Conducting Financial Services Business in China_TopConsulting(mid)

Conducting Financial Service Business
in
China
在中国开展金融服务业
Top Consulting, All Rights Reserved, October 2014

Preface
As the world second largest economy with expanding
middle income class, China has experienced a rapid
growth of financial services in recent years.
With the 23 per cent average annual growth rate on the
scale of financial services market in mainland China, fi-
nancial development and innovation keep flourishing.
The new Chinese government has issued several policies
to encourage and regulate steady development of finan-
cial services industries.
However, facing the significantly different business envi-
ronment and complex regulations, one may encounter
some obstacles when conducting financial services busi-
nesses in China.
The “Conducting Financial Services Business in China”
report aims to briefly introduce financial services market
in China as well as provide practical information on taxes,
contract law, challenges and business matching infor-
mation.

Contents
目录
● Introduction 02
● Four Major Industries 03
● Legal forms of Financial Services Business 07
● Regulators 09
● Taxes and Contract Law 10
● Financing Business Activities 12
● Challenges 14
● Resolving Disputes 18
● Business Matching 20
● Other Resources and Contact Information 22
● References 26
Conducting Financial Services Business in China
01

Introduction
行业介绍
With rapid growth of China`s financial services industry in last years, more new
opportunities keep attracting foreign investor to capture this market. By now, the
young financial services industry in China has become one of the most engaging
market around the globe. Recently, the establishment of pilot free trade zone in
Shanghai, send a clear message that Shanghai is becoming a world financial center
and determine that Chinese government to stimulate development of China`s en-
ergetic financial market.
Overall, China’s financial services industry is still in the process of shifting from
centrally-planned to a market-oriented industry.
In banking industries, although having the downtrend of general profit in 2013, it
is still converging into more normal trend growth rates. And the overall NPLs
(Non-preforming loans) ratio among banking industries continued to maintain
low on 0.97% in 2013.* In security, by the end of 2012, the combined market capi-
talization of China’s Shanghai and Shenzhen financial markets surpassed US$3.7
trillion, a significant rise compared to the US$400 billion value in July 2005. **
However, financial services industries are still highly-regulated and closely relat-
ed to government policies and controls from financial regulators in China. From
December in 2006, China took the comprehensive opening reform on banking and
other several financial industries to outside world, bringing new opportunities as
well as more challenges at the same time. Also, along with the interest rate liberal-
ization process in 2013, regulators and financial services companies in China are
facing new challenges and instabilities.
In the big picture, Chinese domestic financial services companies are developing
rapidly, however the majority remains behind global firms owing to operation
system and experiences. For example, China`s major banks and insurance compa-
nies have already become the world`s largest, but they are still mainly focus on
domestic markets.
New global financial order, financial integration among BRICS countries and new
trend of Internet Finance and e-commerce as well as changing global and regional
financial landscape are shaping new conditions of financial service industries,
what produce enormous opportunities for foreign investment in China.
* Figures by People`s Bank of China;
** Figures by China Banking Regulation Committee;
02

Four
Major Industries
四大金融支柱
2Chapter

Four
Major Industries
四大金融支柱
Under the categories made by China Banking Regulation Committee (CBRC),
there are four major financial services businesses are conducted in Mainland Chi-
na (Hong Kong, Macau and Taiwan excluded): banking, security, trust and insur-
ance, which are also considered as “Four Financial Pillars” and legal forms of fi-
nancial services in China.
Banking
Banking in China referred to all the banking activities conducted by the People`s
bank of China, financial regulators, commercial and policy banks, city, rural com-
mercial banks and cooperatives, etc.
By the end of 2012, the total assets of China’s banking institutions reached RMB
133.6 trillion as well as the total liabilities amounted to RMB125.0 trillion. And
owner’s equity registered RMB8.7 trillion, went up by 20.3 per cent year-on-year.
China`s banking sector consisted of 3 policy banks, including the Export-Import
bank China and other two , 5 large state-owned commercial banks, 12 joint-stock
commercial banks, 146 city commercial banks,149 rural cooperative banks, 1,967
rural credit cooperatives, 4 major state-owned banking assets management com-
panies or institutions. [1]
Table-1-Asset of Banking Industry
RMB 100m 2010 2011 2012
State owned commercial banks 458,815 536,336 600,401
National joint-stock banks 148,617 183,794 235,271
City Commercial Banks 78,526 99,845 123,469
Others 256,627 312,898 377,083
Total 942,585 1,132,873 1,336,224
03

Four
Major Industries
四大金融支柱
China will become the second largest retail banking market by the end of 2015,
with an annual revenue pool of around $280 billion by 2020.
Table-2-Estimated Retail-Banking Revenue for top5 countries ($Billion)
Security
Security in China referred to special industry engaged in securities issuance and
trading services, mainly consists of two securities exchanges in Shanghai and
Shenzhen, 115 securities companies, several securities associations and the finan-
cial institutions. Securities Company in China are normally referred to investment
bank or broker-dealer by the name in the U.S.
In 2013, the operating income and profit of the securities industries reached RMB
159 billion and RMB 44 billion with growth rate 23% and 34% year-on-year re-
spectively, which is the first rebound after 2010 *. Most firms in security industry
provide their retail and institutional customers with a limited range of commodi-
tized services focused on cash execution. Without doubt, security industries in
China has already on its recovery trend.
04

