On August 1, 2025, the Supreme People’s Court issued the “Interpretation on Several Issues Concerning the Application of Law in the Trial of Labor Dispute Cases (II)” (hereinafter referred to as “Interpretation II”), which came into force on September 1 of the same year. This significant judicial interpretation directly affects several aspects of employment management and thus deserves high attention from employers.

This article aims to interpret the key provisions of the Interpretation II and the new adjudication rules established thereby, assisting employers in optimizing their employment management systems and achieving timely compliance with the requirements of the new regulations.

I. Affiliated Enterprises Shall Jointly Bear Liability for Payment of Labor Remuneration in Cases of Mixed Employment Without Written Labor Contracts

Prevalent Shared Employment and Disputes

In practice, the shared employment of employees among affiliated companies is prevalent. This has long given rise to disputes regarding the identification of labor relations and the determination of which entity bears the obligation to pay remuneration.

Interpretation II on Shared Employment​

Article 3 of the Interpretation II clarifies that if an employee works for multiple affiliated entities either alternately or concurrently, the determination of labor relationship shall first be based on whether there is a written labor contract:

• If a written labor contract has been signed, the labor relationship shall be confirmed in accordance with the labor contract;

• If there is no written labor contract, the court shall determine the labor relationship by comprehensively examining factors such as the entity exercising management over the employee, working hours, job content, the payer of remuneration, and the contributor of social insurance.

The court shall also uphold the employee’s claim that all affiliated entities shall jointly assume liability for the payment of wages and other benefits. However, if the affiliated entities have entered into a valid agreement on the employee’s remuneration and benefits with the employee’s consent, such agreement shall prevail.

II. Foreign Enterprises Legally Included as Participants in Labor Dispute Litigation

Current Status of Representative Offices

Under existing laws permanent representative offices of foreign entities are not recognized as eligible employers. They may only hire staff through foreign affairs service providers via labor dispatch arrangements.

In legal practice, while representative offices are often accepted as valid parties in lawsuits and share liability with dispatch agencies, some lack sufficient assets to settle debts. This leads parties to frequently seek to involve the parent foreign enterprise in the liability. However, inconsistent rulings across different courts have created uncertainty in the application of the law.​

Interpretation II on Representative Offices​

Article 5 of the Interpretation II clarifies that representative offices have the status to participate in lawsuits. It also grants parties the right to apply to include the foreign enterprise as a litigation participant. Specifically, if a representative office has no independent property or has been dissolved, the parties may apply for the foreign enterprise represented by such representative office to bear legal liability.  This provision resolves the ambiguity in judicial practice and provides clearer legal guidance for labor dispute cases involving foreign enterprise representative offices. ​

III. No Double Wages Paid During the Period Deemed as Having Concluded an Open-ended Labor Contract

Current Legal Provisions

The Labor Contract Law stipulates that if an employer fails to conclude a written labor contract with the employee for more than one month but less than one year from the date of employment, it shall pay the worker double wages on a monthly basis.​

Furthermore, if an employer fails to conclude a written labor contract with the employee for one year from the date of employment, it shall be deemed that the employer has concluded an open-ended labor contract with the employee from the day after the expiration of one year from the date of employment.

Clear Views in Interpretation II​

Interpretation II explicitly states that double wages for failure to sign a labor contract are generally supported for a maximum of 11 months, andno double wages need to be paid during the “deemed open-ended” period after one year.​

Double wages are punitive compensation rather than labor remuneration, and their application shall be based on the principle of fault liability. Interpretation II clearly points out that if an employer can prove that the failure to conclude a written labor contract is due to the employee’s intentional act or gross negligence, and the employer has indeed fulfilled its obligation of good-faith negotiation, the employer may be exempted from liability.

IV. Clarifying the Special Circumstances of “Consecutively Concluding Two Fixed-Term Labor Contracts”

Employee’s Right to Open-Ended Contracts

Under the Labor Contract Law, if statutory requirements are satisfied, an employee shall be entitled to request the employer to enter into an open-ended labor contract once two consecutive fixed-term labor contracts have been concluded.​

In judicial practice, however, due to different interpretations of what constitutes “consecutively concluding two fixed-term labor contracts,” employers have adopted various tactics to evade their statutory obligation to enter into open-ended labor contracts.

