Key Terms and Phrases for Doing Business in China
A - Share
A-Share (in Mandarin Chinese, “A股”) refers to the stock shares of Chinese companies, that are denominated in Renminbi(RMB) and traded on the stock exchanges in mainland China.
AOA is the abbreviation of “Articles of Association,” which refers to a document functioning as the constitution of a company.
Arbitration refers to an approach to resolving disputes outside the judiciary courts, and in such a process, there are usually 1 to 3 arbitrators who hear the case and make a binding decision on the parties involved.
A business License (in Mandarin “营业执照”) is a permission certificate to operate a business in China. It is issued by the State Administration for Market Regulation of China.
Beijing Stock Exchange
A stock exchange was established in September 2021 in Beijing, China. It is one of the three main stock exchanges operating in mainland China.
China Banking and Insurance Regulatory Commission (CBIRC)
CBIRC is the abbreviation for China Banking and Insurance Regulatory Commission. The Mandarin Chinese is 中国银行保险监督管理委员会, or ‘中国银保监会’. It was established in 2018 to supervise banking and insurance institutions.
China International Economic and Trade Arbitration Commission (CIETAC)
The CIETAC is China International Economic and Trade Arbitration Commission, in Mandarin, “中国国际经济贸易仲裁委员会”.
China National Intellectual Property Administration (CNIPA)
CNIPA is the China National Intellectual Property Administration.
China Securities Regulatory Commission (CSRC)
China Securities Regulatory Commission (CSRC) is a Chinese government ministry in charge of regulating the activities of securities and futures market in mainland China.
Chinese Accounting Standards (CAS)
Chinese Accounting Standards (CAS) for Business Enterprises, also known as the Chinese Generally Accepted Accounting Principles (Chinese GAAP), are the accounting rules used in mainland China.
In general, they are consistent with the International Financial Reporting Standards (IFRS) with some differences.
Committed Capital is the capital that an investor (a shareholder) promises to contribute to a Chinese company in the form of cash, intellectual property or other forms of contribution.
Declared Dishonest Debtor
Declared Dishonest Debtor (in Mandarin “失信被执行人”) refers to a list of people who have defaulted in repaying their debt and are deemed by a legal document of a court in China to refuse to perform payment obligations intentionally. The list of “Declared Dishonest Debtors” or “Untrustworthy persons” is maintained and updated by the Supreme People’s Court in China.
Read more about this topic in our blog “How to Verify if a Chinese Company is Legitimate?” https://www.trustiics.com/verify-chinese-companies/
A letter, usually drafted by a lawyer on his/her client’s behalf, demanding that the recipient of the letter take certain remedial action or cease specific wrongdoing.
Demand Name Squatting
Domain name squatting, also known as cybersquatting, is the action of registering a domain name, usually in bad faith, with the intention of selling the domain name back to that business.
The approach and/or process of resolving disputes between contracting parties.
Due Diligence (also known as D.D.) is an investigation, audit, or review of a company to confirm certain aspects of the company, such as legal, financial, business, or environmental compliances. It is usually needed before an investment, a commercial transaction, or litigation.
Foreign Direct Investment (FDI)
Foreign direct investment (FDI) refers to a cross-border investment in which an investor in one country establishes a lasting interest in and significant influence over an enterprise in another country.
Foreign-invested enterprises (FIEs)
Foreign-invested enterprises are business entities registered in mainland China wholly or partially owned by foreign shareholders.
General Administration of Customs of China (GACC)
General Administration of Customs of China (GACC, in Mandarin “中华人民共和国海关总署”) is the Chinese government authority in charge of imports and exports of goods, customs supervision, health quarantine, etc.
It is the choice of law clause in a contract that the parties decide the laws of what jurisdiction govern the rights and obligations of the parties.
H - Share
H-Shares are shares of companies incorporated in mainland China that are listed and traded on the Hong Kong Stock Exchange.
Hong Kong International Arbitration Centre (HKIAC)
Intellectual Property Rights (IPRs)
Intellectual property rights (IPRs) or intellectual property (IP) refers to the legal rights of the creators or inventors for the protection of his/her original work, these can be patents, trademarks, copyrights, and trade secrets.
IP Infringement Cease and Desist Letter
A letter that asks the recipient to stop the activity allegedly infringing the sender’s IP rights.
Initial Public Offering (IPO) is the process of offering shares of a private corporation to the public in a new stock issuance.
Joint Venture (JV)
A joint venture (JV) refers to a business entity invested by two or more shareholders, and in the context of mainland China, it usually refers to a company with at least one foreign shareholder and at least one Chinese shareholder.
Legal Due Diligence
Legal due diligence refers to investigating and reviewing a company by collecting, verifying, and assessing its legal documents and information.
A Letter Of Intent(LOI) is a document declaring the preliminary intention of one party to do business with another.
Mergers and Acquisitions (M&As)
Mergers and Acquisitions (M&As) refer to the transactions in which the ownership of companies is transferred to or consolidated with other entities.
