Jenny Zhang, Attorney at Law, Lawyer, Law firm in Dalian, China

All these days, I’ve been visited a lot by foreign educators seeking to open schools in Dalian, and most of times, none of them have any idea as to what would be involved and as to what the costs would be.

I made a research and here is my report of this question.

Rules & Regulations

The rules and regulations that govern the setting-up schools include Education Law of PRC, Vocational Education Law of PRC, Higher Education Law of PRC, and Private Education Promotion Law of the PRC. All these laws provide that foreign organizations and persons can set up schools with Chinese organizations, but there are no more specific rules about how to cooperate between the parties. All the details are reserved to be explained by the State Council.

After China’s entry into the WTO, Regulations of the People’s Republic of China on Chinese-Foreign Cooperation in Running Schools was enacted, also with its Concrete Measures. However, this Regulation mainly governs the cooperation between foreign educational institutions and Chinese educational institutions (see Article 2). That is to say, for individual foreigners, they even have no qualification to be governed by this Regulation.

Therefore, the answer is individual foreigner can not set up schools in China to provide education service to Chinese citizens. Foreign investors can only establish schools for children of foreign personnel under Interim Regulations for the Administrion of Establishement of Schools for Children of Foreign Personnel by the Ministry of Educaion of  PRC.

Alternative Solution:

After reading the above, maybe you would feel depressed a lot. Don’t be disappointed, if you determine to create a business and make some kind of achievement in China as a teacher or a headmaster, there is a compromise way for you—that is to be affiliated to a school or training center with an education license. We call it “Gua Kao”(挂靠) in Chinese.

Gua Kao is to use the other’s license and run one’s own business. All the operation has to be under the other’s name, including issuing invoices. Legally, Gua Kao is a kind of cooperation between the foreign educator and the Chinese school. A complete agreement seems to be necessary and essential for both parties. Actually, the approval of an education license is very hard even for most of Chinese. The requirement of scale and capital for schools is much stricter than the requirement for common businesses. Quite a lot of business starters choose to be adjunct of other schools. Like licensing, the starters pay fees to the schools with license.

During the process of finding your partner, the school with license, do make a due diligence research and make sure they really possess the license.

Good News:

Maybe you still feel worried for using the other’s license. Even the Agreement is “perfect drafted”, there are still some concerns, e.g. if you intends to do a long term business, or if you want to promote your own brand.

Up to now, there is still no good resolution. In Catalogue for the Guidance of Foreign Investment Industries (2007), higher education is encouraged but skill traing is not mentioned. 2007 version has been implemented for almost 4 years. Recently, National Development and Reform Commission and Ministry of Commerce has recitified the Gatalogue and the draft is issued for comments. In the Draft for Comment, skill training is listed in the Catagory of Encouraged Foreign Investment Industries. We can believe that in the near future, when this new version is issued, the relevant governmental organs would issue detailed implementing procedures. At that time, for those who dreams to open language schools in China, all come to true.

BEIJING, June 4 — Five types of people with foreign nationalities will be allowed to stay longer in China from the beginning of June. The policy released by the Ministry of Public Security is considered a humanitarian measure.

Gong Lei’s twelve year old son is a Canadian. Before June, Gong had to apply for a residence permit for his son every year in order to let the boy stay with his parents in China.

Now the new policy allows his son to stay two years with multiple entries.

Football coach Gong Lei said, “This is very convenient for us. My son can stay longer with us, and the procedure to enter and leave China is even simpler.”

As more Chinese migrate to other countries and more foreigners choose to live in China, some people with foreign nationalities have had to separate from their families. Their residence permits in China were usually valid for six months or one year.

Gao Peng, Beijng Public Security Bureau Visa Dept. chief. said, “After the limitation is extended, people with foreign nationalities can apply for residence permits of six months, one year, or two years with multi entry. It provides more choice for the applicants.”

The five types of people include: spouses, parents and children under 18 with foreign nationalities of Chinese citizens and foreigners with permanent residence.

Foreigners and their foreign spouses aged 60 or above, without immediate family outside China, to live with their immediate family in China.

Chinese with foreign nationalities aged 60 or above, their spouses and children with foreign nationalities, who have purchased real estate in China.

Chinese with foreign nationalities aged 18 or above, staying in China to look after their parents aged 60 or above without other descendents in China.

Children under 18 with foreign nationalities of Chinese parents with foreign nationalities or with foreign permanent residence, who are fostered in China.

Spouse, parents and children under 18 with foreign nationalities of Chinese citizens and foreigners with permanent residence.

Foreigners and their foreign spouses aged 60 or above, without immediate family outside China, to live with their immediate family in China.

Chinese with foreign nationalities aged 60 or above, their spouses and children with foreign nationalities, who have purchased real estate in China.

Chinese with foreign nationalities aged 18 or above, staying in China to look after parents aged 60 or above without other descendents in China

Children under 18 with foreign nationalities of Chinese parents with foreign nationalities or with foreign permanent residence, who are fostered in China.

