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China New Law Bulletin - Issue Three 2011


Edward J. Epstein

In This Issue:

National Security Review of Foreign M&A Deals Clarified

Since February 2011, all foreign mergers and acquisitions of domestic Chinese enterprises in certain sectors have been subject to national security reviews. These interim regulations will be replaced on September 1 by new and clarified regulations. The new regulations introduce no significant changes but clarify thresholds and characteristics that will trigger a national security review.


Foreign Nationals Must Participate in China’s Social Security System

Draft regulations circulated for public consultation in June will, if enacted, require all foreign employees working in China, including seconded staff and permanent residents of Hong Kong, Macau and Taiwan, to participate in China’s mandatory social security system.


Circular Issued on Pre-paid Stored Value and “Shopping” Cards

New regulations that came into effect on August 1, 2011 impose restrictions on issuing of all pre-paid stored value cards in China. The new restrictions signal the Chinese government’s concerns about the use of stored value cards in corrupt dealings. 


Licensing Rules for Storage of Hazardous Chemicals under Review

On September 15, 2011, China’s State Administration of Work Safety will conclude its public consultation process on new draft rules for obtaining operating licenses for storage of hazardous chemicals.


Patent License Filings Now Subject to New Requirements

On August 1, 2011, China’s State Intellectual Property Office (“SIPO”) issued revised patent license rules. The new rules bring China’s patent filing requirements in line with the third amendments to the Patent Law.  Some restrictions have been dropped and under the new rules parties are no longer required to file patent licenses with SIPO as a precondition for remitting royalties or recording the patent with PRC customs.


Entitlements under China’s Social Security System Clarified

New regulations came into effect on July 1, 2011 to redress regional discrepancies in the administration of the basic pension insurance scheme and the workplace injury-related insurance scheme.


New Individual Income Tax Rates Take Effect on September 1, 2011

In a move to spur domestic consumption by increasing disposable incomes for low and medium income earners, China’s National People’s Congress approved new IIT rates in July. The new regulations come into effect on September 1. Taxpayers earning above RMB38,600 per month (USD6,000 approx) (after deduction of social welfare contributions), will experience an increase in their tax burden under the new IIT rates but other tax payers can look forward to keeping a higher percentage of their salaries.