Ministry of Industry and Information Technology of China
The Ministry of Commerce of the People’s Republic of China (MOFCOM)
A Memorandum Of Understanding (MOU) is a non-binding agreement stating parties’ intentions to take action, conduct a business transaction, or form a new partnership.
The National Development and Reform Commission of the People’s Republic of China (NDRC). It is the Chinese government authority on the central level in charge of the macro-planning of China’s economic activities.
The Negative List (in Mandarin “负面清单”) refers to the negative list for Foreign Direct Investment (FDI) in China, which is a special administrative measure for access to foreign investments. It is issued and updated by NDRC and MOFCOM, providing a detailed list of industries in mainland China that are restrictive or prohibitive to foreign ownership.
The National Health Commission of China is a ministerial-level Chinese government authority, in charge of health and medicare policies.
National Immigration Administration, also known as the Exit and Entry Administration of the People’s Republic of China. It is a national bureau under the Ministry of Public Security.
In addition to conducting due diligence on your business partner, companies should consider signing a “Chinese”-style NDAs (i.e. tailored to China and drafted by a Chinese-speaking and licensed lawyer) to truly protect themselves from trade secret theft. The most comprehensive of these types of agreements are referred to as an NNN Agreement (Non-Use, Non-Disclosure and Non-Circumvention). This gives more overall protection than an NDA with special consideration to the circumstances of the Chinese market.
Read more in this blog here.
In addition to conducting due diligence on your business partner, companies should consider signing a “Chinese”-style NDAs (i.e. tailored to China and drafted by a Chinese-speaking and licensed lawyer) to truly protect themselves from trade secret theft. The most comprehensive of these types of agreements is referred to as an NNN Agreement (Non-Use, Non-Disclosure and Non-Circumvention). This gives more overall protection than an NDA, with special consideration for the circumstances of the Chinese market.
Non-disclosure agreement (NDA)
A non-disclosure agreement, also known as a confidentiality agreement, is a legal contract or part of a contract protecting information shared between the parties from disclosure to outsiders
Paid-in Capital refers to the amount of cash or other assets contributed by investors to a company in exchange for the company’s equity ownership.
The People’s Bank of China(PBOC) is China’s central bank and is in charge of China’s monetary policy.
Original equipment manufacturer (OEM) refers to a company that manufactures a product following its client’s design and request, which ultimately will be branded by its client.
Red Chip (in Mandarin “红筹股”) refers to the stocks of mainland China-based companies incorporated outside mainland China and listed on the Hong Kong Stock Exchange.
Usually, the majority shares of the companies are controlled directly or indirectly by a government body in mainland China.
The capital all the shareholders (promise to) contribute to the company as they apply with government authorities for incorporation of the company.
The Renminbi is the official currency of mainland China. Yuan is the unit of currency. Its symbol is ￥.
State Administration for Market Regulation of China (SAMR) is a ministerial-level Chinese government authority in charge of fair playing and fair competition in business activities.
The State-owned Assets Supervision and Administration Commission of the State Council of China (SASAC) is a ministerial-level Chinese government authority in charge of State-owned assets and State-owned enterprises.
Compensation an employer pays to an employee at the dismissal from employment.
A ‘Severance Agreement’ is a contract between an employer and an employee that sets forth terms and conditions for the termination of employment.
Shanghai Stock Exchange (SSE)
Shanghai Stock Exchange, or SSE, is a stock exchange based in Shanghai, China, and is one of the three major stock exchanges operating in mainland China.
Shenzhen Stock Exchange (SZSE)
Shenzhen Stock Exchange, or SZSE is a stock exchange based in Shenzhen, China, and is one of the three major stock exchanges operating in mainland China.
Share Purchase Agreement (SPA)
Share Purchase Agreement (SPA) or stock purchase agreement: a legally binding contract establishing terms and conditions related to the purchase and sale of a company’s shares.
Shanghai Stock Exchange STAR Market
The Shanghai Stock Exchange STAR Market, officially known as the Shanghai Stock Exchange Science and Technology Innovation Board, is an equity market operated by the Shanghai Stock Exchange (SSE) for shares of technology and innovative companies to list and trade. It was established in 2019.
A non-binding agreement outlining the basic terms and conditions under which an investment will be made.
Total investment refers to the entire investment amount for establishing a foreign investment enterprise in China.
The concept of total investment was repealed in the Foreign Investment Law of the PRC when the law came into force on January 1, 2020.
Letters, words, graphics, numbers, three-dimensional marks, sounds or designs or a combination of the aforementioned distinguish one’s goods or services from others.
Trademark squatting refers to registering a mark, brand name or logo that belongs to someone else, usually in bad faith, intending to sell the registered trademark back to its original brand owner. It often happens in international markets because most business owners do not register their trademarks in a foreign market before they have seen a strong business performance in that market.
VIE or VIE structure
Variable Interest Entity (VIE) is a legal business structure in which the controlling interest is arranged via a contractual relationship rather than direct equity ownership.
VIE is a common structure for Chinese companies to be listed on an international stock exchange, such as Nasdaq.
Wholly Foreign-Owned Enterprise (WFOE) refers to a company incorporated in mainland China and 100% owned by a foreign investor.