Four
Major Industries
四大金融支柱
Table-3-Total Net Profit of Security Firms in Mainland China (RMB billion)
For foreign investors, according to Catalogue of Industries for Guiding Foreign Invest-
ment 2011, foreign investment are limited to involve A-shares underwriting and B-
shares, H-shares, government bonds and corporate bonds underwriting and trad-
ing. Meanwhile, the proportion of foreign investment shall not exceed 1/3. Also,
proportion of foreign investment in Securities investment fund management com-
panies shall not exceed 49% by the regulation approved in 2007. [3]
Trust
After “Trust Law of PRC” taking into action in 2001, trust industry in China experi-
enced a policy-driven integration and only 65 trust companies were approved to
continue their business. By the end of 2013, the assets scale of the whole industry
reached RMB 10.91 trillion with the rapid growth around 48.98% year-on-year.
Also, about 80% of assets flows to the real economy.
In China, trust is a unique form of financial services. It takes the form of two dif-
ferent business models, namely private placement investment banking such as
high yield loans and conduit such as the trust license to enable banks and other
institutions to invest in certain asset classes.
Trust industry in China is and will continue to be a unique combination of two or
even more businesses under one single license with tight market entrance regula-
tions.
05

Four
Major Industries
四大金融支柱
Insurance
Insurance industry in China keeps its steady growth and development during the
past decades. However, if measured by the density of insurance or insurance per-
meability, insurance industry in China is relatively small. This fact underlines the
opportunities for future investors.
The total domestic insurance premiums income reached RMB1.55 trillion in 2012,
with health insurance premiums leading the growth. The premiums of the life
insurance sector hit RMB1.332 trillion in 2013, with the raise of more than 5.3per
cent per year. The premiums of the non-life insurance sector rose from 12.7 per
cent to RMB672 billion. [6]
Given the emergence of the country’s middle class, rapid urbanization, and an
aging population in the upcoming decades, insurance industry in China is ex-
pected to keep growing trend in the future.
By the end of 2012, around 55 foreign invested insurance companies have been
competing and conducting their business activities in the mainland China market.
According to Catalogue of Industries for Guiding Foreign Investment 2011, pro-
portion of foreign investment in life insurance ventures shall not exceed 50%.
* Figures by SAC: Security Association of China
** Figures by IAC: Insurance Association of China
06

Legal forms of
Financial Services Business
金融服务业企业形式
3Chapter

Legal forms of
There are six major forms of foreign investment in financial services market in
mainland China required by laws.
Chinese-Foreign Equity Joint Ventures
The Chinese Foreign Equity Joint Venture is a Limited Liability Company, and
possesses the status of Chinese legal person. In general, the capital from the for-
eign party shall not be less than 25% of the total.
Chinese-Foreign Cooperative Joint Ventures
The Chinese-Foreign Cooperative Joint Venture, also called Chinese-foreign con-
tractual joint ventures, is formed within the Chinese territory by foreign compa-
nies, enterprises, other economic organizations or individuals and Chinese com-
panies, enterprises, other economic organizations or individuals in accordance
with the Law of the People's Republic of China on Chinese-Foreign Contractual Joint
Ventures and its implementation regulations, and is based on their conditions for
cooperation.
Wholly Foreign-Owned Enterprises
A wholly foreign-owned enterprise that meets the conditions for legal personality
under the relevant Chinese laws shall obtain such status in accordance with the
law. The organizational form of a foreign-capital enterprise shall be a limited lia-
bility company. Upon approval, the enterprise may also take any other liability
form. With respect to a foreign-capital enterprise which is a limited liability com-
pany, the liability of the foreign investor to the enterprise shall be limited to the
amount of investment subscribed and contributed to the enterprise by the inves-
tor. With respect to a foreign-capital enterprise which takes any other liability
form, the liability of the foreign investor to the enterprise shall be dealt with in
accordance with the provisions of Chinese laws and regulations.
Joint Stock Limited Companies with Foreign Investment
Joint Stock Limited Companies with Foreign Investment are companies set up
within the Chinese territory by foreign companies, enterprises, or other economic
organizations and Chinese companies, enterprises or other economic organiza-
tions on the principle of equality and mutual benefit and through subscribing for
a certain proportion of stocks. Foreign investors may also acquire A-shares of the
PRC listed companies through medium and long-term strategic merger and acqui-
sition under relevant laws and regulations.
07

Legal forms of
Foreign Investment Companies
Foreign investment companies are Chinese-foreign equity joint ventures or wholly
foreign-owned enterprises within the Chinese territory that deal with direct in-
vestment. They take the form of limited liability companies. Its total asset must
register at least US$400 million in the year prior to the application; the investor
should have already established a foreign-invested enterprise within the territory
of China and the amount of the investor's paid-in capital contribution to the regis-
tered capital thereof must exceed US$10million.
Foreign-invested Venture Investment Enterprises
The term "venture investment" shall refer to an investment method consisting of
equity investment, principally in unlisted high-tech enterprises (Investees), and
start-up management services to such enterprises in order to obtain gains in the
form of capital appreciation.
The establishment of a Venture Investment Enterprise shall satisfy the following
conditions: (1). The number of investors shall be more than two and less than 50,
and there shall be at least one requisite investor that has venture investment as its
main line of business; (2). The minimum amount of capital contribution to which
the investors of a Non-legal Person Venture Investment Enterprise subscribed
shall be US$10 million, and the minimum amount of capital contribution to which
the investors of a Corporate Venture Investment Enterprise subscribed shall be
US$5 million. Except for the requisite investors, the minimum amount of capital
contribution to which each of the other investors subscribed may not be less than
US$1 million. Foreign Investors shall make their capital contributions in a freely
convertible currency, whereas Chinese Investors shall make their capital contribu-
tions in RMB.
TBO and Chinese-Foreign Cooperative Exploitation are also two possible ways of
foreign investment, however by now they are not available to financial services
industry. [4]
08