For instance, some enterprises, seeking to avoid concluding open-ended labor contracts with employees, arrange for affiliated entities to alternately enter into labor contracts with employees. This practice is intended to prevent a single employer from meeting the condition of having concluded two consecutive fixed-term labor contracts with the same employee. While existing laws stipulate that in such cases, the employee’s working years with the original employer should be calculated into their tenure with the new employer, there remains no clear rule on whether the “number of labor contracts concluded should be calculated cumulatively.”

Additionally, some companies, aiming to streamline management, often agree with employees on terms like “automatic renewal of the labor contract upon expiration” or “extension of the contract term.” In practice, there is frequent debate over whether such arrangements qualify as “consecutively entering into two fixed-term labor contracts.”

Interpretation II on “Consecutive Fixed-Term Contracts”

Article 10 of the Interpretation II clarifies the above controversial situations by explicitly stipulating that the provision of “consecutively concluding two fixed-term labor contracts” shall apply in the following scenarios:

1. The agreed extension of the labor contract term accumulates to one year or more, and the extended term has expired.
   
   Prior to the issuance of Interpretation II, some regions treated any extension of the labor contract term as the employer having consecutively concluded two labor contracts with the employee. Other regions, however, formulated provisions on whether such extensions would be deemed as concluding two fixed-term labor contracts based on the extended period after the modification of the labor contract. For example, in regions such as Jiangsu, it was stipulated that if the accumulated extension of the labor contract term between the employer and the employee exceeds six months, it shall be deemed that both parties have consecutively concluded two fixed-term labor contracts.
   
   Article 10 of Interpretation II adopts the perspective of regions like Jiangsu but extends the period for “being deemed as consecutively concluding labor contracts” to “one year,” which is more lenient to employers compared to the provisions in Jiangsu and other regions.
   
2. The employer and the employee have agreed that the labor contract will automatically renew upon expiration, and the renewal term has expired.
   
   In practice, some enterprises stipulate that the labor contract will automatically renew upon expiration to reduce the risk of “double wages” arising from forgetting to renew the written contract after its expiration. However, this approach may infringe upon the employee’s right to request the conclusion of an open-ended labor contract. Article 10 of Interpretation II clearly stipulates that if the labor contract term is automatically renewed upon expiration, after the expiration of the renewal term, it shall be deemed that both parties have consecutively concluded two fixed-term labor contracts.
   
3. Employees continue to work at the original workplace and position for reasons not attributable to the employee, the employer changes the subject concluding the labor contract but continues to exercise labor management over the employee, and the contract term has expired.
   
   For some enterprises operating in a group manner that may establish and operate multiple entities simultaneously, they may utilize different entities to renew labor contracts with employees alternately, thereby evading the obligation to conclude open-ended labor contracts with employees. In such cases, Interpretation II clearly stipulates that if “the employer changes the subject concluding the labor contract,” the number of concluded labor contracts shall be calculated cumulatively, which further protects the legitimate rights and interests of employees.
   
4. Re-signing a labor contract in violation of the principle of good faith, and the term has expired.

V. Validity of Non-Compete Agreements During Employment

Abuse of Non-Compete Clauses and Related Disputes

The purpose of establishing non-compete clauses is to protect employers’ trade secrets. However, in practice, some employers abuse non-compete restrictions by imposing unreasonable non-compete obligations, through signed non-compete clauses, on employees who have no obligation to maintain confidentiality. For example, concluding non-compete agreements with grassroots employees such as security guards and cleaners. This restricts employees’ freedom of employment to a certain extent, which is largely inconsistent with the intended purpose of the non-compete system.

In addition, among the current laws and regulations related to non-compete restrictions, most provisions focus on employees after the termination or dissolution of labor contracts, with no detailed regulations on non-compete obligations during employment. This has led to disputes over in-service non-compete clauses, such as whether signed in-service non-compete clauses are valid, and whether employers are required to pay economic compensation to employees for such in-service clauses.

