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The China Law News keeps you on top of business, economic and political events in the China.
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In the News
New Exit-Entry law in China

On June 30, 2012, China's Ministry of Public Security announced a significant new immigration law, the "Exit-Entry Administration Law", scheduled for implementation by July 1, 2013.

While final, official protocols and regulations have yet to be announced, companies and assignees should be aware that during the next 12 months, the Chinese Government may phase-in changes to the new master immigration law.

The new law is a combination of two, current laws for foreign nationals and for Chinese nationals.

According to a recent interview by China's official press agency, Xinhua, the Public Security Bureau (PSB) is introducing the new law to make, "Innovations and improvements in exit-entry administration organizations, systems and mechanisms.

“It contributes to the strengthening and improvement of exit-entry administration work by Public Security organs. It heightens the requirements for administration and law enforcement by Public Security organs."

The emphasis of this new law is two-fold: increased immigration enforcement over foreign visitors and worker/residents and increased scrutiny by the Overseas Chinese Affairs Department in administering matters for overseas Chinese, particularly for returning-resident Chinese.

In general, the major points for companies and assignees considered for implementation under the new master law are as follows:

Increased Border Control:

  • Gathering of biometric data/personal appearance requirement at specific Chinese consular posts for certain nationalities

A recent update from PLG's China office indicates that certain EEA nationals will no longer be eligible for expedited or same-day visa application processing with the Commissioner's Office of China's Foreign Ministry in Hong Kong. As visa applications for certain EEA nationals will be more closely scrutinized when applying in Hong Kong, these applicants should expect an increased processing time of four business days instead of one;

  • Foreign nationals found to be in violation of their condition of stay can face summary deportation and be barred from re-entering China for up to ten years
  • Greater information sharing between the PSB's, MOFA and Chinese consular posts to confirm accuracy of visa information supplied by visa applicants and to ensure compliance by all visa holders

Increased Enforcement Policies:

  • Assignees found to be in violation of their condition of employment or failing to carry proof of valid employment status may face a civil fine of up to RMB 20,000 (approx. US$3,170) and a possible criminal penalty of detention
  • Any foreign national, inclusive of visitors, found in violation of condition of stay may face a civil fine of up to RMB10,000 (approx. US$1,590) and possible detention of up to 15 days
  • All foreign nationals, regardless of visa category, will be required to register their presence with the local PSB Office within 24 hours of arrival in China.   While this is a current requirement, enforcement will be enhanced as a result of increased spot-checks of foreign nationals. Re-registration is, and will be, required for each new entry to China
  • Chinese employers knowingly hosting illegal foreign workers may face civil fines of up to RMB10,000 (approx. US$1,590) per worker, with a total, maximum fine of RMB100,000 (approx. US$15,900). In addition, any company profit derived from such employment will be subject to forfeiture to the Chinese Government
  • Chinese employers found to be in non-compliance (e.g., preparing fraudulent or inaccurate host invitation letters, submitting inaccurate work and residence permit applications) may face civil and criminal penalties

New Policies:

  • An assignee's Employment and Residence Licenses will be issued for a minimum of 90 days up to a maximum of five years
  • Residence Licenses for accompanying family members will be issued for minimum of 180 days up to a maximum of five years
  • Any visa valid for a stay of up to 180 days will require the visa holder to submit an extension application to the local PSB no later than seven days from date of the initial visa's expiration
  • "Ordinary" visas (e.g., visas for visit or work) will be considered for extension on a discretionary basis
  • Employment of any foreign national, including foreign students enrolled in Chinese universities, must be reported in a timely fashion to the Labor Office and PSB. Chinese citizens are also encouraged to inform their local government of any suspected failure by a Chinese company to report the presence of foreign workers
  • "Skilled Talent" and "Outstanding Alien" Visas will be offered to foreign nationals considered to have specialized or shortage-occupation skills or recognized by a Chinese Government authority as possessing exceptional and internationally-recognized expertise/skills
  • New Permanent Residence system may open more paths to non-immigrants to apply for unlimited stay in China. Currently, paths to Chinese permanent residence are fairly restricted to such cases as foreign dependents of Chinese nationals, outstanding workers and wealthy individual investors

Action Items For Employers

Presently, specific requirements to implement the proposed new law have not yet been formulated. However, companies and assignees should be aware that implementation of these changes may be phased-in over the course of the coming year versus waiting until July 1, 2013.

