Understanding China’s Legal System: An Overview

Published by:
Mike Chelbet

Reviewed by:
Alistair Vigier
Last Modified: 2024-06-09
Laws are not often made at China’s municipal, district, or provincial levels. Most of the rules come from the central government in Beijing. China’s legal system is civil law, not common law.
Therefore, China has a law based on French law. China’s congress is the lawmaker. The main purpose of the Chinese courts is to deal with all different types of disputes. There are a few different court levels in China.
You can contact our legal consultant on Wechat: alistairvigier

Comprehending China’s Legal Framework
China’s economy is growing again, making it attractive to investors. Investors should use a legal translation agency to help them. China said that its GDP grew by 18.3% in 2021.
That came right after the pandemic, and many were surprised. Some economic experts thought the pandemic would end the Chinese economic miracle, but they’ve been proven wrong. Now that the Chinese economy is moving again, investors worldwide are excited.
China remains one of the most attractive investment destinations in the world today. It is still the number one destination for foreign investments in all of Asia. Even in 2020, during the height of the pandemic, the inflow of FDI into China actually improved. It grew from $141 billion in 2019 to $149 billion in 2020.
If you’re an investor looking for a great opportunity, China should be on your list. You’ll need help from a legal translation agency, interpreters, and legal experts to ensure you are working within the bounds of the law.
Legal Translation for Drafting Contracts and Other Documents
If you’re determined to invest in China, you don’t have to study their entire legal system. It’s enough that you have a working knowledge of the laws. The important thing is that you have the support of experts who can assist you.
Regarding contracts or international investment agreements, you need help from a legal translation agency to make things clear for you. You cannot use just any translator to handle legal documents concerning your investments in China. Translating contracts requires knowledge of the country and its system. Fluency in the language is not enough when it comes to legal translation.
Grasping the Chinese Legal System
Investors must first learn a few things about China before they fully commit to investing there. For example, they must know something about the Chinese legal system.
One does not need a comprehensive overview of the legal system in China. Services like business insiders, legal experts, translators, and interpreters can help investors. However, an investor must understand the laws concerning investors in place there. An investor will need help from a legal translation agency when drafting contracts.
Before January 2020, three laws in China dealt with enterprises with foreign investments. Those laws were the following:
- Law on Wholly Foreign-Owned Enterprises
- Law on Sino-Foreign Co-operative Joint Ventures
- Law on Sino-Foreign Equity Joint Ventures
Foreign investment rules in China
The Foreign Investment Law has superseded these three laws. One of the more interesting provisions of this law is that if the governance structure of a company with foreign investment runs counter to the provisions of other relevant laws like the Company Law, then there must be amendments to be carried out five years after the Foreign Investment Law has been implemented.
The law also establishes the Negative List for Access by Foreign Investors. The sectors on the list are off-limits to foreign investors. When an investor is still interested in an industry that is prohibited, there is still a way to get in. The investor will have to satisfy the conditions set in the law.
The Foreign Investment Law also establishes a foreign investment information reporting system and a foreign investment security review system. The latter is mandated to conduct reviews of foreign investments that might affect national security.
Anti-Monopoly Laws
The Anti-Monopoly Law became effective in 2008, and other laws concerning competition in China were introduced. Those laws include the Law Against Unfair Competition, the Price Law, and the Law on the Invitation and Submission of Bids.
As its name suggests, the main target of the AML is monopolistic competition. It does not explicitly prohibit companies from having a dominant position in the market. Instead, the law prohibits players who attain such a position to abuse it. Another necessary provision of the AML is that it gives those harmed by monopolies the right to file a lawsuit in a Chinese court for damages.
The Law Against Unfair Competition was enacted to combat the manufacturing of poorly made products, unfair competition, false advertising, and other practices seeking an unfair advantage.
Anti-corruption Laws
China has been trying to crack down on corruption in recent years, and this crackdown has affected high-ranking officials.
China has agreed with other countries that it needs to crack down on corruption. In light of that aim, the country has enacted anti-corruption laws that affect businesses. These regulations can be divided into four levels:
- state anti-corruption policies
- party discipline and regulations
- criminal laws and regulations
- civil and administrative regulations
Commercial bribery is one of the main things the laws fight against. Investors interested in China should be concerned about these laws, but many other laws can affect them.
Investors will also benefit from being supported by interpreters and actual Chinese lawyers. They can help during negotiations by ensuring everyone complies with Chinese laws.
Navigating the labyrinth of the Chinese legal system as an investor can be a daunting task. But when you have the correct support backing you up, you will be more confident in facing your chosen new market.
You can see some helpful articles about the Chinese legal system below:
How The Chinese Legal System Works
The Supreme Court is the highest in China. It only deals with the most important legal cases. The next one is the local courts. The high court is the most important in a province. There is also a special court. These deal with disputes with the military or government.
It can deal with tax disputes between companies and the government. The special courts can also deal with maritime law. This could be a dispute between ships. In conclusion, since China has no common law system, you don’t use past cases to argue your case. Every case is based on the rules that come down from Congress.
The best way to deal with problems is to prevent them. You can speak to a lawyer before you get in trouble. If you wait until you get in trouble, it will cost you much more regarding legal fees.
A lawyer in China charges around the same amount per hour as in Canada. The law firms in China only know Chinese law. Therefore, you need to hire someone with litigation and arbitration experience in the country where you need help.
These law firms can help with real estate, business law, intellectual property, and other legal services. Other lawyers practice corporate and commercial law, dispute resolution, and international arbitration.
Insights into China’s Legal Structure
A lot of foreign companies that go into China get cheated. That’s why it’s so important to do the contract correctly. And it’s essential to get a copy in both Mandarin and English. You don’t want to sign a Chinese contract assuming the correct translation. You have to have your lawyer.
They often suggest you are good friends, so you don’t need to worry about the contract. Once much money is on the table, the Chinese might try to push you out of the business.
You no longer have to be Chinese to own a company in China. The law firm can provide the registered address and help with visas, work permits, etc.
You don’t want to give everything to the Chinese company you work with. If you upset them, they could bring false criminal charges against you. A judge will often believe the Chinese person over the foreigner.
Hiring a Chinese lawyer for criminal law is vital if you get into trouble. Of course, you could also go to jail, even if you didn’t do anything. They can hold you in a cell for up to six months without evidence.