Interpretation II imposes restrictions on the application of non-compete restrictions

Drawing on the summary of trial experiences in recent years, Interpretation II has explicitly regulated the application of non-compete clauses:​

Article 13 of Interpretation II

If an employee requests the people’s court to confirm that a non-compete clause is not effective on the grounds that the employee is not aware of or has no access to the employer’s trade secrets and confidentiality matters related to intellectual property, the people’s court shall support such request in accordance with the law.

If the scope, territory, duration, and other contents stipulated in a non-compete clause are incompatible with the trade secrets and confidentiality matters related to intellectual property that the employee is aware of or has access to, and the employee requests the people’s court to confirm that the excessively unreasonable part of the non-compete clause is invalid, the people’s court shall support such request in accordance with the law.

Notably, Article 13 of Interpretation II stipulates that for employees who are not aware of or have no access to the employer’s trade secrets and confidentiality matters related to intellectual property, the non-compete clauses they signed shall be deemed “not effective” rather than “invalid.” This means that if the employee does not claim the invalidity of the non-compete clause to the court, the clause may remain effective, and the employee may request the employer to pay economic compensation in accordance with the non-compete agreement. However, specific circumstances shall be subject to subsequent judicial practice results.

Article 14 of Interpretation II

If an employer concludes an in-service non-compete clause with senior managers, senior technical personnel, or other personnel obligated to maintain confidentiality, and the employee requests the people’s court to confirm the non-compete clause is invalid on the grounds that in-service non-compete clauses cannot be agreed upon or that no economic compensation has been paid, the people’s court shall not support such request.

Article 14 of Interpretation II addresses the aforementioned controversial issues by affirming the validity of in-service non-compete clauses. It also indicates that since employees already enjoy employment opportunities and salary benefits from the employer during their tenure, it is inappropriate to require the employer to pay non-compete economic compensation.

VI. Illegally dismissed employees may demand reinstatement, with wages paid during arbitration and litigation.

Previous Judicial Disputes

In previous judicial practice, there was no uniform standard for adjudicating employees’ claims for resuming labor relations after employers illegally terminated labor contracts.

For example, judicial cases in Jiangsu Province show that if an employer can provide evidence proving that the trust foundation with the employee has broken down and the employer explicitly refuses to resume the labor relationship, the court will generally not order the employer to continue performing the labor contract.

However, arbitration institutions and courts in Beijing hold different views. The judicial standards in Beijing for determining “impossibility of continued performance” are relatively strict. It is rather difficult for employers to obtain support when they cite only the breakdown of trust or the replacement of the original position as grounds for being unable to continue performing the contract.

Meanwhile, there were differences in provisions across regions regarding the wage payment standards and liability bearing during the labor recovery period. Specifically, there was a certain controversy over whether employees’ wages during the period of resuming labor relations should be paid according to the basic wage or the minimum wage.

Some regions hold that wages should be paid in full according to the amount when the employee was normally working, while others argue that it should be determined comprehensively by considering factors such as whether the employee actually provided labor and whether the employer was at fault. As a result, similar cases may lead to completely different adjudication results in different regions.​

Clarifications in Interpretation II

Interpretation II clearly lists six circumstances under which a labor contract “cannot continue to be performed,” including but not limited to the employer declaring bankruptcy, the employer dissolving, and the employee retiring. Paragraph 6 of the interpretation clearly states that the “inability to continue performing” a labor contract must be based on other “objective” circumstances rather than subjective judgments.

Therefore, in previous judicial practice, reasons such as the loss of a foundation of trust between the employer and the employee can no longer be used alone as a basis for determining that the labor contract cannot continue to be performed.​

We can further understand that, in practice, if the employer has already hired a new employee for the position during the arbitration process, the arbitral tribunal may not support the reinstatement of the labor relationship and may instead encourage negotiation on compensation. This is particularly applicable when the termination was based on organizational restructuring and the responsibilities of the new employee differ significantly from those of the original position. However, if the new employee’s duties remain substantially the same, the employer may be deemed to have acted in bad faith, and the ruling is likely to favor the employee’s claim for reinstatement.

