This Employment Contract for China is used for foreign companies established in China that hire employees. It is a legal document drafted according to Employment Laws and Regulations in the People’s Republic of China. The foreign company enters into this individual written contract only with full-time employees.

The contract contains all main clauses of employment contracts in China such as probation period, job description, working hours, remuneration, confidentiality, termination, etc. The contract is in a dual version (English-Chinese); however according to Chinese Law, in the event of a conflict between the employer and the employee, the Chinese version will prevail.

Foreign companies should use this contract to hire employees of Chinese nationality. For hiring employees of another nationalities that travel to work in China for foreign companies, the Expatriate Contract of Employment should be used.

LEGAL WARNING

Depending upon your particular situation this contract might not meet your needs and requirements. In case of doubt, you should consult a legal advisor.Global Negotiator as publisher and copyright holder of this contract disclaims all warranties, whether express or implied, respecting the legal content of this contract. For any claims arising out or in connection with the use of this contract, Global Negotiator shall be limited to a refund of the purchase price.

INDEX

Parties

Clauses

1. Category & term of contract

2. Probation period

3. Job description & place of work

4. Working hours, rest and vacation

5. Remuneration

6. Social insurance

7. Labour protection, working conditions & prevention of occupational harm

8. Rules of conduct

9. Confidentiality

10. Performance & amendment of contract

11. Termination

12. Expiry of contract

13. Severance pay

14. Liability for breach

15. Miscellaneous

Signatures

EMPLOYMENT CONTRACT FOR CHINA (ENGLISH-CHINESE)

Nº OF PAGES: 11 + 6 (Guide Negotiating contracts in China)FORMAT: WordLANGUAGE: English-Chinese

EMPLOYMENT CONTRACT 劳动合同书

Party A: 甲方名称

Legal Representative (Chief Principal): ......................................................................................................... 法定代表人

or Authorized Representative: ..........................................................................................................................（或）授权代表：

Registered address: ..................................................................................................................................................注册地址：

Business address: ......................................................................................................................................................经营地址 Party B: 乙方姓名：Gender: ..........................................................................................................................................................................性别：

ID number: ...................................................................................................................................................................身份证号码：

Home address: ............................................................................................................................................................家庭地址：

Postal Code ...................................................................................................................................................................邮政编码

Province (Municipality).................... District (County)...................... Street (Town).....................省（自治区） 市（县） 街道（镇）

Telephone: Mobile: 电话： 手机：

In accordance with the Labour Law of the People's Republic of China, Labour Contract Law of the People's Republic of China and other related laws and regulations, after consultation

and in compliance with the principles of equality and fairness, Party A and B agree to enter into this contract and abide by the terms set out below.根据《中华人民共和国劳动法》及《中华人民共和国劳动合同法》和相关法律及规 定，甲乙双方本着平等、公平的原则，经协商一致，同意签订本劳动合同书，以便 同遵守。

1. CATEGORY & TERM OF CONTRACT合同的类型和期限

This Contract is:本合同的类型为 Alternative A:选项一：A fixed term contract commencing on …………, ..............., until ..................., ................. 有固定期限合同。 期限..........年，自...........年.............月..............日至...........年............月............日止。

Alternative B:选项二：An open-ended contract commencing on …………………………………..................无固定期限合同。 自＿＿＿＿年＿＿＿＿月＿＿＿＿日起。

Alternative C:选项三：A contract for the duration of a defined task which is............................................................以完成一定工作任务为期限的合同。具体为：...........................................................

2. PROBATION PERIOD试用期

The probation period will be from…………………to…….......................本合同的试用期自............年.........月.........日至..............年.......月........日。

3. JOB DESCRIPTION & PLACE OF WORK工作职位和工作地点

3.1 Party B’s position is: .......................................................................... 乙方的职位及工作内容为：................................................

3.2 Party B’s place of work is: ..................................................................乙方的工作地点为：............................................................................