As more immigration compliance will be expected from Chinese host companies, it is recommended that Chinese HR be made aware of these and other proposed changes according to the PSB's recent announcement


Win-win approach to entry and exit

Since China's top legislature passed a new exit and entry law on June 30, which stipulates harsher punishments for illegal entry, stay or employment of foreigners, there is a growing concern among the expat community whether an "anti-foreigner" sentiment is spreading. Such worries are unfounded. However, the Chinese authorities should try to make the visa-related procedures more convenient.

The "three illegals" as they are known - the illegal entry, illegal stay (including non-registration of address and exceeding visa validity) and illegal work (including business activities and working without an appropriate visa) - have become a hot topic since Beijing launched a clampdown campaign in May.

In the past couple of months, there have been reports in the media of both criminal and offensive behavior by foreign individuals and suggestions that Westerners are in danger of being attacked by locals. Yet the truth is locals and foreigners in general live harmoniously together.

So should the new rules be seen as a changing attitude toward foreigners and are the rules more burdensome than those of developed nations? The answers are yes and no. China's largest trading partner is the European Union and there is much to be said for greater engagement between the citizens in EU and China. Equally the EU has important relationships with the United States. Yet contrast the visa policies for EU passport holders visiting the two leading world economies. Most EU citizens can enter the US under visa-waiver policies, provided they have registered their details electronically once every two years for pre-approval on inbound international flights. Once there they don't have to go to the local county sheriff to register where their are staying.

However, foreigners should understand that China is the land of the hukou, and the concept of household residence permits among its large population is well ingrained. With city authorities working hard to offer residence rights to migrant workers from the countryside, they are hardly likely to allow foreigners to roam unrecorded. We have to accept that. It is not difficult to complete the formalities at a local police station, albeit there is a lot of paperwork, and visa that will soon expire can be extended. So there really is no excuse for staying illegally, something all other countries try to prohibit.

The documentation China requires for various visa categories is relatively simple and inexpensive, if carefully followed, especially when compared with a visa like the US' notorious L-1 visa, a non-immigrant visa which allows companies operating both in the US and abroad to transfer certain classes of employee from foreign operations to the US for up to seven years. This requires a significant amount of paperwork, inspection and cost. However, once obtained, the L-1 visa gives three years' unlimited entry and exit and indefinite duration of stay, is routinely extended to seven years and forms a key stage in getting the famous green card if desired.

China's approach is more "easy in, easy out" as the authorities regard one year as the maximum length of any visa, having once had a two-year visa myself, it is a pity visas of such length were suspended in 2008.

We should acknowledge that it is hard to separate a country's visa policy from those imposed by countries that its nationals seek to visit, reciprocity is part of the picture, so too is the greater revenue that comes from short-length visas with regular renewal or extension fees.

The contribution of foreigners to China should not be doubted. In modern times, it is recognized that after China's reform and opening-up, overseas entrepreneurial expertise greatly aided China's economic progress. China today is the second largest recipient of foreign direct investment, and foreign firms want to bring some key staff with that investment. English is the language of international business and learning it here from a native speaker is in demand and beneficial to Chinese enterprises "going out". China rightly wants to expand cultural tourism and increase the understanding the world has of China. It also wants to expand international education exchanges. However, foreigners must abide by China's laws and abide by its visa policies.

The authorities should make sure it easy and inexpensive for foreigners to get the appropriate visas or to extend them, in an era where, globally, many travelers simply don't need visas. With the right approach it will be win-win.

The author is an economist and director of China Programs at CAPA International Education, a US-UK based organization that cooperates with Capital Normal University and Shanghai International Studies University.


China targets patented drugs with law change

China has altered its licensing laws to allow domestic pharmaceutical companies to make cheap generic copies of patented drugs under certain circumstances. The move is part of the country’s efforts to ensure it has the weapons to tackle health crises like Aids, but there are concerns about the effect these policies could have on innovative drug development.

The new measures allow the government to issue compulsory licences to eligible companies to produce generic drugs. A clause has been added to existing patent laws stating: ‘SIPO [China’s State Intellectual Property Office] has the right to authorise compulsory licences in emergencies, extraordinary conditions or in the public interest.’

Zhang Weijun, associate professor of the intellectual property institute at Tongji University, China, says that the changes to the law come under the auspices of TRIPS (Agreement on Trade-Related Aspects of Intellectual Property Rights), so it would not be illegal for Chinese companies to produce patented drugs – provided they get a permit from the government.


TRIPS is an international agreement administered by World Trade Organization (WTO) which sets down minimum standards for many forms of intellectual property (IP) regulation for its members. Recognising public health crises caused by patented drug shortage in some developing and least developed countries, an interpretive statement of TRIPS was issued in November 2001, which indicated that TRIPS should not prevent states from dealing with public health crises.