Regulators
金融行业监管方
4Chapter

Regulators
金融行业监管方
Different from other developed economies, China has its unique financial regulators
system which is highly dependent on governmental policies and decisions. There are
five main regulators in financial services market.
People`s Bank of China (PBOC)
PBOC is a central bank of mainland China. Since 1984, PBOC started to operate as cen-
tral bank without any business function. According to Chinese law, PBOC should con-
centrate on regulations concerning monetary policies, financial liquidity for promoting
balanced economic growth and price stability. However, in practice, there is no clear
division between the function of PBOC and China’s Banking Regulatory Commission.
In the number of cases, the two organizations work together. It might be hard to deter-
mine the distinction between conducted by them business activities, even though the
PBOC Law has already stated their responsibilities. [1]
China Banking Regulatory Commission (CBRC)
Established in 2013, CBRC is the ministerial-level organization under the State Council.
All the regulations and supervision of banking institutions, trust, insurance companies
and investment companies are entrust with it. The key responsibilities of CBRC are to
govern and authorize all banking institutions, enforce rules and regulations as well as
advice PBOC to do amendments. Furthermore, CBRC is also responsible for research-
ing and publishing statistics and reports on the financial markets. [2]
China Securities Regulatory Commission (CSRC)
CSRC is responsible for formulating and developing plans and rules in security for
future Industries. Also, CSRC is responsible for oversee entering, issuing, trading, list-
ing of securities exchanges and companies in mainland China. [3]
China Insurance Regulatory Commission (CIRC)
The CIRC is authorized by the State Council to administrate, supervise and regulate
insurance market in mainland China, and to ensure its stable and compliant operation.
It examines and approves the establishment of insurance companies and their branch-
es, insurance groups and insurance holding companies; approves in conjunction with
relevant authorities the establishment of insurance asset management companies; ex-
amines and approves the establishment of representative offices by overseas insurance
organizations within the territory of the mainland China.[4]
State Administration of Foreign Exchange (SAFE)
The State Administration of Foreign Exchange of the People's Republic of China is an
administrative agency tasked with drafting rules and regulations, governing foreign
exchange market activities, and managing the state foreign exchange reserves. Acting
on behalf of the PBOC, the SAFE has extensive influence over the financial system. Its
functions include overseeing the balance of payments, governing the statistical system
and supervising the foreign exchange market and its transactions. [5]
09

Taxes and
Contract Law
税务和合同法
5Chapter

Taxes and
Contract Law
税务和合同法
Taxes
Taxation system in China is a subject to frequent changes and adjustments. Tax
exemptions and concessions can vary significantly for different financial services
industries and also depend on their location.
Ministry of Finance is the main governmental agency in charge of the tax policies,
while State Administration of Taxation is responsible institution for tax collection.
A brief overview of the taxes companies may be subject to when conducting busi-
ness in China.
Operating in mainland China, all foreign businesses are subject to Corporate Tax,
approximately 25% on net income.
All enterprises that carry out business in China also need to pay Business Tax.
Rate of Business Tax depends on which industry the company is registered, and
can vary from 3% to as high as 28%. To be mentioned here, representative office
also are required to pay Business Tax
Withholding Tax should be paid if foreign enterprises take profits in the form of
dividends out of China or overseas companies receive payments for businesses in
mainland China.
All enterprises engaging in import and export, manufactures, commercial busi-
ness in China are required to pay Value Added Tax. Standard rate of Value Add-
ed Tax is 17%.
Also, there are several mandatory contributions such as Education surcharge,
Land Use Tax, Employer paid social security and housing fund Contributions
needed to be considered in conducting business in China.
10

Taxes and
Contract Law
税务和合同法
Contract Law
China as a WTO member is a contracting party to the United Nations Convention
on Contracts for the International Sale of Good (CISG), however financial services
are not included in CISG. Thus, it is essential for foreign enterprises to understand
Contract Law in China.
The most updated version of Contract Law were enforced in 1999. One of the most
notable changes of the new law is to subject all market players, including foreign
parties, to the same set of rules and to put them on an equal footing. In addition,
three fundamental principles of contract law (freedom of contract, good faith and
promoting the making of transactions) are particularly emphasized in the new
law.
Like continental legal systems, Chinese Contract Law does not require the con-
tract to be supported by consideration, as is the case in common law systems. Al-
so, Chinese Contract Law also follow the “offer and acceptance” model, but it
should be noted that for certain contracts in China, for example some major fi-
nance services investment, government approval is required.
What`s more, for growing use of standard form contracts in China, Chinese Con-
tract Law contains specific provisions to regulate the use of standard terms. Con-
sequently, if the user of the standard terms does not explain the tern or fails to
explain them clearly and accurately, the standard tern is not binding and will lead
to the invalidity of that term.
Generally speaking, considering the complex and frequent changes in the Chinese
legal system, most of foreign investors and enterprises tend to cooperate with lo-
cal legal advisory services companies in China. Most of them (reliable legal advi-
sory services companies) are located in first-tier cities such as Beijing, Shanghai,
Shenzhen and Guangzhou.
11