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3.3 Party A may change Party B’s place of work and position according to its requirements and Party B’s ability and performance.甲方可能根据需要和乙方的能力及工作表现适当调整乙方的工作职位及工作地点。

4. WORKING HOURS, REST & VACATION工作时间和休息及休假

4.1 When adopting the standard working hours system, the working hours of Party B shall be no more than 8 hours per day and 40 hours per week. The rest days are Saturday and Sunday.执行标准工时制度的，乙方每天工作时间不超过 8小时，每周工作不超过小时。每周休息日为星期六及星期日。

4.2 Party A shall comply strictly with the provisions of the laws by the state with regard to rest days.甲方严格执行国家有关休息休假的规定。

4.3 If Party B is required to work overtime for Party A’s business, Party A shall strictly follow the statutory provisions concerning overtime and shall determine the overtime through consultation with Party B. 甲方应严格遵守国家有关加班的规定，确实由于生产经营需要，应当与乙方事先协商并确定加班事宜。

5. REMUNERATION劳动报酬

5.1 Party B’s salary is RMB ............ per month. (Party B’s salary during probation is RMB ................).乙方月工资为.........元（人民币）。（乙方试用期内工资为.......元人民币）。

5.2 Party A shall pay Party B's salary on the ......... day of each month. 甲方每月.......日前支付乙方工资。

5.3 When paying Party B’s salary, Party A is entitled to deduct social insurance fee, housing accumulation fund, individual income tax and other taxes stipulated by the State that are payable by Party B.甲方在支付乙方工资时，可从中扣除社会保险费、住房公积金、个人所得税和国家规定的其他费税中应由乙方缴纳的部分

5.4 Other provisions on salary agreed by both parties are:.................................................甲乙双方对工资的其他约定 .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. .. ..

6. SOCIAL INSURANCE社会保险

6.1 Party A shall enroll Party B in the social insurance scheme in accordance with the applicable provisions of the state and the municipality respecting social insurance.

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甲方应按国家和本市社会保险的有关规定为乙方参加社会保险。

6.2 In circumstances where Party B contracts an illness or sustains a non-work-related injury, his/her salary during illness, compensation for illness and medical benefits shall be in accordance with the applicable provisions of the state and the municipality.乙方患病或非因工负伤，其病假工资、疾病救济费和医疗待遇等按照国家和本市有关规定执行。

6.3 In circumstance where Party B contracts an occupational illness or sustains a work-related injury, his/her salary and medical benefits for work-related injury shall be in accordance with the applicable provisions of the state and the municipality.乙方患病或非因工负伤，其病假工资、疾病救济费和医疗待遇等按照国家和本市有关规定执行。

7. LABOUR PROTECTION, WORKING CONDITIONS & PREVENTION OF OCCUPATIONAL HARM劳动保护、劳动条件和职业危害防护

7.1 Party A shall establish sound production processes and operating rules, health and safety procedures and standards. Party A shall give any requisite notice to Party B and take necessary preventive action with regard to activities that may cause occupational illness or hazard. 甲方建立健全生产工艺流程，制定操作规程、劳动安全卫生制度及其标准。甲方应当向乙方履行明确的告知义务，对可能产生职业病危害的岗位，做好劳动过程中预防职业危害的必要工作。

7.2 Party A shall provide safe working conditions, any necessary protective equipment and a safe and healthy working environment for Party B and shall strictly abide by the regulations concerning safety of labour.甲方按照国家有关劳动安全、卫生的规定，需为乙方提供安全的劳动条件, 配备任何必要的安全防护措施以及安全卫生的工作环境

8. RULES OF CONDUCT 行为准则

8.1 Party A shall establish rules of conduct and disciplinary procedures according to the requirements of its business and make these rules and procedures, and any changes, available to Party B.甲方应向乙方提供根据自己业务需要建立的必要行为准则和惩戒程序。

8.2 If Party B breaches the rules of conduct of Party A, Party A shall be entitled to take appropriate disciplinary procedures which might, ultimately, result in termination of Party B’s employment.如果乙方违反甲方的行为准则，甲方有权启动必要的惩戒程序。严重违纪者可能会导致劳动合同的中止。