In addition, Interpretation II has stipulated the wage payment standards and liability bearing during the period of disputes over the termination or dissolution of labor contracts:

• Wages during the dispute period shall be calculated according to the wage standard when the employee provides normal labor.

If both the employer and the employee are at fault for the termination or dissolution of the labor contract, each party shall bear corresponding responsibilities.

VII. Agreements and Undertakings on Exempting Employers from Social Insurance Contributions are Invalid

Article 19 of Interpretation II invalidates any agreement or undertaking between employers and employees to forgo social insurance. When an employer fails to pay such insurance lawfully, employees may terminate the labor contract under the Labor Contract Law and claim economic compensation. The court shall uphold the employees’ claims.

This provision first explicitly invalidates all agreements or undertakings to refrain from paying social insurance premiums. If an employee claims that the employer should make supplementary social insurance contributions, the employer shall do so accordingly. It further stipulates that after making such supplementary contributions, the employer may request the employee to return any social insurance compensation that may have been paid.

Notably, this provision supports employees’ claims for economic compensation arising from forced resignation on the grounds of the employer’s failure to pay social insurance, even if the employee had previously executed a waiver regarding such contributions. Prior to this, there were discrepancies in judicial practice across regions: some regions held that if an employee, after executing a waiver of the employer’s obligation to pay social insurance premiums, subsequently claimed forced termination of the labor contract on the grounds of non-payment, such conduct would violate the principle of good faith, and the court would not support the claim for economic compensation.

Other regions, however, held the opposite view, maintaining that the waiver of social insurance contributions violates mandatory legal provisions and is thus invalid, and that employees are still entitled to claim economic compensation for forced termination of the labor contract on the grounds of non-payment of social insurance.

Now, Article 19 of Interpretation II clearly states that if an employer, with the employee’s consent via a waiver, fails to pay social insurance, the employee is entitled to claim forced termination of the labor contract and request economic compensation on this ground, regardless of factors such as the subjective intent or fault of both parties.

VIII. Abolition of Provisions Treating Employments of Pension Recipients as Service Relations

Interpretation II has abolished the provision in Interpretation I that “if an employer and a recruited retired person have a labor dispute and file a lawsuit, the people’s court shall handle it as a service relationship.”​  Specifically, the possibility of establishing a labor relationship (as opposed to a pure service relationship)concerning certain areas between an employer and a person who has already enjoyed retirement benefits is not excluded.

The relevant provisions on employers recruiting retired employees shall be subject to the Interim Provisions on the Protection of Basic Rights and Interests of Over-aged Workers which are to be promulgated soon.  These provisions stipulate that employers recruiting people who have enjoyed retirement benefits shall enter into a written employment agreement with them. To a certain extent, such a written employment agreement is a document that falls between a labor contract and a service contract, creating a mixture of positions as an employee and as a service provider.

Employers shall ensure that such employees are entitled to basic rights and interests including labor remuneration, rest and leave, labor safety and health, and work-related injury protection. It is our understanding that these aspects should be handled by reference to the requirements of the Labor Contract Law. However, with regard to matters such as the term, modification, and termination of the service agreement, the provisions are relatively similar to the handling methods applicable to service contracts governing a pure service relationship. For employers that re-employ or recruit people who have already enjoyed retirement benefits, it is necessary to continue paying attention to the subsequent issuance of relevant regulations. We will also provide a timely update on the topic for your information.​

Background

The Ministry of Human Resources and Social Security (MOHRSS) has formally issued the Compliance Guidelines for the Implementation of Post-Employment Competition Restrictions by Enterprises, providing comprehensive guidance for employers on the lawful application of competition restrictions. Below is a structured overview of the key provisions:

Preconditions for Implementing Non-Compete Restrictions

Employers shall first identify and define the scope of their trade secrets. Restrictions should be applied only when necessary and reasonable. Employers are encouraged to prioritize alternative measures such as:

• Controlling access to confidential information;
• Encrypting sensitive data;
• Implementing reasonable declassification periods;

If non-compete restrictions are implemented, a necessity assessment shall be conducted.

