiscated.

Invitation Letters

Companies issue invitation letters in applying for a work visa for a foreign employee and to issue such letters for customers, potential clients, etc in order for them to obtain a business visa. In our experience companies have been fairly laissez faire about issuing invitation letters. However, the new law holds companies to account for issuing letters where the invitation letter’s content is untrue. E.g. A company issues an invitation letter to a customer to obtain a business visa citing “in order to negotiate a hire/purchase agreement” and it is discovered that the recipient of the business visa used the business visa and came to China for a completely different purpose. The company issuing the invitation letter may be fined, illegal income resulting from the issuing of the visa may be confiscated and the company may be responsible for the foreigner’s exit expenses.

Exiting China

The new law enunciates situations where a foreigner can be denied exit from China. Significantly, the new law states if a foreigner defaults in labour remuneration to their employees they may be prevented from leaving China.

Conclusion

We view the underpinning motivation for the new law as two-fold. First and foremost, to mitigate foreigners’ presence in China for purposes beyond or different to the scope of the visa they are issued. E.g. it stands to reason that if a company in China employs foreigners then a valid work visa should be obtained. This is perfectly reasonable and a standard expected in Australia. We view that legislation will avoid situations where foreigners seek to do business in China using a litany of business/tourist visas.

Issuing the correct visa for foreigners’ working in China also ensures their salaries and other monies go through into the Chinese domestic economy as opposed to being completely off-shore and that appropriate income taxes are paid individually and by the company in China. Second, potentially to attract more talented individuals in fields where there is short-fall of qualified people in China. As is always the case with legislation enacted by the Central Government, we must wait and see how provincial governments administer the new legislation. Additionally, further guidelines should be issued concerning how provisions will be implemented before we can know the new law’s practical reality. Though the practical affect remains to be seen, the laws have been enacted and feedback received from the Public Security Bureau in Shanghai which we interact with have stated that this is ‘good law’. ■

*Disclaimer: This article provides generalist information on the new foreigner visa laws. The new legislation is complex. This article simply highlights what our firm regards as some of the more significant provisions within the legislation and should not be considered as legal advice. For more detailed advice on the new legislation, consultation should be obtained from a lawfully qualified firm.

 

**Tony Tang spent a considerable amount of his career with many government bureaus rising to head the Shanghai District Labour and Social Security Bureau. Tony currently holds amongst other posts, the position of arbitrator within the Shanghai Municipal Disputes Arbitration Committee and Vice Chairman of the Labour Committee of the Shanghai Bar Association. Tony holds an LLB from East China University of Politics and Law and is largely considered an authority on PRC HR and labour law.

Tony is the founder of Tony Tang Law Firm, a PRC law firm based in Shanghai which specializes in HR and labour law. Services include HR document design, employee termination and labour disputes. To contact the author email John Crozier-Durham, Business Development Manager, Foreign Service Centre at Tony Tang Law Firm, john.crozierdurham@tonytanglawfirm.com or call on +86(21) 6283 5892 or 6283 6533.