‘Innovator pharmaceutical companies are obviously not going to be happy with this move, but there's not much they can do for existing drugs besides try to get the pricing and distribution right and compete against the generics in the marketplace,’ says Colleen Chien, associate professor of law at Santa Clara University, US.

Indeed, pharma giant of Bayer has recently been on the receiving of a compulsory licence. In March, India's patent authority granted a licence to a local generics manufacturer to produce sorafenib, a kidney and liver cancer drug.

Following India’s move, China’s legislative changes have put big pharma on notice. ‘HIV drugs may be the first target, as HIV has become a growing threat in China, especially in rural areas where drugs are in extremely short supply,’ says Lu Shoufu, chief executive of Shanghai-based AQBiopharma. ‘Patented drugs are a heavy load for the Chinese government [to bear].’

Urgent need

According to the Chinese human rights charity the Yirenping Center, compulsory licensing of hepatitis B drugs is also urgently needed in China. Shanghai-based generic drug maker Aurisco is already reported to have applied for a compulsory licence through the appropriate government agency for Gilead Sciences antiviral tenofovir, which can be used to treat hepatitis B and HIV.

Just like in India, generic drug production capability is developing rapidly in China, which is what makes compulsory licensing possible in the country in the first place. ‘It is good news for some local pharmaceutical firms,’ Lu says, ‘and also protects the Chinese drug industry.’

However, all compulsory licence applications have to be put forward by the appropriate government agency and this is seen as something that will slow the process. Big drug firms are not helpless, either. They have already foreseen the amendments to the law in China and ‘big pharmas like Pfizer and Merck are cooperating with local pharmaceutical firms to set up research centres to make patented drugs in China, which reduces costs and lowers the price of medicines,’ Lu tells Chemistry World. ‘Some big companies would share the patent under the new rules.’

With new drug development becoming more and more difficult, international pharmaceutical companies that pump funds into innovative research have reason to worry. However, the risk of setting back innovative drug research seems to have led the Chinese government to view compulsory licences as being a weapon of last resort.

Nevertheless, Chien says that the impact of compulsory licences on innovation is still uncertain. ‘For drugs that are not specific to emerging markets, the worldwide market is typically large enough for this not to matter, for drugs that are specific to emerging markets, this will impact innovation.’ She points out that, ‘we need to be careful here. Pharmaceuticals are already facing a lot of problems with new drug innovation. To some degree compulsory licensing favours dissemination of existing innovation but at the expense of future innovation.’


Over one-tenth of convicts in criminal cases receive severe penalties

About 14.21 percent of 1.05 million convicts in criminal cases last year received severer penalties than five-years imprisonment, according to a report on China's legal system development released Tuesday.

The number included the convicts sentenced to life imprisonment and death, said the report issued by the China Law Society annually. But it did not give the exact number of people sentenced to death.

Last year, courts at all levels closed about 11.49 million cases, including 840,000 criminal ones, the report said.

Criminal cases related to food safety received a higher priority in court last year while corruption cases remained a top priority, the report said.

A total of 278 cases of producing and distributing poisonous and harmful foods and more than 27,000 corruption cases were closed last year, according to the report.

Prosecutors also worked hard on corruption cases. They investigated about 44,000 suspects in 32,567 graft cases last year, the report said.

Among the suspects involved in bribery, 2,524 were officials holding higher positions than county heads, including seven at the minister or governor level.

In addition, 10,585 officials were investigated for breach of duty, a year-on-year increase of 3.5 percent, the report said.

More bribers stood trial last year. The number of bribers taken to court increased by 6.2 percent to 4,217 in 2011 from that of 2010, according to the report.

Also, 1,631 wanted suspects in corruption cases were captured and arrested last year.


Edward Lehman ʦ
Managing Director ³

Lehman, Lee & Xu is a top-tier Chinese law firm specializing in corporate, commercial and intellectual property matters. For further information on any issue discussed in this edition of China Law Digest , or for all other enquiries, please e-mail us at mail@lehmanlaw.com or visit our website at www.lehmanlaw.com and Mongolia www.lehmanlaw.mn.

Lehman, Lee & Xu Mongolia is one of the first and only international law firms with a full time presence in Mongolia.  Our Ulaanbaatar office is staffed with resident foreign legal consultants having significant experience in Mongolia and qualified Mongolian attorneys. The firm’s foreign legal consultants and local attorneys are fully acquainted and experienced with Mongolia’s laws and legal system, business climate and political affairs. For any Mongolian legal matters please refer to our Mongolian website www.lehmanlaw.mn.

© Lehman, Lee & Xu 2012.
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