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8.3 Party B shall abide by the rules of conduct and disciplinary procedures, comply with health and safety regulations and actively participate in all the training arranged by Party A and increase his/her occupational skills.甲方的行为准则和惩戒程序对乙方有约束力，符合国家有关劳动安全、卫生的规定。乙方应积极参与甲方安排的各种必要的教育培训以提高职业技能。

9. CONFIDENTIALITY保密

9.1 Party B is obliged to keep confidential all information that Party B obtains during the course of his/her employment with Party A. Without Party A’s prior written consent, Party B shall not disclose or transfer any such information to any third party, or move Party A’s documents, including all the copies and electronic files, out of Party A’s offices, or use such information for purposes other than Party B’s responsibilities and duties under this Contract. Party B agrees to continue to be bound by these obligations without limit in time following termination or expiry of this Contract. 乙方有义务对在为甲方工作期间所掌握的所有具有保密或机密性质的信息进行最高限度的保密。未经甲方事先书面同意，不得向任何第三方泄露，转让或转移这些保密信息。不得将文件，包括所有拷贝，电子文件带出甲方所属范围之外，或用于除本合同项下规定的乙方职责和义务以外的其它用途。乙方特别同意在本合同终止后无时间限制地继续承担此义务。

9.2 For the purpose of this Contract, information of a confidential or secret nature includes but is not limited to manufacturing and management procedures, techniques, processes, and formulae for the production and business operations of Party A and relevant design and use of machinery and equipment; financial and commercial information; contracts; customer lists and sales related data; the identity and capabilities of Party A's suppliers; the identity, needs, preferences, and requirements of Party A's customers; trade secrets; employee information; records; marketing and sales information; information and materials that Party A is obligated to keep secret for any third party; all information and materials that Party B is required by Party A whether orally or in writing, to keep secret; or any information or data of any kind that could be used by a third party to the disadvantage of Party A. 为本合同之目的，具有保密或机密性质的信息，包括但不限于公司生产经营有关的制造及管理程序，技术、流程和配方以及有关机器设备的设计和使用；财务和商业信息；客户名单和与销售有关的数据；公司供应商的身份和能力；公司客户的身份、需求、偏好和要求；商业秘密；雇员信息；记录；市场和销售信息；公司对第三人承担保密义务的信息资料；甲方书面或口头要求乙方保密的其他信息资料；或者能够被第三人使用并因其使用将对公司产生不利的任何种类的一切信息或者数据。

10. PERFORMANCE & AMENDMENT OF CONTRACT劳动合同的履行和变更

10.1 Party A shall provide an appropriate working place and working conditions and pay remuneration pursuant to this Contract. Party B shall perform his/her occupational duties diligently and perform the tasks allocated to him/her. 甲方应当按照约定向乙方提供适当的工作场所、劳动条件和工作岗位，并按合同规定向乙方支付劳动报酬。乙方应当按照合同约定的工作任务认真履行自己的劳动职责。

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10.2 This Contract may be amended by agreement between the parties following negotiation and the amendment shall be confirmed in writing and signed by both parties.甲、乙双方经协商一致，可以变更和修改本合同的内容，并以书面形式签字确定。

11. TERMINATION劳动合同的解除

11.1 This Contract may be terminated by agreement between the parties. 经甲、乙双方协商一致，本合同可以解除。

Party A

11.2 Party A shall have the right to terminate this Contract if any of the following circumstances occur:甲方甲方有权在下列情况发生时解除本合同：

(1) Party B is shown not to satisfy the requirements of the job during the probationary period;乙方在试用期间被证明不符合录用条件的；

(2) Party B seriously violates the rules and regulations of Party A;乙方严重违反甲方规章制度的；

(3) Party B commits a serious breach of his/her duties or engages in fraud or dishonesty and causes loss to Party A;乙方严重失职，营私舞弊，不诚实而给甲方利益造成重大损害的；