Financing
Business Activities
商业活动融资
6Chapter

Financing
Business Activities
商业活动融资
Compared to other advanced reformers, Chinese firms rely more on internal
sources of financing. Although Chinese government and financial regulators have
been accelerating the reforms on reducing cost on financing since 2005, but financ-
ing problem still haunts new enterprises.
Although the differences in policies between state-owned enterprises and private
enterprises have been eliminating for decade, private enterprises still suffer from
lack of financing resources in China. Some scholar believes that compare to state-
owned enterprises, financing is one of the biggest disadvantage of private enter-
prises when conducting business in China. [15]
The risk of private enterprises, especially in the financial services industry, are
relatively high. Also, lacking of capital is another important reason of difficulty
financing for private or foreign funded small enterprises. What`s more, the loan of
state-owned commercial bank has been for the state-owned enterprises. In prac-
tice, private enterprises issue corporate bonds and stocks listed on the direct fi-
nancing by the country`s strict control from financial regulators, which makes dif-
ficult for private enterprises to obtain the support of bank.
During the executive meetings of the State Council on June 23th, 2014, Premier Li
Keqiang issued 10 acts to solve the enterprise financing problem, showing the determi-
nation of accelerate the reform on business financing.[16]
Table-4-Financing Cost in Different Channel in China 2014
12

Financing
Business Activities
商业活动融资
According to the survey of financing cost by channels in China 2014 (shown
above), bank, trust company, mutual funds and bond, stock market entrust loan,
privately offered fund, P2P loan and usury are major financing channels in China.
Annual loan rate reaches approximately 7%-10% in 2014. But the total cost on
bank loan financing would be 8%-12% adding implicit cost such as the third inter-
mediary fee.
For Lending funds trust, the average financing cost is around 13%-20%, and the
average single loan financing is RMB 109 million. For fund into trust, considering
the third party agency costs about 2%, the total cost of funding through trust is
about 12 to 13%
If choosing to financing from mutual funds and bond, the total cost on the annual
interest rate is about 15%-24%, and the scale of single financing in this channel is
about RMB 50 million to 300 million.
Financing through stock market entrust loan, normally the most possible way is
purchasing the issuing loans commissioned from listing corporation via banks.
Contract interest rate plus intermediary handling charges would normally reach
15%.
Privately offered fund is a relatively new channel of financing, which also has a
relatively high risks compare to other ways. P2P loan and usury are still in the
gray zone according to Chinese laws. [17]
13

Challenges
挑战与机遇
7Chapter

Challenges
挑战与机遇
All enterprises would experience diversity challenges when conducting financial
service business in other countries, especially in China. According to the data and
ranks from World Bank Doing-business Annual Report, China ranks 96 out of 189
economies in conducting business environment.
Table-5-Business Operation Ranking by Doing Business(World Bank)
Open
-up
new
As the chart shows above, China still lag behind the advanced market economies
in open-up new enterprise, go through the government process and tax-paying,
etc. For example, the average to-go processes or approvals are 13 to open up a
new enterprise with 33 working days for its tight financial control and complex
regulations in China.
Table-6-China on Doing Business-Open up New Enterprise-2014
Table-7-China on Doing Business-Capital Registration-2014
CHINA 2014 Ranking 2013 Ranking
Open-up new enterprise 158 153
Apply for Construction 185 185
Apply for electricity supply 119 116
Capital Registration 48 47
Getting Credit 73 82
Investor Protection 98 95
Taxes Payments 120 122
International Trade 74 74
Contract Implementation 19 19
Bankruptcy Application 78 78
[Open-up New Enterprise] China Asia and Pacific Developed Economy
Processes 13 7 5
Time Cost (Day) 33.0 37.8 11.1
Cost (by GDP per capita) 2.0 29.8 3.6
[Capital Registration] China Asia and Pacific Developed Economy
Processes 4 5 5
Time Cost (Day) 29.0 81.0 24.1
Cost (% of Asset) 3.6 4.5 4.4
14

Challenges
挑战与机遇
Table-8-China on Doing Business-Taxes Payments-2014
Table-9-China on Doing Business-Getting Credit-2014
Table-10-China on Doing Business-Contract Implementation-2014
And there are also growing concern about regulated financial policies and com-
plex and fast-changing market environment. For example, the market share for
foreign commercial banks is 1.8 percent of total banking assets, up from 1.7 per-
cent in 2009 but down from 3 percent in 2005. Generally speaking, foreign finan-
cial services enterprises will face more challenges than other type of companies for
tighter and wider ways of financial control and regulations.
Under the Chinese fast-growing financial system background, the tight financial
control on foreign exchange and complex regulations and changing polices. Also,
national monopoly in credit payment and transactions can also become an obsta-
cle for financial service companies to conduct business activities. [18]
[Taxes Paying] China Asia and Pacific Developed Economy
Taxes Payments (Times) 7 25 12
Time Cost (Hour) 318 208 175
Profit Tax (% of Profit) 6.2 16.4 16.1
Labor Taxes 49.6 10.7 23.1
Other Taxes(% of Profit) 7.9 7.4 2.0
Total Tax Cost
(% of Gross Profit)
63.7 34.5 41.3
[Getting Credit] China Asia and Pacific Developed Economy
Legal Rights Index 5 7 7
Credit Information Index 5 3 5
Public Registration Coverage Ares 30.2 19.7 66.7
[Contract Implementation] China Asia and Pacific Developed Economy
Time (Days) 406 551 529
Cost (% of Target) 11.1 48.7 21.0
15

