When Expats Get Blacklisted in China

Posted by Reading Time: 4 minutes

The reasons why and the implications of falling foul of Chinese regulations

By Eunice Ku

Apr. 6 – The State Administration of Industry and Commerce (SAIC) is the national governmental organization directly under the State Council that coordinates local Administrations of Industry and Commerce (AICs).

Among the many SAIC and AIC functions and responsibilities, those highly relevant to the foreign investor include:

  • Overseeing the registration and supervision of enterprises, including punishing businesses without licenses;
  • Managing IPR registration and protection, including investigating and punishing IPR infringement activities and handling IPR disputes;
  • Enforcing Anti-Trust Law, including investigating and punishing unfair competition, commercial bribery, smuggling and other illegal economic activities;
  • Categorizing enterprises by creditability and publicizing basic registration information;
  • Supervising trade in food commodities; and
  • Supervising advertising activities.

The “AIC blacklist” is part of an enterprise “credibility supervision information system” shared between AIC bureaus, but not made available to the public.

Specifically, the list categorizes enterprises into four categories (A, B, C, D) based on their creditability. If your name is listed in a key position of a company in categories B to D of this list, this may inhibit or prevent you from participating in a key position in new FIEs in the future.

Furthermore, while the directly relevant AIC policy does not state consequences for individuals beyond the legal representative, it is worth noting that during company establishment, the names of all people in key positions of an enterprise are registered with the AIC. Many people do not even know that their name is on the blacklist before applying to register a new FIE.

This article was taken from the April issue of China Briefing Magazine, titled “The China Manager’s Handbook.” Stories of expats having their name added to the Administration of Industry and Commerce “blacklist,” or being “trapped in China” for company legal proceedings, encourage a careful consideration of key positions in an FIE. This issue of China Briefing Magazine aims to shed a little light on this topic. “The China Manager’s Handbook” is temporarily available as a complimentary PDF download this month on the Asia Briefing Bookstore.

Dezan Shira & Associates is a boutique professional services firm providing foreign direct investment business advisory, tax, accounting, payroll and due diligence services for multinational clients in China, Hong Kong, India, Singapore and Vietnam. For further information on the risks and responsibilities you have as a foreign manager in China, please email china@dezshira.com, visit our web site at www.dezshira.com, or download our brochure here.

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