(4) Party B establishes an employment relationship with other entity which adversely affects his/her performance of work for Party A, or Party B

refuses to rectify the matter after being requested to do so by Party A; or 乙方同时与其他单位建立劳动关系，对完成甲方的工作任务严重影响,或者在甲方提出后，拒不改正的；

(5) Party B is prosecuted for a criminal offence.乙方被依法追究刑事责任的。

11.3 Under any of the following circumstances, Party A may terminate this Contract if it gives Party B 30 days written notice or after it pays Party B an extra month’s salary:有下列情形之一的，甲方可以解除本合同，但应当提前 30日以书面形式通知乙方或额外支付乙方一个月工资：

(1) Party B is sick or is injured for a non-work related reason, and after the expiration of the prescribed period of medical treatment, he/she is unable to return to his/her original job or engage in other work arranged for him/her by Party A; 乙方患病后或非因工负伤，医疗期满后，不能从事原工作也不能从事由甲方另行安排的工作；

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(2) Party B is incompetent and after training or adjustment to his/her duties, remains incompetent; or乙方不能胜任工作，经过培训或者调整工作岗位，仍不能胜任工作的；

(3) The objective circumstances, relied on at the time the Contract was made, have materially changed, making it inappropriate to continue and no agreement on changing the terms of the Contract is reached after negotiation between both parties.本合同订立时所依据的客观情况发生重大变化，致使本合同无法履行,经甲乙双方协商不能就变更劳动合同达成协议的。

Party B乙方

11.4 During his/her probation period, Party B may terminate this Contract by giving Party A three days' prior notice. After the probation period Party B may terminate this Contract by giving Party A 30 days' prior written notice. 乙方在试用期间解除本合同，应当提前 3日以书面形式通知甲方。乙方在试用期后解除本合同，应当提前 30日以书面形式通知甲方.

11.5 Party B may terminate this Contract if:乙方有权在下列情况发生时解除本合同：

(1) Party A fails to provide work protection or working conditions inaccordance with this Contract;甲方未按照本合同约定提供劳动保护或者劳动条件的；

(2) Party A fails to pay Party B’s remuneration on time and in full;甲方未及时足额支付劳动报酬的；

(3) Party A fails to pay social insurance premiums for Party B in accordance with the law;

甲方未依法为乙方缴纳社会保险费的；

(4) Party A’s rules and regulations violate public laws or regulations and harm Party B’s rights and interests; or甲方的规章制度违反法律、法规的规定，损害乙方权益的；

(5) any other circumstance exists under which laws or administrative regulations permit Party B to terminate this Contract.法律、行政法规规定乙方可以解除本合同的其他情形。

11.6 Party A may not terminate this Contract pursuant to Clause 11.2 if Party B: 乙方有下列情形之一的，甲方不得依据第 11.2的约定解除本合同：

(1) has been engaged in operations that exposed him/her to an occupational illness or injury and has not undergone a pre-departure occupational health examination or is suspected of having contracted an occupational illness or is being diagnosed or undergoing medical observation;

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乙方如从事接触职业病危害作业但未进行离岗前职业健康检查，或者乙方为疑似职业病病人在诊断或者医学观察期间的；

(2) has contracted an occupational illness or sustained a work-related injury with Party A and has been confirmed as having lost all or part of his/her capacity to work; 在为甲方工作期间患职业病或者因工负伤并被确认丧失或者部分丧失劳动能力的；

(3) has contracted an illness or sustained a non-work-related injury and the set period of medical treatment therefore has not expired;患病或者非因工负伤，在规定的医疗期内的；

(4) is a female employee in her pregnancy, confinement or nursing period;女职工在孕期、产期、哺乳期的；

(5) has been working for Party A for at least 15 years continuously and is less than five years away from the statutory retirement age; or在甲方连续工作满十五年，且距法定退休年龄不足五年的；

(6) is in circumstances under which laws or administrative regulations prohibit Party A from terminating the Contract.

