With the new China Labour Contract Law coming into effect on January 1 2008, the December edition of China Briefing (req. registration) analyses the changes foreign invested companies in China must make to their employment contracts for all staff. Foreign investors are the prime target for legal and financial control mechanisms in China, and aiming to discourage employers from signing short-term labour contracts, the new labour law will have a direct impact on employment costs. Officially designed to improve employment relationships, clarify rights and obligations and provide more stability and security for employees, the law will in effect result in the abolition of fixed-term contracts as every such contract will require a severance obligation when expiring.  

And from the China Briefing blog yesterday, foreign enterprises in China seem set to lose their tax holidays as China moves to implement new corporate income tax regulations. As tax authorities have recently increasingly focused on foreign invested enterprises (FIE's), many of these enterprises have seen their tax holidays eliminated for breaching Regulation #43 of the new law, which dictates that once the tax breaks end, income tax should be submitted without delay and any changes affecting the tax payer within 15 days of the change should be declared. And taxpayers who no longer qualify for the tax breaks must pay up.

According to Steven Dickinson in Business Week, China has made 'remarkable progress in introducing a fully functioning civil law system... The Chinese authorities fully understand that economic development and development of a strong legal system go together.' Citing data from the Report on China Law Development published earlier this year, Dickinson pointed to a full 94,288 laws and regulations promulgated in China between 2001 and 2004 as an indication of a legal system being established in China which, once in place, 'will do its job of providing the guidance and legal certainty required of a modern market economy.'