Scope of Personnel Subject to Non-Compete Restrictions

In accordance with the Labor Contract Law, non-compete restrictions shall apply only to senior management personnel, senior technical personnel, and other personnel with confidentiality obligations.

When a company agrees on non-compete obligations with other personnel who have confidentiality obligations, it shall inform them of the reasons in advance and specify the details of the trade secrets to be protected.

Employees who only possess general professional knowledge and skills in the industry and have access only to the company’s general business information do notfall into the category of personnel with confidentiality obligations.

Scope and Geographical Limitations

Companies shall, to the greatest extent possible, make specific and clear agreements on the scope of companies where employees are prohibited from working; if conditions permit, a list of such enterprises may be provided.

The geographic scope of non-compete restrictions shall be consistent with the scope of the enterprise’s business operations. Without sufficient reasons, it is generally not allowed to agree on a nationwide or global scope. If the agreed scope is nationwide or global, sufficient reasons must be fully stated in the agreement.

Amount of Economic Compensation for Non-Compete

The monthly economic compensation paid by an enterprise to an employee shall generally not be less than 30% of the employee’s average monthly wage in the 12 months prior to the termination or dissolution of the labor contract, and shall not be less than the minimum wage standard of the place where the labor contract is performed.

If the non-compete period exceeds 1 year, the monthly economic compensation shall generally not be less than 50% of the employee’s average monthly wage in the 12 months prior to the termination or dissolution of the labor contract (this is a new provision not previously in place).

Liquidated Damages

The amount of liquidated damages shall be reasonably determined based on the potential economic losses caused by the employee’s disclosure of trade secrets and the amount of non-compete economic compensation paid by the employer to the employee.

Generally, it shall not exceed 5 times the total amount of the agreed non-compete economic compensation. This will effectively restrict the practice of many enterprises setting excessively high liquidated damages.

Invalidity of Advance Payment of Economic Compensation During Employment

The Guidelines also stipulate that after the termination or dissolution of the labor contract, the employer shall promptly pay the non-compete economic compensation to the employee in monetary form on a monthly basis during the non-compete period.

It shall not refuse to pay on the grounds that the non-compete compensation has been included in the wages, bonuses, etc. paid to the employee in daily work.

These updated guidelines represent a substantial step in standardizing competition restriction practices across China. We recommend employers carefully review existing agreements and policies to ensure full compliance with the new requirements, particularly regarding compensation thresholds and payment timing.

Back in year 2015, China made cybersecurity an integrated part of its national security with the introduction of the National Security Law (NSL). This laid the groundwork for further regulations, and on 1 June 2017, the Cybersecurity Law (CSL) came into effect. The CSL sets broad rules for companies to follow in managing and protecting their online networks. In 2021, China continued to strengthen its legal framework with the implementation of the Data Security Law (DSL) and the Personal Information Protection Law (PIPL). Together, these laws created clearer rules for how data should be handled. With additional guidelines and supporting regulations, China has built a comprehensive system to oversee both data security and cybersecurity for businesses.

In March 2024, the Cyberspace Administration of China (CAC) introduced the Regulations on Promoting and Regulating Cross-border Data Flows (the 2024 Regulation). This new regulation highlights the growing focus on data protection and marks a key step in China’s control over how data can move across borders. With this update, it is a good time to explore several important topics under China’s legal framework for data protection, including data classification, personal information protection and supervision of cross-border data transfers, especially to understand how these rules and changes would impact foreign businesses operating in China.

Obligations of Critical Information Infrastructure Operators (CIIOs) under CSL

The CSL governs the construction, operation, maintenance and use of networks, as well as the oversight of cybersecurity within China. A key provision, Article 31, emphasizes the protection of critical information infrastructures (CIIs) in vital sectors and industries, like energy, transportation, finance, public services, e-government, and communications and information services, as well as other CIIs where any data that, once tampered with, damaged or leaked, may significantly endanger national security, economic operation, livelihood of people and public interest.