法律、行政法规规定的其他情形。

12. EXPIRY OF CONTRACT劳动合同的终止

12.1 This Contract shall end if: 有下列情形之一的，本合同终止：

(1) its term expires;本合同期满的；

(2) Party B begins receiving basic old-age insurance benefits in accordance with the law;乙方开始依法享受基本养老保险待遇的；

(3) Party B dies, or is declared dead or missing by a people's court; 乙方死亡，或者被人民法院宣告死亡或者宣告失踪的；

(4) Party A is declared bankrupt in accordance with the law; 甲方被依法宣告破产的；

(5) Party A has its business license revoked, is ordered to close down or is closed down, or decides to dissolve early; or甲方被吊销营业执照、责令关闭、撤销或者甲方决定提前解散的；

(6) another circumstance specified in laws or administrative regulations arises. 法律、行政法规规定的其他情形。

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12.2 If any of the circumstances specified in Clause 11.6 exists at the time of the expiration of this Contract, its term shall be extended until such time as the circumstance no longer exists, at which point this Contract shall then end. However, the ending of this Contract of Party B who has lost all or part of his/her capacity to work as specified in Clause 11. 6 (2) shall be handled in accordance with state provisions on work-related injury insurance.本合同期满，有第 11.6条约定情形之一的，本合同应当续延至相应的情形消失时终止。但是，第 11.6条（2）款约定乙方丧失或者部分丧失劳动能力后终止本合同的情形，按照国家有关工伤保险的规定执行。

13. SEVERANCE PAY

经济补偿

13.1 Party A shall pay Party B severance pay if:有下列情形之一的，甲方应当向乙方支付经济补偿：

(1) Party B terminates this Contract pursuant to Clause 11. 5; 乙方依照第 11.5条约定解除本合同的；

(2) Party A proposes the termination of this Contract in accordance with Clause 11.1 and reaches agreement with Party B on termination through consultation;甲方依照 11.1约定向乙方提出解除本合同并与乙方协商一致解除本合同的；

(3) Party A terminates this Contract pursuant to Clause 11.3;甲方依照第 11.3条约定解除本合同的；

(4) This Contract ends pursuant to Clause 12.1 (1), unless Party A proposes its renewal on the same or better terms and Party B does not agree to the renewal; 除甲方维持或者提高本合同约定条件续订合同，乙方不同意续订的情形外，依照第 12.1条（1）款约定终止本合同。

(5) this Contract ends pursuant to Clause 12.1 (4) or (5); or 依照第 12.1条（4）款、(5)款约定终止本合同的；

(6) another relevant circumstance specified in laws or administrative regulations occurs. 法律、行政法规规定的其他情形。

13.2 Severance pay shall be paid to Party B based on his/her years of service with Party A at the rate of one month's salary for each full year of service. A period of service of not less than 6 months but less than one year shall be counted as one year. For a period of service of less than 6 months, Party B shall be paid half a month's salary as severance pay. 经济补偿按乙方在甲方工作的年限，每满一年支付一个月工资的标准向乙方支付。六个月以上不满一年的，按一年计算；不满六个月的，向乙方支付半个月工资的经济补偿。

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13.3 If the monthly salary of Party B is three times greater than the average monthly salary of staff and workers in the municipality during the preceding year, severance pay shall be paid to him/her at the rate of three times the average monthly salary of staff and workers in the municipality during the preceding year and for a maximum period of service not exceeding 12 years.如乙方月工资高于本市上年度职工月平均工资三倍的，向其支付经济补偿的标准按本市上年度职工月平均工资三倍的数额支付，向其支付经济补偿的年限最高不超过十二年。

13.4 For the purposes of this Article, the term "monthly salary" means Party B's average salary during the 12 months prior to the termination or expiry of this Contract.法律、行政法规规定的其他情形。