Source: Xinhua Net

Recently,  a lot of my foreigner friends just consult how to get a “green card” in China. So here I just extract some details about Measures for Administration of Examination and Approval of Foreigners’ Permanent Residence in China.

 In accordance with Article 6 of the above Measures, those who want to apply Chinese green card shall abide by Chinese laws, be in good health and without criminal record, and also shall meet at leat one of the following requirements:

1. having made direct investment in China with stable operation and a good tax paying record for three successive years;

2. having been holding the post of deputy general manager, deputy factory director or above or of associate professor, associate research fellow and other associate senior titles of professional post or above or enjoying an equal treatment, for at least four successive years, with a minimum period of residence in China for three cumulative years within four years and with a good tax paying record;

3. having made a great deal and outstanding contribution to and being specially needed by China;

4.Being the spouse or unmarried child under 18 years old of a person with reference to the item (1),(2)or (3) of this paragraph.

(5)Being the spouse of a Chinese citizen or of a foreigner with permanent residence status in China, in a marriage relationship for at least five years, with at least five successive years of  residence in China and at least nine months of stay in China each year, and having stable source of subsistence and a dwelling place.

(continued)

 (An article by an Australian about how to set up business in China—from Alibaba)

More and more Australian companies are setting up their own presence in China in order to source products/services directly from China or enter the Chinese market. However, given the alien nature of local regulations and business environment in China, it is critical to be proactive and fully prepared before you take the strategic move to set up your own presence in China.

Here are some “must-knows” before you set up the business in China:

1.You have more than one option for a local presence in China. Your China presence may be in the form of a wholly owned foreign enterprise, a contractual joint venture, an equity joint venture, a representative office or a local representation by a third party (local secretary/representation service companies).

2.Carefully define your business scope for the China presence. China National Development and Reform Commission may prohibit, restrict, permit or encourage your business set-up based on your business categorization and scope. Hence it is critical to carefully define your business scope so as to be permitted or encouraged to set up the presence.

3.Select the right location for your China operation. China abandoned its preferential tax rate for investments of foreign companies from January 1st 2008. However, some areas still offer local preferential policies for foreign investors in terms of land leasing/procurement, staff recruitment and management, local tax etc.

4.Confirm the minimum registered capital for your China operation. The Chinese government requires certain minimum registered capital for various types of businesses. However, local Industry and Commerce Administrations may decide on your minimum registered capital based on their judgement of your business scope and operation scale. You need to confirm with local government agencies the minimum registered capital through local contacts before taking any other actions in case they require an amount far above your financial resources available for the China operation.

5.Integrate commercial clauses in the Articles of Association to maximise profit repatriation into Australia. You may have commercial arrangements between your Head Office in Australia and the subsidiary in China in order to guarantee maximum profit repatriation. However, some arrangements must be included as part of the Articles of Association to be valid. The Articles of Association is to be submitted to local government agencies for approval and filing during business license registration. Hence, you must incorporate necessary clauses in the Articles of Association in the first instance.

6.Fully understand employers’ responsibilities and liabilities in China. China issued the new Law of Labour in 2007 which specified issues on employment contract, redundancy, etc. Without preliminary knowledge of this law, you may end up spending a huge amount of time and money terminating the contract with under performing employees, as the structure of the contract was wrong. You also need to be aware of the mandatory employee welfare and benefits so as to include such cost in the budget.

7.Conduct thorough due diligence and credit check on your joint venture partners. Your partners may not be what they claim to be. China has the business culture to show their wealth and status by driving luxurious cars, wearing  prestigious watches and owning an impressive factory. Hence your Chinese business partners may look financially viable and well connected but, as a matter of fact, live on bank loans and personal debts.

8.Develop a comprehensive local employee management system. It is a hard job to recruit the right staff in a foreign country. It is even harder to effectively manage the local staff in a foreign country. A sound and robust employee management system will encourage the engagement and commitment of local staff and avoid potential risks. You may include reporting and communication policies, staff training, performance assessment, remuneration, career management and employee management manual in the system.

Business set-up in China is a big project by itself, which requires financial and time commitments, business management knowledge and China expertise. Identifying a competent agent to manage the complex process will be a cost and time effective way to avoid potential pitfalls.

The Notarization Law of the PRC provides a basic legal frameword for notarization in China. According to the Law, all notarization must be conducted by licensed notaries public, which are definced under the Law as non-profit, independent institutes established in accordance with law and subject to the approval of provincial justice administrations. A notary public is permitted to notarize contracts, company articles of association, and documents relating to inheritance, trust, declaration, gift, property division, bidding and tendering, auction, marriage and family relationship, conservation of evidence, etc.

In most countries public notaries are also practising solicitors. In China, the notary has not expanded into other areas of legal work and is a separate profession. Therefore, if you need a official notary service, please go to local notary office, not the law firm.

In Dalian, you can choose Dalian Notary Office, which located in 263, Huanghe Road, Xigang District, or other notary office in each district. The charges and fees sometimes differ.