CIIOs in China are required to store all personal information and important data collected and generated within the country. If there is a need to transfer abroad, CIIOs must first complete a data security review through CAC’s data export reporting system (https://sjcj.cac.gov.cn), following guidelines set by the CAC and the State Council. Additionally, CIIOs must perform an annual security and risk assessment of their networks, either by themselves or entrusting cybersecurity service agencies. The results, together with any recommended improvements, should be submitted to the relevant authorities, with the Ministry of Public Security currently leading CIIs protection nationally, whereas sectoral regulators will be responsible for developing rules for designating CIIs in their areas of responsibility, and the CAC plays a coordinating role.

DSL and data classification

The DSL governs data processing activities within China and related security check. It has extraterritorial reach with respect to data processing carried out outside China if such activities threaten national security, public interests, or the legitimate rights and interests of Chinese citizens and organizations.

The DSL introduces a data classification system that is structured hierarchically, categorizing data based on its significance. Different levels of protection standards and requirements are executed accordingly. At the top is “core data,” which is defined to include data crucial to national security, lifeline of national economy, important aspects of people’s livelihoods, and major public interests. Any data that is important enough to affect political security will also fall under the category of “core data.”

The next level is “important data,” the detailed definition and scope of which will be outlined in “important data catalogues.” National authorities, alongside regional, departmental and industrial regulators shall have the discretion to develop their own catalogues for important data within their respective domains. So far we note that a nationwide guideline for identifying “important data” has been published already and shall take effect from October 2024 whilst some industries (to name a few, industrial, automotive, telecommunications) have released their own rules or guidance on “important data” identification. Overall, as what is generally provided for in the DSL, “important data” should cover such critical data that, once tampered with, damaged, leaked or illegally obtained or used, may directly endanger national security, economic operation, social stability, and public health and safety.

“Important data” handlers are required to fulfil the following major obligations in their data processing activities: (1) designation of a specific responsible person and establishment of an internal management organization to handle data security, (2) data encryption and back-up, (3) conduct of risk assessment in respect of processing activities and report to regulators, (4) performance of data security review on data export, (5) filing of “important data” catalogue that is stipulated by the data processor itself with regulators. By now this last requirement only applies to handlers in industrial and informatization sectors. With the entry into effect of the upcoming Regulations on Network Data Security Management from 2025, all network data handlers will then be required to identify and file the “important data” they process with regulators.

PIPL and cross-border data transfer

China’s PIPL shares many goals with the EU’s General Data Protection Regulation (GDPR), aiming to strengthen individuals’ rights to control how their personal information is collected and used by third parties. The PIPL also has extraterritorial reach, applying to activities conducted outside China that are aimed at providing products or services to individuals in China or analyzing their behaviors. In the spirit of such enhanced protection for individual data subjects, “personal information” is broadly defined as information that is capable of identifying natural persons to the exclusion only of irreversibly anonymized information. A sub-category of “sensitive personal information” is also introduced which a higher level of protection is accorded to. The sensitiveness relates to data subjects’ biometrics, religious beliefs, health, finances, geographical locations and personal information of young children no older than 14 years.

Before handlers can process any personal information, one of the following conditions should be fulfilled:

• obtain informed consent from data subject. Where consent is not required:
• if the intended data processing is necessary for the conclusion or performance of a contract to which the individual concerned is a party, or for the implementation of human resource management
• if it is necessary for the fulfilment of legal duties or obligations
• if it is necessary for responding to public health emergencies or for protecting people’s life, health or property in emergency situations;
• for news reporting on a matter of public concern and to the reasonable extent
• processing of personal information that has been disclosed and to the reasonable extent
• accurate and complete disclosure of all major details relating to the intended processing activities to the data subjects concerned. Major items include:
• contact details of processors
• how data will be processed and for how long it will be retained. Also, the purpose thereof and the scope of personal information to be involved
• methods and procedures for individuals to exercise their rights to protect their personal information

When it comes to “sensitive personal information,” additional requirements are imposed. They are: (1) specific purpose and necessity for the intended processing activities must be identified, (2) separate prior consent is a must, and (3) pre-processing impact assessment should be conducted. This last procedural requirement will also come into play in other circumstances where there is an international data transfer, delegation of data processing activities or provision of the data concerned to other data handlers, or where data processing is required for automated decision making process.