14. LIABILITY FOR BREACH违反合同的责任

14.1 If Party A terminates this Contract in violation of its provisions causing loss to Party B, Party A shall be liable for compensation to the extent of Party B’s loss. 甲方违反本合同约定的条件解除、终止本合同，给乙方造成损害的，应按损失程度承担赔偿责任。

14.2 If Party B terminates this Contract in violation of its provisions or executes an causing loss to Party A, Party B shall be liable for compensation to the extent of that loss. 乙方违反本合同约定的条件解除本合同，给甲方造成经济损失的，应按损失的程度承担赔偿责任。

14.3 If Party B breaches the obligations of confidentiality and non-competition and thus causes economic loss to Party A, Party B shall be liable to Party A to compensate it for that loss.如果乙方违反被合同的保密和非竞争规定，由此给甲方造成经济损失的，应按损失的程度承担赔偿责任。

15. MISCELLANEOUS其他

15.1 To the extent that any necessary matters are not covered by this Contract or any of the terms of this Contract subsequently conflict with applicable provisions stipulated by the state or the municipality, the applicable provisions shall prevail. 本合同未尽事宜，或者有关劳动标准的内容与今后国家、本市有关规定相悖的，按有关规定执行。

15.2 After the expiry of this Contract, if neither party proposes any reservations within [3] days before the expiry date, this Contract shall be extended automatically and the extended term is [the same as the term hereof]. 本合同到期后，如任何一方均未于本合同到期日前[3]日内提出异议，本合同则自动续延，续延期限与本合同期限相同。

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15.3 This Contract is prepared in two copies, one of which is held by Party A and one by Party B. This Contract shall be effective when it has been signed by both parties.本合同到期后，如任何一方均未于本合同到期日前[3]日内提出异议，本合同则自动续延，续延期限与本合同期限相同。

Date of signature:签字日期：

Party A: (seal) 甲方：（盖章）

Legal Representative (Chief Principal) or Authorized Representative (signature or seal)法定代表人（授权代表）签字：

Date of signature: ............................签字日期：

Party B: (signature or seal) 乙方： 签字 （或盖章）

Although it is true that China has experienced great economic growth in recent years, it is important to bear in mind that until a few years ago China did not have private companies, or hardly any international lawyers firms. Consequently, the legal system and legal procedures and documents are considerably less developed than in the Western world. However, for companies trading in China, it is essential to use draft contracts to help in negotiations with Chinese companies and which can also provide legal certainty.

In this guide, we are going to analyse, first, why foreign companies doing business in China - be it export, import or manufacturing - should have their own clear and simple draft contracts, adapted to commercial practices in China and to its laws; and then, we shall offer guidelines on drawing up and negotiating the main clauses in contracts with Chinese companies such as: Exclusivity, Intellectual Property Rights, Confidentiality, Compensation, Place of Delivery and Form of Payment, Applicable Law, Arbitration, etc.

THE CONTRACT AS A NEGOTIATION INSTRUMENT IN CHINA

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N E G O T I A T I N G C O N T R A C T S I N C H I N A

There is a belief that in China the agreements set out in contracts are often not complied with, and that the system does not provide sufficient legal guarantees; in this regard, it is widely thought that signing a contract is merely the start of the real negotiations. Therefore, it is essential for foreign companies to have contracts whose essential role is to reduce the risk of conflicts as much as it is possible: Chinese business culture is based on harmony between the Parties.

A contract which is efficient for regulating the relations between a foreign company and its Chinese partner will basically need to have three characteristics: clarity, compliance with obligations and threat of litigation.

Clarity

One of the negotiation strategies used by the Chinese is to answer "yes" to everything, even if they have not really understood the question, or do not agree -and they sometimes blame their interpreters for possible misunderstandings-. To avoid these situations which will compromise compliance with the agreements, contracts must be simple and clear. It is also advisable to have a version in two languages, English and Chinese, which will help the Chinese Party to understand the contract. A clear and simple contract will allow the foreign company to know what it may realistically expect from the Chinese company.