Challenges
挑战与机遇
For all types of financial service business, there are three major challenge they
may face.
Under the Market Background
Tight Control on Foreign Exchange.
For all kinds of financial services, efficiency in transaction is one of the most im-
portant factors. In China, all foreign exchange transactions must be approved by
China’s State Administration of Foreign Exchange (SAFE), which has tight policy
control.
Complex Regulators and Changing Polices.
As a growing and reforming financial system, disagreement on policy execution
often happens between two or more financial regulators. Sometimes regulations
and policies from central government and local government conflicts in some
ways. Also, for keeping the overall stability of China`s financial system, polices or
regulations changes often in 2007-2013, but after the new government come to
power, the financial policies and monetary policies only have slight adjustment
since 2013 under the new act of reform.
Monopoly in Credit card and Payment.
Different as other countries, China Union-pay is the only bank card association
allowed in mainland China to provide card payment settlement, transactions and
clearance services in mainland China. Although China Union-pay has been going
global into several neighboring countries or regions such as Taiwan, South Korea
and some ASEAN countries, it still limit the access for Visa, MasterCard and other
international payment services.
Monopoly in National treatment.
By now, current license approval process is only open to domestic companies in
third party payment, and not to foreign players. For example, PayPal is required
to registered and approved under a name of Chinese company. A truly fair com-
petitive environment has not been set up. Also, Alipay and other controlling do-
mestic third party payment tool make it harder for new foreign player in financial
service market. [19]
16

Challenges
挑战与机遇
For Enterprise itself
Setup Obstacles
All financial services industries are in the category of restriction in Catalogue of
Industries for Guiding Foreign Investment 2011, not only the US$50 million minimum
investment (foreign wholly owned) are required, but also it is subject to the ap-
proval of the competent department of commerce of provinces, autonomous re-
gions or municipalities directly under the Central Government. The limit for the
Joint Stock Limited Company with Foreign Investment is measured by its regis-
tered capital. The limit for the company that is restructured into a Joint Stock Lim-
ited Company with Foreign Investment is measured by its post-assessment net
assets. The limit for the merger of a domestic enterprise by a foreign investor is
measured by the value of the M&A.
Procedures for Establishing Chinese-Foreign Equity Joint Ventures (EJV), Chinese-
Foreign Cooperative Joint Ventures (CJV) and Wholly Foreign Owned Enterprise
(WFOEs) are normally involve four or more departments or steps: National Devel-
opment and Reform Commission, Commerce departments (indifferent level), In-
dustrial and commercial administrative departments and Registration at the taxa-
tion, customs and foreign exchange authorities and at the banks.
Rigid Ownership restrictions.
There are five major forms of foreign investment in financial services market in
mainland China required by laws. But in real practice, foreign financial service
firms can most possibly step into local securities or IPOs by having a local ven-
ture. But it is also a challenge to find a local venture partner. However, recently in
2013, Morgan Stanley and JPMorgan’s recently got the permission to enter China`s
domestic securities (only A share) was counted as a historic moment to start to
open up to the foreign financial service companies.
Capital Requirements.
To ensuring only the large and prestigious banks getting into China`s banking
market, RMB200 million for local currency operation capital are required for for-
eign banks. Not only in banking industries, capital requirements are widely exists
in many financial service industries, which makes relatively low market share of
foreign financial services enterprises. [20]
17

Resolving Disputes
争端解决
8Chapter

Resolving Disputes
争端解决
There are no specific restrictions on the manner in which commercial disputes
ought to be resolved in China. Negotiation, mediation, arbitration, and litigation
are the four primary ways to resolve commercial disputes in China.
Negotiation
Negotiation with the other party is the best way to resolve business disputes. It
costs least and preserves good relationship of the parties involved. In most cases,
business contracts in China should include several clause stipulated that negotia-
tion should be employed while any disputes have arisen. When a foreign firm ex-
periences difficulty in directly negotiating a solution to a dispute with its Chinese
partner, companies sometimes seek assistance from Chinese government officials
who can encourage the Chinese party to honor the terms of the contract. [21]
Mediation
Unfortunately, negotiations do not always lead to resolution. Mediation is an ef-
fective step in the resolution of the dispute and is usually conducted as part of,
but prior to, arbitration or litigation. The principle of mediation is that the parties
may present their proposals to the mediator who suggests a solution based on
those proposals. In arbitration before a Chinese arbitral tribunal or in litigation
before the Chinese courts, parties are encouraged to participate in mediation with
mediators selected by the arbitral panel or during an in-court session, respective-
ly. The less confrontational nature of mediation may also help preserve the com-
mercial relationship.
Arbitration
Negotiations and mediations do not always lead to resolution quickly and effec-
tively. Arbitration is the next preferred method. Arbitration also offers an ad-
vantage over litigation in China because of the finality of the rulings. A major ad-
vantage is the finality of the rulings. Court rulings are subject to appeal, which
means litigation may continue for years. Although the distinctions no longer ap-
ply, Chinese arbitration institutions were traditionally divisible into those han-
dling “foreign related” disputes and those handling purely domestic disputes.
“Foreign-related” disputes are those in which at least one party is a foreign person
or entity, the contract was formed, modified or terminated in a country other than
China, or the object of the action is in a foreign country. A foreign-invested enter-
prise in China is not a foreign entity for these purposes, and as an organization
established under Chinese law, it is considered a domestic entity. [22]
18

