In April 2017, PRC authorities launched New Work Permit Rules (as defined below). The New Work Permit Rules are consistent with the attitude of PRC authorities to "welcome high-end, control mid-level and restrict low-end expatriates" (鼓励高端，控制一般，限制低端). On the one hand, the New Work Permit Rules streamline the expatriate work permit application process and remove the distinction between "foreign experts" and "foreigners". On the other hand, however, they indicate an intention to impose quota controls on non-expert expatriates and to tighten supervision on short-term illegal work in China.
While it is not clear whether, on balance, the New Work Permit Rules are more favourable or restrictive than previously, the changes do signal that the PRC Government is taking an increasingly strict position on expatriates coming to work in the country.
1. Overview of the New Work Permit Rules
The new rules include the Notice to Implement the Expatriate Work Permit Rules on National Basis (关于全面实施外国人来华工作许可制度的通知), Guidelines for Expatriates to Apply for PRC Work Permit (外国人来华工作许可服务指南), and Classification of Expatriates to Work in China (外国人来华工作分类标准) (collectively, New Work Permit Rules). Since October 2016, PRC authorities have run pilot programs in ten municipalities and provinces to trial amended expatriate work permit rules. The New Work Permit Rules incorporate changes based on practical experiences from the trials.
2. Key features of the New Work Permit Rules
One and the same "expatriate work permit"
A major change is that expatriate work permits no longer distinguish between "foreign experts" and "foreigners".
"Foreign experts" include governmental officials, talent with special expertise, senior managers or senior technical personnel, and talent working in specific sectors. Previously, a PRC employer needed to apply for a "foreign expert certificate" (外国专家证) for any foreign expert. However for "foreigners" (ie those with less work experience or expertise than foreign experts), the PRC employer needed to apply for a "foreigner work permit" (外国人就业证). In practice, the distinction between a foreign expert and a foreigner was not clear, especially in respect of senior managers. In practice, therefore, the work permit requirements varied depending on locality.
The New Work Permit Rules consolidate the foreign expert certificate and the foreigner work permit into one and the same "expatriate work permit" (外国人工作许可证). This should relieve some of the previous confusion. For foreign expert certificates and foreigner work permits issued prior to April 2017, these can remain in force until the expiration of their current term.
Streamlined application process
The New Work Permit Rules set out a detailed application procedure that an expatriate must complete to lawfully work in China for more than 90 days:
Step 1: PRC employer conducts online eligibility registration
PRC domestic companies with no foreign investment must initially obtain approval from their relevant industrial authority to hire expatriate workers. This is not required for foreign invested enterprises (FIEs).
Step 2: PRC employer applies for PRC Expatriate Work Permit Notice (中华人民共和国外国人工作许可通知) for the expatriate
The PRC employer must submit the expatriate worker's qualifications, diplomas, no-criminal record certificate, physical health certificate and employment/secondment contract.
Difficulties may arise where an expatriate worker is seconded from an offshore affiliate to work for a PRC entity and there is no employment contract in place with the PRC entity. While on strict interpretation, the New Work Permit Rules allow the "PRC employer" to submit a secondment letter instead of an employment contract, based on our experience and communications with relevant authorities, it seems likely that the "PRC employer" will be required to submit an employment contract between it and the expatriate worker anyway. This will give rise to a number of legal issues, including whether PRC labour law will apply to the relationship between the PRC entity and the expatriate authority. If it does, this raises further issues as to whether it can be displaced by contract and whether the PRC entity will be required to make social insurance contributions for the expatriate worker.
Step 3: Expatriate applies for "Z" visa either outside or within PRC
Expatriates are generally required to apply for a "Z" visa outside PRC. However, an expatriate worker will be permitted to convert a current valid visa into a "Z" visa within China where the expatriate:
is a Class A Talent (discussed below);
is the spouse or child of a PRC citizen (or a PRC permanent resident or expatriate holding a valid work permit);
currently holds a "Z" visa for another PRC employer; or
falls into another permissible category.
Step 4: PRC employer applies for expatriate work permit
Within 15 days after the expatriate worker's entry into China with a valid "Z" visa, the PRC employer must apply for a work permit for the expatriate worker.
Step 5: Expatriate applies for resident permit
Within 30 days of the expatriate worker's entry into China, and after obtaining a valid expatriate work permit, the expatriate worker shall apply for a resident permit with the competent public security bureau.
Expatriates categorised into Class A, Class B and Class C Talent
The New Work Permit Rules categorise expatriates into three classes:
Class A Talent will generally include scientists, military experts, Global 500 global headquarter senior managers, personnel with globally recognised accomplishments, and other high-performing talent.
Class B Talent will generally include senior managers, technical personnel and personnel with special expertise.
Class C Talent refers to expatriates who provide temporary, seasonal, non-technical or service jobs that do not require substantial expertise.
The New Work Permits Rules introduce an Expatriate Evaluation Form to assess the appropriate class for an applicant against a maximum potential score of 120 points. Scoring criteria include age, educational background, work experience, salary, proposed length of stay in China, Chinese language skills and location of the PRC employer. These factors carry different weightings and the total score will determine the applicant's class:
|Class A||85 or above|
|Class B||Over 60 but less than 85|
|Class C||Below 60|
The Expatriate Evaluation Form is, however, only one method of determining talent classification. An expatriate satisfying other thresholds in the Classification of Expatriates to Work in China will also be categorised accordingly.
Class A Talent is not subject to quota or age restrictions. Class B Talent is subject to age restrictions (ie the expatriate must not be over 60 years of age) but currently there are no quota restrictions (although PRC authorities reserve the right to impose quota controls depending on market demand). Class C Talent is subject to quota restrictions however, we are currently not aware of any specific quotas.
In addition, Class A Talent will benefit from favourable treatment in a number of respects, such as, the ability to apply to convert a current valid visa into a "Z" visa within China, fast-track visa review and simplified document requirements for work permit applications.
Launch of online platform
An online platform has also been launched (http://fwp.safea.gov.cn/) on which PRC employers may submit expatriate work permit applications and track their status. The online platform also assigns a unique code to each expatriate worker which they retain for their lifetime. The code is intended to assist in tracking an expatriate's work history and personal credit in China.
3. Predictions for expatriate management in China
Quota control on non-expert positions
Considering the PRC authorities' statement that they will "welcome high-end, control mid-level, and restrict low-end" expatriates, it seems clear that it will be increasingly difficult for expatriates to obtain work permits for temporary, seasonal, non-technical and service jobs. FIEs are advised to evaluate the qualifications of their current and future foreign employees and adjust resourcing accordingly.
Tightened supervision of short-term work in China
Consistent with the Notice on Procedures for an Expatriate to Work in China for Short Term (Trial) (外国人入境完成短期工作任务的相关办理程序(试行)), which requires that expatriates intending to work in China for no more than 90 days shall obtain a "Z" visa, the New Work Permit Rules set out detailed rules regarding short-term "Z" visa applications. This suggests that the PRC authorities will increase their supervision of short-term visa holders and take increased enforcement action against short-term illegal work in China.
Development of expatriate personal credit system
Given that the online platform assigns each expatriate a unique code, it appears likely that greater data on an expatriate's activities in China will be gradually collected and this may be used to form an expatriate personal credit system.
The New Work Permit Rules raise a number of issues for employers of expatriate staff in China. We encourage employers to carefully review the new regime to assess the impact on their existing expatriates and their future resourcing needs. Herbert Smith Freehills can assist you with navigating the new requirements and advising on specific circumstances.