China business & legal glossary

A quick reference to the acronyms and concepts that recur across China market entry, investment, employment, data and disputes. Each term links, where useful, to the guide that covers it in depth.

Entities & market entry

WFOE — wholly foreign-owned enterprise

A Chinese limited liability company that is 100% foreign-owned and can invoice customers, hire staff directly and repatriate after-tax profit. The default vehicle for a foreign company earning revenue in China. See choosing your China entity and setting up a WFOE.

Joint venture (JV)

A Chinese company with at least one Chinese and one foreign shareholder. Required where the foreign-investment negative list caps foreign equity or mandates a Chinese partner — otherwise chosen when a local partner adds real value.

Representative office (RO)

A non-trading liaison office of a foreign parent. It cannot sign revenue contracts, issue invoices or directly employ Chinese staff (who must be engaged through a dispatch agency such as FESCO).

Foreign-invested enterprise (FIE)

Umbrella term for any Chinese company with foreign investment — a WFOE, a joint venture, or a foreign-invested partnership.

Foreign Investment Law (FIL)

In force since 1 January 2020, it unified China's foreign-investment framework around pre-establishment national treatment plus a negative list, replacing the old equity-JV, cooperative-JV and WFOE statutes.

Negative list

Formally the Special Administrative Measures for Foreign Investment Access: the document naming the only sectors where foreign investment is prohibited or restricted. Everything off it receives national treatment. Current nationwide edition: 2024, 29 items. See the negative list, explained.

National treatment

Treating a foreign investor the same as a domestic one. Under the FIL it applies at the entry stage ("pre-establishment") to any sector off the negative list.

Market-access negative list

A separate, larger list governing which activities any investor — foreign or domestic — may enter. It is not the foreign-investment negative list, and its item count is different; the two are often confused.

Encouraged catalogue

The Catalogue of Industries for Encouraged Foreign Investment — sectors China wants foreign capital in, carrying incentives such as import-duty exemptions and tax benefits. It grants advantages; it does not restrict entry.

Free Trade Zone (FTZ)

Pilot zones operating a shorter negative list (2021 edition, 27 items), where liberalisation is often tested first. The Hainan Free Trade Port runs its own separate, shorter list.

Registered capital

The capital a company's shareholders subscribe. Under the 2024 Company Law it must be paid in within five years of establishment; there is no general statutory minimum for most sectors, so set it to genuine need.

Regulators & filings

SAMR — State Administration for Market Regulation

Registers companies, issues the business licence, and handles merger control.

MOFCOM — Ministry of Commerce

Oversees foreign investment and, with the NDRC, maintains the foreign-investment negative list.

NDRC — National Development and Reform Commission

Co-leads foreign-investment policy and houses the office of the foreign-investment security-review mechanism.

SAFE — State Administration of Foreign Exchange

Administers cross-border currency flows. A WFOE registers with SAFE, through its bank, to receive its capital from abroad and later remit profits.

Apostille

Since 7 November 2023 China is a party to the Apostille Convention: a single apostille replaces the old two-step consular legalisation for public documents from member states.

Business licence

The certificate SAMR issues on registration — the company's legal "birth certificate." Its date starts several statutory clocks, including the five-year capital deadline.

Fapiao

The official, tax-authority-regulated invoice in China. Issuing fapiao requires tax registration, and it is the basis for VAT and expense deduction.

Corporate & tax

Company chop (seal)

An official carved seal registered with the Public Security Bureau. In China the chop, not a signature, binds the company — so custody of the chops is a governance question, not a stationery one. See company chops.

Legal representative

The individual empowered by law and the articles of association to bind the company. A required corporate role under the Company Law; internal limits on their authority are not, by themselves, assertable against a bona fide third party.

Withholding tax

Tax deducted at source on China-sourced income paid abroad. Dividends to a foreign parent bear 10%, commonly reduced to 5% under a qualifying double-tax treaty. See getting profits out of China.

Beneficial owner

The genuine owner, with real substance, of income such as a dividend. Being the beneficial owner — not a conduit — is a condition for claiming a reduced treaty withholding rate.

Profit repatriation

Moving profit out of China — chiefly by dividends, and alternatively by service fees, royalties or intercompany loans, each with its own tax cost, documentation and bank scrutiny.

Employment

Labour Contract Law

The statute governing employment in China. There is no at-will employment: a unilateral dismissal needs a statutory ground (Articles 39–41) and the correct procedure.

Severance — N, N+1, 2N

Statutory severance formulas. N = one month's pay per full year of service; N+1 adds one month in lieu of the 30-day notice on a no-fault exit; 2N is double severance, payable for unlawful termination. See terminating an employee in China.

Social insurance & housing fund

Mandatory contributions — pension, medical, unemployment, work-injury and maternity insurance, plus the housing fund — that add roughly 30–40% to an employer's payroll cost.

Labour dispatch (FESCO)

A labour-dispatch agency through which a representative office — which cannot hire directly — engages its local Chinese staff.

Data & PIPL

PIPL — Personal Information Protection Law

China's comprehensive data-protection statute (2021), governing the processing and cross-border transfer of personal information.

CAC — Cyberspace Administration of China

The data regulator that oversees cross-border data transfer and issues the security-assessment and standard-contract rules.

PIPIA — Personal Information Protection Impact Assessment

A mandatory internal assessment before certain sensitive processing or the export of personal data.

Cross-border data transfer

Moving personal data out of China, permitted via one of three routes — a CAC security assessment, the standard contract, or certification. See PIPL cross-border transfer.

Review & disputes

Foreign Investment Security Review (FISR)

The regime in force since 18 January 2021 that reviews inbound deals on a sector-plus-control test. Where it applies the filing is mandatory and must be made before closing. See the four-question screen.

Actual control

For the security review: holding 50% or more of the equity, a smaller stake with material influence over the board, or veto rights over key matters. Assessed on substance, not the headline percentage.

CIETAC

The China International Economic and Trade Arbitration Commission — the leading onshore arbitration institution. Its proceedings default to Chinese if the clause is silent on language. See the China arbitration clause.

Seat of arbitration

The legal home of an arbitration, which fixes the supervisory courts and the law governing the arbitration itself. Generally, only foreign-related disputes may be seated offshore.

New York Convention

The 1958 treaty under which foreign arbitral awards are recognised and enforced in China — far more readily than foreign court judgments. See enforcing foreign awards in China.

These definitions are general information for foreign companies, not legal advice. Rules and practice change; please take advice on your facts.