In addition to these requirements that need to be fulfilled before data handlers can proceed with any processing activities, the PIPL imposes several rules on code of conduct when processing is performed.

For example, processing should be limited only to the minimum extent that is required for the purpose intended. Once the purpose is satisfied, data processed should be deleted from record. Several data protection mechanisms should also be put in place. Amongst others, personal data handlers are required to formulate internal management and operational protocols in respect of data processing, as well as contingency plans when security emergencies occur. Regular self-audits, training organization and technical measures implementation are also needed for personal information protection. The PIPL further requires data localization if the volume of data to be processed achieves certain threshold. This volume-based assessment also matters in determination of the question on whether an information protection officer should be appointed. Though for both cases, where the specific thresholds lie is yet to be confirmed by regulators.

International data transfer is another area of practice that may trigger biggest compliance risk for MNCs operating businesses in China, since more often than not and for many foreign investments we observe, the actual administration and management lies overseas.

Extra requirements and codes of conduct need to be followed by processors transferring personal data abroad:

• approval from competent authorities is required for data transfer to foreign regulators and governmental authorities
• pre-export impact assessment should be conducted and the results be recorded for three years
• complete and accurate disclosure of information on overseas recipient(s), the purpose and manner of processing by the latter(s), scope of personal data involved as well as the methods and procedures for individuals to exercise their rights to protect their personal information
• separate prior consent from data subjects is to be obtained
• completion of one of the following administrative procedural requirements: i. security review, ii. personal information protection certification, or iii. execution of cross-border data transfer contract

Having said the above, we saw a legal trend with the introduction of the 2024 Regulation to relax the administrative procedural burden that was previously exerted on personal data exporter. Now an extensive list of exemptions has been implemented following the entry into effect thereof; to name a few:

• to carry out cross-border human resources management in the company
• to fulfill a contract to which the data subject is a party; this will cover a wide range of cross-border activities (e.g., shopping, courier, payment, bank account opening, visa application)
• non-sensitive personal information transfers by data handlers that are not critical information infrastructure operators and the aggregate volume of data to be exported is less than 100,000 data subjects within the current year
• to conduct international trade, cross-border transportation, academic cooperation, cross-border production and manufacture, as well as marketing, if no important data or personal information is involved in the export

Kindly note that the exemptions from the abovementioned procedural requirements do not however release data handlers from complying with other existing requirements mentioned above, which are obtainment of separate prior consent, completion of pre-export impact assessment, and full disclosure of information on recipient(s).

Practical implications

• With the introduction of a categorical and hierarchical protection system based on the importance of data, it is advisable for multinational companies to implement ongoing monitor in terms of the type, significance and quantity of the data collected, stored, processed, transferred and used during their business operations, and implement the appropriate protection mechanisms
• Due regard to be accorded to catalogues of “important data” that are or will be issued by regional and industrial authorities as basis for the assessment and identification in respect of the significance of data concerned
• Multinational companies seeking to transferring data abroad including without limitation to foreign regulators would be prudent to seek legal advice before undertaking such activities
• Marketing activities that use personal data to assess data subjects’ behavior, interest, financial and credit status, health conditions, and to ultimately form a decision through automated decision making systems are regulated under Chinese laws. Pre-processing impact assessment should be completed

The Shanghai authorities recently issued several policies governing the new practice of social security collection and the contribution of employment injury insurance. We summarize the key points of these policies and their implications below.

I. Transition of social security collection from the Social Security Bureau to the Tax Authority

Announcement on the Optimization and Adjustment of the Process of Declaration and Payment of Social Security Premiums, Announcement No. 2 of 2023, by the State Administration of Taxation Shanghai Municipal Tax Authority, jointly with other competent authorities in Shanghai Municipality (effective from 1 December 2023)

According to the announcement, from 1 December 2023, employers shall make social security declaration and payment directly with the tax authority. In the past, the declaration and payment were handled separately with the social security bureau and the tax authority. 

This is a further step in the transition of the collection authority from the social security administration to the tax authority, which has been under discussion nationwide for years.

In addition to Shanghai, authorities in some other municipalities and provinces in China also made similar announcements to implement the new practice in their justifications from December 2023.

