China: Labour Regulation
This page was last updated on 15 July 2019.
China has a huge population, abundant labour resources and a relatively low level of wages. The Chinese work force is of a relatively high quality. Generally speaking, overseas-funded enterprises set up in China are satisfied with the quality of Chinese workers and technicians.
Representative offices can employ foreign staff, who will require employment visas and residence permits. They will be subject to tax on China-sourced income (unless they are in the country for less than 90 days a year, or 183 days if a tax treaty applies), and after five years will be taxed on their worldwide income.
Local staff can also be employed, but not directly. They have to be provided by a 'labour service organisation' licensed by the Ministry of Labour and Social Security. However, the RO is responsible for paying taxes due in respect of Chinese employees.
Wholly foreign owned enterprises (WFOEs) and foreign invested commercial enterprises (FICEs) on the other hand can employ Chinese staff directly if they choose to. Individual labour contracts are required and must be submitted for approval to the local labour bureau.
Managing a Chinese workforce needs to take into account any conflicts between the individualistic Western ethos and the more collective Chinese culture. Local staff will typically need to be made aware of free market principles and the rule of law. Conversely, Western managers will need to accept collective principles and dilute their individualistic attitudes if staff morale is not to be damaged.