Resolving Disputes
争端解决
There are a number of important differences between onshore and offshore arbi-
tration in China-related disputes. Onshore arbitration can only be conducted us-
ing mainland Chinese Arbitration Commissions, such as the China International
Economic and Trade Arbitration Commission (CIETAC), and for the arbitration
agreement to be valid, the institution must be specified. No foreign institution is
able to administer arbitration in China. Currently there are two Chinese govern-
ment-sponsored arbitration bodies for handling cases involving at least one for-
eign party: the Beijing-based China International Economic and Trade Arbitration
Commission (CIETAC) and, for maritime disputes, the China Maritime Arbitra-
tion Commission (CMAC). [23]
Litigation
The final way to resolve a commercial dispute in China is through litigation in
local courts. A foreign individual or a foreign enterprise has ability to bring action
in court just as a Chinese citizen or a company could have. The Chinese court and
judicial system works very different from that of other countries, and especially
differs from U.S. and U.K as systems of common law. If you are considering liti-
gating in China, you should contact a Chinese lawyer. Foreign lawyers and law
firms cannot litigate in China and court proceedings are mandatorily conducted in
Chinese.
There are four levels of courts in China. Every major city has basic courts and in-
termediate courts. Supervising these courts are the provincial high courts. The
Supreme People's Court, located in Beijing, has appellate jurisdiction over all
courts in China. Cases involving foreign interests can be filed in either the basic-
level courts or intermediate courts, depending on their nature. Most observers
agree that Chinese courts are not up to international standards. [24]
19

Business Matching
寻找商业伙伴
9Chapter

Business Matching
寻找商业伙伴
Exhibitions, Forums, Chamber of Commerce, and Business Counsellor in Embas-
sy, Consulting Corps, Investment Promotion Conference, business info websites
and other types of business matching activities are all popular method to find the
right business partners.
Business Events
China holds a lot of exhibitions and fair for investment and encourage business
matching and partnership.
CIFIT
The China International Fair for Investment and Trade (referred to as “CIFIT” in
short), approved by the State Council of the People’s Republic of China, is spon-
sored by the Ministry of Commerce of the People's Republic of China and hold in
Xiamen, Fujian Province every year in Sep 8th .
CIFIT not only comprehensively showcases the investment environments, poli-
cies, projects and corporate products in all provinces, autonomous regions and
municipalities in China, but also attracts investment promotion agencies from
dozens of countries and regions. CIFIT offers optimum opportunity for business
people at home and abroad to get an overview on the investment climates in Chi-
na and other countries. It also provides them with the one-stop shopping service
for multilateral investment cooperation, helping them to select from the widest
range of investment projects and business partners. [25]
China International Financial Services Conference
China International Financial Services Conference” (hereafter called “CIFSC”),
hosted by Ministry of Commerce, China Council for the Promotion of Internation-
al Trade (CCPIT) and Guangzhou Municipal Government, with the support of the
People’s Bank of China, China Banking Regulatory Commission, China Security
Regulatory Commission. China International Financial Services Conference is a
must attend event for those who are involved in the financial service sector. This
conference includes plenary sessions, concurrent sessions, exhibitions, match-
making talks and business tours.
20

Business Matching
寻找商业伙伴
Other Events
Chamber of Commerce
Many foreign chamber of commerce in China have good connection both with
government and local investors. More importantly, chambers of commerce are
more likely to act according to circumstances. Contact information is provided in
Other Resources chapter for reference.
21

Other Resources and
Contact Information
其他信息及联系方式
10Chapter

Other Resources
And Contact Information
Financial Regulators
The People's Bank of China (PBOC)
No.32 Chengfang Street, Xi Cheng dis-
trict, Beijing, China
中国北京市西城区成方街32号
Tel:86-010-66194114
E-mail: webbox@pbc.gov.cn
http://www.pbc.gov.cn/
China Banking Regulatory Commission
(CBRC)
N0.15 Financial Street, Xicheng District,
Beijing
中国北京市西城区金融街15号
www.cbrc.gov.cn
China Securities Regulatory Commis-
sion (CSRC)
Focus Place 19，Jin Rong Street，West
District ,Beijing
中国北京市西城区金融街19号富凯大厦
http://www.csrc.gov.cn/
China Insurance Regulatory Commis-
sion (CIRC)
N0.15 Financial Street, Xicheng District,
Beijing
中国北京市西城区金融街15号
Tel: 86-10-66286688
http://www.circ.gov.cn/
State Administration of Foreign Ex-
change (SAFE)
Huarong Plaza, No.18 in Fucheng Road,
Haidian District, Beijing
中国北京市海淀区阜成路18号华融大厦
Tel: 86-10-68401188
http://www.safe.gov.cn/
Government and
Relevant Departments
Ministry of Commerce, China
No.2 Dong Hangman Avenue, Beijing
China
中国北京东长安街2号
Tel: +86-10-51651200-612/613/623
http://www.mofcom.gov.cn/
Department of Foreign Investment Ad-
ministration
Ministry of Commerce, China
No.2 Dong Chang'an Avenue, Beijing
China
中国北京东长安街2号
Tel：010-65197962
E-mail：wz_office@mofcom.gov.cn
National Bureau of Statistics of China
No. 57, Yuetan Nanjie, Sanlihe, Xicheng
District, Beijing
北京市西城区月坛南街57号
Fax: +86-10-68782000
http://www.stats.gov.cn/
22