Preference in compliance with obligations

China has become the world's economic centre and its companies have a lot of proposals to do business with foreign companies. This privileged situation allows them to negotiate and reach similar agreements with several foreign companies at the same time. A contract clearly specifying the Parties' obligations and establishing a system of sanctions in the event of a breach of contract will be a competitive advantage for the foreign company. In other words, the Chinese company will honour its undertakings as a matter of priority with foreign companies with which it has signed contracts which are clearly expressed, compared to those with which it has not drawn up contracts, or with which it does have contracts but when these do not clearly specify the Parties' obligations.

Threat of litigation

The Chinese political system is quite authoritarian, and in this regard Chinese companies respect the law. On the other hand, it is important to take into account that in the annual Doing Business report carried out by the World Bank, China usually stands around the 20th position in the ranking (16 in 2012) of the 183 countries analysed, in the section of "Enforcing Contracts". Therefore, the threat of the foreign company of starting legal proceedings or using arbitration (depending on what has been stipulated in the contract) in the event of non-compliance by the Chinese Party will reinforce the negotiating position of the foreign company.

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GUIDELINES FOR DRAWING UP THE MAIN CONTRACT CLAUSES IN CHINA

Having emphasised the usefulness for foreign companies of having clear and precise contracts to regulate their commercial relations with Chinese companies, we shall now analyse as follows the most important clauses and how they should be negotiated in accordance with Chinese commercial practices and laws. Exclusivity

Chinese companies, on the strength of their great negotiating power, often demand that the foreign company should grant them exclusivity in all - or part - of Chinese territory, for example in distribution or agency contracts. Foreign companies are advised, however, not to grant this exclusivity, because in addition to not being able to use other distribution channels, in the event of inefficient management by their Chinese partner, their access to the market would be suspended until the contract is terminated.

In any event, the thing to do is to make the exclusivity dependent on reaching a minimum sales target. If the Chinese partner were unable to meet such a target, the foreign company will be able to cancel the contract, or, alternatively, to continue but on a basis of non-exclusivity so that it might be able to distribute its products in the same territory through other companies.

Intellectual Property Rights

This is an essential point in any contract with a Chinese company in light of the well-known difficulties faced by foreign companies in protecting intellectual property in China. A clause must be included whereby the Chinese partner acknowledges that these rights (patents, trademarks, designs, utility models) are the property of the foreign company, and also undertakes not to apply to register these rights in China or also in other countries. In any event, as well as including this clause in all contracts carried out in China, foreign companies are advised to seek legal advice regarding this matter and to consider the possibility of registering their Intellectual Property Rights in China.

Confidentiality

It is important to include a clause in all contracts stating that the Chinese company shall not be entitled to disclose to third parties technical or commercial information of the foreign company or to use the aforesaid information for proposals other than those set out in the contract, during the validity of the contract or once it is terminated. In negotiating complex contracts (Manufacturing, License, Joint Venture) which may include the supply of technical and commercial information, even before the signing of the contract, it is essential to sign a Confidentiality Agreement with the Chinese company, clearly specifying

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what confidential information is considered to be, in other words what is called "List of Confidential Information".

Quality control

In China, the concept of quality differs from that which exists in the Western world. Therefore, companies which sign supply and manufacturing contracts in China must include a clause which exhaustively covers possible incidents or breaches which could arise in the quality of the products supplied. This clause must include matter such as the following, inter alia: permission to visit the Chinese manufacturer's installations, sending of samples representing the products which are to be manufactured, inspections during the production process, etc.

Required authorisations

Chinese laws regarding external trade and foreign investments are complex, and sometimes difficult to comply with by foreign companies, so that it is advisable that contracts include a Required Authorisations clause so that the Chinese Party shall be held responsible for requesting, processing and, lastly, obtaining all the necessary documents, such as licenses, certificates, import permits, etc.

Delivery and payment period specifications

In contracts with Chinese companies, it is important to clearly specify the place the goods are to be delivered. It will usually be a seaport which will have to be mentioned in the contract - if it is going to be the usual port - or in the shipment orders, as can happen in the supply and manufacturing contracts.