The new practice divides the responsibilities as follows. 

The Social Security Bureau is in charge of:

• Social security registration for employers;
• Social security registration for employees;
• Social security contribution records;
• Verification of social security benefits (e.g. pension, work-related injury insurance).

The Tax Authority is in charge of: 

• Social security declarations by employers;
• Social security payments by employers.

However, in most areas, the transition of certain crucial responsibilities such as the determination of the social security contribution base and the conduct of social security inspection, is still pending. The exception is Guangdong Province (excluding Shenzhen and Dongguan), which has taken a regulatory step further by assigning the entire chain of social security responsibilities from social security information registration, declaration, determination of contribution base, collection, inspection, dispute settlement etc. to the relevant tax authorities. 

What are the implications of this new practice?

• Late payment interests
  Let’s take Shanghai as an example. In the past, supplementary social security declarations and payments were handled by the social security authority and were not subject to late payment interest. With the integration of social security declaration and payment into the tax system, supplementary social security payments will be subject to a late payment interest at a daily rate of 0.05%. 
• Social security inspection
  In the long term, the transition of social security collection function to the tax authority implies the possibility that the tax authority will be able to identify irregularities in the social security contribution base on the basis of the income information collected in the tax system and thus, if necessary, carry out a social security inspection. This may result in further restrictions on the flexibility of the social security arrangement for certain employers.   

II. Work-related injury insurance relationship is effective upon successful registration by the employer

Opinions of the Shanghai Municipal Bureau of Human Resources and Social Security on Several Issues Concerning the Implementation Measures for Work-Related Injury Insurance of the Shanghai Municipality, Announcement No. 28 of 2023, by Shanghai Municipal Human Resources and Social Security Bureau (effective from 1 December 2023)

The Opinions aim to clarify the uncertainties and resolve the problems in the implementation practice of the work-injury insurance in Shanghai. 

According to the Opinions, the work-related injury insurance relationship of the employees shall take effect from the time the employer registers them for work-related injury insurance. 

This implies a potential liability for work-related injuries in the period upon employment start before the registration with the social security authority, despite the fact that the full social security declaration for the first employment month can be made in the month following the start of employment. This can be seen as an indication that employers shall make the registration for onboarding employees as early as possible.

III. Work-injury insurance for Overage Employees and Interns in Shanghai

Opinions on the Trial Implementation of Participation in Work-Related Injury Insurance by Employees Beyond the Statutory Retirement Age and Interns in Shanghai, Announcement No. 30 of 2023, by the Shanghai Municipal Human Resources and Social Security Bureau, jointly with other competent authorities in Shanghai Municipality (effective from 1 December 2023)

According to the Opinions, from 1 December 2023, employers within the jurisdiction of Shanghai Municipality may register their overage employees (not over 65 years old) and interns (enrolled students in Shanghai) for the work-related injury insurance under a specific type of insurance.

Adapting to the needs in the practice of the new era, this will further strengthen the work-related injury insurance system, protect the legitimate rights of employees and diversify the work-related injury risks at the employers.

In the context of these new regulations, we recommend that employers conduct regular compliance checks to review their social security declaration practice and make corrections where appropriate and necessary.

On 24 November 2023, the spokesperson of the Chinese Ministry of Foreign Affairs announced that, China has decided to expand the scope of its unilateral visa-free policy and implement unilateral visa-free entry for six more countries on a trial basis. According to the official notice, from 1 December 2023 to 30 November 2024, travelers with ordinary passports of France, Germany, Italy, the Netherlands, Spain and Malaysia may enter China on a visa-free basis for the purposes of business, tourism, visiting relatives and friends, transit through China. The visa-free stay must not exceed 15 days.

Travelers that do not meet the conditions of visa-free entry shall still apply for a Chinese visa before entering the country.

This is a major step in a series of loosened entry policies by the Chinese government in the post-pandemic period in order to further promote the exchange of people and to maintain a high level of opening up to the world.

Following the announcement by the Ministry of Foreign Affairs, Chinese embassies in France, Germany, the Netherlands and Malaysia also released information on their official websites to notify the policy.