Navigating China’s Judicial System
Foreigners don’t have any rights unless they hire a lawyer. In China, you have to be connected to the right people. It’s about getting to know the right people.
China law requires both parties to agree to divorce. A simple divorce in China doesn’t cost much. However, they can say no if the other side wants to get paid more. Now, it can get extremely expensive.
The easiest way to get divorced is to be separated for a few years and then get divorced in your own country. You then get a certificate from a divorce in your own country. You then register the certificate in China. Family lawyers can help you with this.
If you get your money stolen, get divorced, or get in a bar fight, contact us. It would be best to have everything ready to go when you arrive in China.
Exploring China’s Legal Landscape
If your wife says, let’s put the company in my name, or it will be hard to do business in China, don’t listen. It doesn’t matter whose name it’s in. There are lots of rumours in China.
If you marry in China, don’t listen to your friends’ legal advice. It would be best if you got legal advice from a lawyer. The family will push you to buy a property.
If your wife divorces, you might lose your property. You need to be very careful. If you put the property in your wife’s name, it’s gone—you will never get it back.
Are lawyers in China expensive?
The pricing is similar to what you would find in Canada and Australia. One difference from the West is that most lawyers in China bill on a flat fee. If you go to them looking for a shareholder agreement, they might quote you $5000. Hourly rates are not typical in China.
Should I set up my company in Shanghai?
That’s up to you! Shanghai and Beijing are popular places for foreign companies to set up. Shenzhen and Hangzhou are popular cities for the technology industry. It depends on your industry. A lawyer in China can help you find the correct city. They also might be able to get you tax credits…
We hope you found this guide on the Chinese legal system interesting.
RELATED POSTS
No related posts found.