As far as payment is concerned, the common practice is for the payment period (usually 30 days) to begin on the date the goods are inspected and approved in the port of origin, rather than on the shipping date or acceptance date of the goods at the destination.

Subcontracting

The more competitive Chinese companies often have a large number of proposals by foreign companies for distributing or manufacturing products in China. In these circumstances, it tends to subcontract part of its activities to other companies over which it does not have sufficient control. Therefore, contracts with Chinese companies should include a clause whereby the Chinese company is not allowed to subcontract its obligations to third parties. By this means, when the Chinese company does not have sufficient capacity, it shall subcontract the works of those foreign companies which do not have this clause in their contracts.

Compensation

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Chinese law is less protectionist than in countries of the European Union or the United States when dealing with the right of compensation in the event of termination of contract. Thus, in the Compensation Clause the foreign company is recommended to choose the option of compensation in accordance with Chinese laws. Law and jurisdiction

In accordance with Chinese laws (PRC Civil Law), the Parties are allowed to choose the law and jurisdiction they wish to apply in contracts with foreign companies. This has been ratified in a Provision of the Popular Republic of China's Supreme Court (Provisions of the Supreme People´s Court on Certain Issues Concerning the Application of Law for the Hearing of Foreign-Related Civil or Commercial Contractual Disputes - 8 August 2007).

Nevertheless, in commercial practices Chinese companies refuse to sign contracts in which matters of litigation are not referred to the Courts or Arbitration Commissions of China. The questions of which procedure to choose will depend particularly on the power and influence of the Chinese Party and the prestige of the Court proposed by the Chinese company; as a general rule, it will be preferable to choose the alternative of Arbitration rather than the Court.

Arbitration

In contracts subject to Arbitration in China, it is advisable to act as follows:

Choose one of the Arbitration Commissions with most prestige and international experience: CIETAC (China International and Economic Trade Arbitration Commission) or BAC (Beijing Arbitration Commission). Chinese companies will not oppose at this point.

Regardless of where the central office of the Chinese company is located, it is preferable for the Arbitration to take place in Beijing or Shanghai, the two cities with most experience and the best arbitrators. The Chinese company could possibly propose another city, but they will usually accept one of these two cities.

At least one of the arbitrators must have a nationality which is not Chinese. Chinese companies will usually not oppose at this point.

The arbitration will be carried out in the English language. It is important to take into account that if no language is specified in the contract, the arbitration will be in Chinese. At this point, Chinese companies would be expected to object strongly, and might even use it as grounds for not signing the contract.

Language

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In China, contracts are usually drawn up either in English or in a dual English-Chinese version. It is not common to sign contracts in other languages such as Spanish, French or German. For the version in Chinese, simplified Mandarin Chinese shall be used.

It is advisable to use the dual English-Chinese version as this will make it easier to negotiate the contract, and also help compliance with obligations and an amicable settlement in the event of conflict.

However, when using the English-Chinese dual version, the Chinese company would try to insist that the Chinese version prevails in the event of conflict.

Signatures

For the Chinese, signing a contract with a foreign company is an important act which is given a certain degree of protocol and which is usually celebrated with a banquet. When contracts are especially relevant, a local authority or national representative of the foreign company (Ambassador, Consul, Commercial Attaché, etc.) is often invited.

The persons who sign the contracts on behalf of each one of the Parties will have to have the same hierarchical range. Furthermore, it is common procedure for a witness to sign on behalf of each Party. Next to the signatures, the seal of each one of the companies should be stamped - this is because in accordance with Chinese law, contracts without a seal might be invalid.

Lastly, it is important to take into account that China is a huge country: each province has its own laws, rules and uses, which from the standpoint of business are just as important as national laws. In this regard, you are advised to seek assistance from professionals with local knowledge of the businesses, especially in operations with a certain degree of importance, which could give rise to conflicts with serious consequences for foreign companies.

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