Other Resources
Ministry of Finance, China
No.3 Nansan Street, Sanlihe, Xicheng Dis-
trict, Beijing
北京市西城区三里河南三巷3号
Tel: 86-010-68551114
http://www.mof.gov.cn/
State Administration of Taxation, China
No.5 West Yangfangdian Road, Haidian
District, Beijing
北京市海淀区羊坊店西路5号
Tel: 86-10-63417114
http://www.chinatax.gov.cn/
Investment Promotion Agency of
MOFCOM
No.82 Donganmen Street Beijing China
中国北京东安门大街82号
Tel: (86-10) 64404554
E-mail: service@fdi.gov.cn
http://www.fdi.gov.cn/
Legal and
Arbitration Consulting
China International Economic and
Trade Arbitration Commission
(CIETAC):
6/F, CCOIC Building, No.2 Huapichang
Hutong, Xicheng District
中国北京西城区桦皮厂胡同2号国际商会大
厦6层
Beijing, 10035, P.R. China
Tel: 86 10 64646688;
E-Mail: info@cietac.org
http://www.cietac.org
Hong Kong International Arbitration
Center (HKIAC)
38/F, Two Exchange Square, 8Connaught
Place, Central, Hong Kong
中国香港特别行政区康乐广场8号交易广场
二期38楼
Tel: 852 2525 2381
E-Mail: chiann@hkiac.org
http://www.hkiac.org
China Association of Enterprises with
Foreign Investment (CAFEL)
CAFEL is a nationwide non-profit social
entity reporting to the Ministry of Com-
merce, is mainly composed of companies
in the territory of China with foreign in-
vestment or investment from Hong Kong,
Macao, Taiwan and overseas compatriots.
2F, No.82 Donganmen Street, Dongcheng
District, Beijing China
北京市东城区东安门大街82号二层
Tel: 86-10- 85226219
E-Mail: info@caefi.org.cn
http://caefi2.mofcom.gov.cn/
23

Other Resources
Investment and
Business Matching Promo-
tion Institution
CCIIP
China Council for International Invest-
ment Promotion (CCIIP) is a national non
-profit organization responsible for pro-
moting China‘s inward and outward in-
vestment in line with China‘s economic
strategies, with a view to advancing eco-
nomic development and social progress.
4th Floor, Jing Guang Center Office
Building, Hujialou, Chaoyang District,
Beijing. (Beijing Mailbox No.8806)
北京市朝阳区呼家楼京广中心商务4楼
Tel: 010-65978801
E-mail: msc@cciip.org.cn
Website: www.cciip.org.cn
CCPIT
Established in 1952, China Council for the
Promotion of International Trade (CCPIT)
comprises VIPS, enterprises and organi-
zations representing the economic and
trade sectors in China. It is the most im-
portant and the largest institution for the
promotion of foreign trade in China.
No.1 Fuxingmenwai Street, Xicheng Dis-
trict, Beijing, China
北京市西城区复兴门外大街1号
For Legal servise:
Tel: 86-10-82217098
E-Mail:flwebadmin@ccpit.org
http://lad.ccpit.org
For International Relationship:
Tel:86-10-88075621
E-Mail: wangxiaozhe@ccpit.org
For Exhibition:
Tel:86-10-88075037
E-Mail: Mali@ccpit.org
http://www.fair123.cn/
BizMatch Online, Search for Chinese
companies:
Website: http://bizmatch.ccpit.org
China Association for the Promotion of
Development Financing
No.16 Taipingqiao Street, Xicheng Dis-
trict, Beijing
北京市西城区太平桥大街16号
Tel: 86-010-88303421
E-mail：CADF.ZY@CDB.CN
http://www.capdf.org.cn/
China (Shanghai) Pilot Free Trade Zone
China (Shanghai) Pilot Free Trade Zone
marks a major milestone in the nation's
commitment to forge ahead with domes-
tic reforms and wider opening to world
markets, in line with global economic
trends. The priorities of the zone are to
explore new routes and systems for Chi-
na's opening-up policies, to accelerate the
transformation of how government func-
tions, to promote economic restructuring
and to prioritize development steps to
ensure effective but stable growth.
NO.819, Huanhu Xi Yi Road, Pudong
New Area, Shanghai, China
中国上海市浦东新区环湖西一路819号
Tel: +86-21-58698500,
http://en.china-shftz.gov.cn/
24

Other Resources
Chamber of Commerce
China Chamber of International Com-
merce
CCOIC Building, No.2 Huapichang
Hutong, Xicheng District
西城区桦皮厂胡同2号国际商会大厦
Tel: +86-10- 82217800
E-Mail: ccoic@ccoic.cn
http://www.ccoic.cn/
EUCCC
The European Union Chamber of Com-
merce in China now has more than 1,800
members in 7 chapters operating in 10
cities: Beijing, Chengdu, Chongqing,
Nanjing, Pearl River Delta (Guangzhou,
Shenzhen and Zhuhai), Shanghai, Shen-
yang and Tianjin. Each chapter is man-
aged at the local level by local boards re-
porting directly to the Executive Commit-
tee. The Chamber is recognized by the
European Commission and the Chinese
Authorities as the official voice of Euro-
pean business in China.
Beijing Lufthansa Center, Office C412, 50
Liangmaqiao Road, Beijing,
中国北京朝阳区亮马桥路五十号，燕莎中
心写字楼C-412室
+86 (10) 6462 2066
euccc@europeanchamber.com.cn
The European Chinese Chamber of
Commerce
Headquarter:
No.12 Puertorico Street, 1339kt, Almere,
Holland
Tel: +31 367852939
China Office:
Room212, Donghua Business Area, No.82
Business Department, Beijing
北京东安门大街82号商务部东华门办公区
212室
TEL：+8610 65129725
E-Mail：w86100@163.com
http://www.ecccchina.com/
The Poland Investment and Trade
Chamber of Commerce
Headquarter:
Polsko-Chińska Izba Inwestycyjna Sp. z
o.o.
Marszałkowska 83 lok. 64, 00-683 War-
szawa, Polska
Tel：+48 881642882
Email: zhang1958@aliyun.com
www.sfor-poland.com
Beijing Office:
Tel: +86 13241546876
Email: zhang1958@aliyun.com
Shanghai Office:
Tel: 13241546876
Email：zhang_visa@aliyun.com
Guangzhou Office:
Tel：+86 18929989339
Email: 543518403@qq.com
Chengdu Office:
Tel：+86-28-83328213-804
Email：18011462069@qq.com
25

References
参考资料
11Chapter

References
参考资料
[1] CBRC. 2012 Annual Report[R] China: CBRC, 2012. 21-25(中国银行业监督委员
会2012年年度报告).
[2] 20060801, Regulation of the People's Republic of China on the Administration
of Foreign-funded Banks[S](中华人民共和国外资银行管理办法)
[3] 2011, Administration of Securities Investment Fund Management Companies
Procedures, [S] (中华人民共和国证券投资基金管理公司管理办法)
[4] Investinchina. Invest in China[R]. China: Ministry of Commerce, China, 2011. 7
-30(商务部印发投资中国指南)
[5] PBOC. Introduction [EB/OL]. www.pbc.gov.cn/publish, 2014-07-21
[6] CBRC. Introduction [EB/OL]. http://www.cbrc.gov.cn/showyjhjjindex.do
[7] CSRC. About [EB/OL]. http://www.csrc.gov.cn/pub/csrc_en/about/
[8] CIRC. Introduction [EB/OL]. www.circ.gov.cn/web/site0/tab5200/.
[9] SAFE. Introduction [EB/OL]. http://www.safe.gov.cn/
[10] World, Bank. Taxes-Doing Business in China [EB/OL].
http://www.doingbusiness.org/data/exploreeconomies/china/paying-taxes/
(世界银行全球营商报告-中国税务)
[11] China-Iraq, org. Business and Taxes in China [EB/OL]. http://www.china-
iraq.org/en/news_detail.asp?key=A00770033&id=2322 (中伊商贸网-中国商务和
税务信息)
[12] Nicole, Kornet. Contracting in China and UK - comparative observations UK:
electronic journal of comparative law, 2009.
[13] Li, Wen. Comparison of Contract Law between Common Law and Chinese
Law [J/OL]. (李文-中国法和习惯法对比)
26

References
参考资料
[14] Shuxin, Zhang. Comments on English Version of Contract Law of China [D].
China: Southwest University of Political Science and law, 2010. 13-20
(李淑新-评《中华人民共和国合同法》英译本-西南政法大学-2010)
[15] Neil, Gregory, and, Stoyan, Tenev. The Financing of Private Enterprise in Chi-
na [J/OL].
http://www.imf.org/external/pubs/ft/fandd/2001/03/gregory.htm.
[16] Zhou, Wenjian. Financing Difficulties of SMEs in China [J/OL]. http://
wenku.baidu.com/view/d74f630231126edb6f1a1072.html?re=view.
(周文健-中国中小企业融资难问题)
[17] Sohu, finance. Financing Cost Comparison [J/OL].
http: //business.sohu.com/20140725/n402710486.shtml. (一文看懂融资难：国内
各融资渠道资金成本比较)
[18] World, Bank. Doing Business in China [J/OL]. http://
chinese.doingbusiness.org/data/exploreeconomies/china# (世界银行全球营商报
告-中国)
[19] The, American, Chamber, of, Commerce, in, Shanghai. Viewpoint on Finan-
cial Service in China [J/OL]. http://www.amcham-shanghai.org/ (中国金融服务
洞察-上海美国商会)
[20] KPMG, China. Financial Services Publication [J/OL]. http://
www.kpmg.com/cn/en/industry/financial-services/pages/financial-services-
publications.aspx (毕马威中国-中国金融服务行业出版物)
[21] Gao, Jingfen. Commercial Dispute Resolution Methods in China
[J/OL]. http://blog.sina.com.cn/s/blog_74df42cc0100p9bv.html (高
静芬-中国商业争端解决方式)
27

References
参考资料
[22] Australian, Trade, Commission. Resolving commercial disputes in China [J/
OL]. http://www.austrade.gov.au/Export/Export-Markets/Countries/China/
Doing-business/Resolving-commercial-disputes (澳大利亚贸易委员会-解决商业
争端-中国)
[23] Foreign, &, Commonwealth, Office, and, UK, Trade, &, Investment. Commer-
cial disputes in China [J/OL]. https://www.gov.uk/commercial-disputes-in-
china (英国国外贸易和投资协会办公室-中国的商业争端)
[24] The, U, S, Export, Assistance, Center. DISPUTE AVOIDANCE AND DIS-
PUTE RESOLUTION [J/OL]. http://export.gov/china/doingbizinchina/
riskmanagement/eg_cn_028283.asp (美国商务部期刊-争端避免和解决-中国)
[25] Investinchina. Invest in China[R]. China: Ministry of Commerce, China, 2011.
7-30(商务部印发投资中国指南)
28

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity.
Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date
it is received or that it will continue to be accurate in the future. No one should act upon such information without appropriate professional
advice after a thorough examination of the particular situation.
本刊物所载资料仅供一般参考用，并非针对任何个人或团体的个别情况而提供。虽然本所已致力提供准确和及时的数据，但不能保证这些数据在您收取本刊物时或日后仍然准确。任何人士不应在没有详细考虑相关的情况及获取适
当的专业意见下依据本刊物所载资料行事。
Top Consulting S.A. , All Rights Reserved, October 2014
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