After the implementation of a pilot programme in ten locations (including Beijing and Shanghai) for six months, the State Administration of Foreign Expert Affairs (SAFEA) has recently issued the Circular on the Implementation of Work Permit Services Guidelines for Foreigners in China (“Guidelines”), which takes effect from 1 April 2017 across the country.

Compared with the pilot programme, the Guidelines maintain the basic principles of optimizing the administration of work authorization (e.g., combining two different systems of foreign experts and business employees into one, classifying expats into three categories for better management, introducing online application and single code identification system), and further specify and detail the provisions of criteria and procedural requirements for work permits application (“new policies”). These new policies may have a significant impact on China’s expats employment market and HR strategies of structuring a cross-border secondment arrangement.

This article highlights the key points of those impacts which need to be noted by HR practitioners in MNCs.

I. Classified administration of expats at three levels

Like many other jurisdictions (e.g., Hong Kong and Singapore), China starts to optimize its administration of expats by classifying them into three different levels according to labour market’s needs.

Specifically, applicants are differed on a score based assessment by their education, working experience, salary awarded from the sponsoring entity, mandarin proficiency, working locations in China, age and so on. Details of such classification are summarized in the table below.

Categories

Limitation

Criteria (and examples)

Duration of work permit

High-end foreign talents (Category A)

Encouraged - no limit of amount

  • Advanced quality international talents with special expertise (scored 85 or above).
  • Examples: scientists, technology experts, international entrepreneurs (e.g., top managements in Fortune 500 MNCs).

2-5 years

General-end foreign professionals

(Category B)

Permitted - floatable to market demand

  • Quality talents with at least a bachelor’s degree and 2 years’ working experience (scored 60 or above)
  • Examples: mid-level employees in MNCs, representatives in representative offices of foreign companies, foreign language teachers.

1-2 years

Low-end foreign employees

(Category C)

Restricted - quota control

  • Other employees who engage in temporary (within 90 days), seasonal, non-technology or service-related work.
  • Examples: Foreign students graduated from Chinese or overseas universities, interns under inter-governmental agreements, foreigners in ocean fishing industry.

Up to 1 year

Applicants at three categories are generally subject to the same procedural requirements, but high-end talents at Category A can be entitled to some preferential conveniences, which include:

  • Certain supporting documents (e.g., highest academic credentials and no-criminal record certificates) are not required to provide and a pre-commitment approach would apply instead.
  • Hard copies of supporting documents may not be required to provide before candidates enter China.
  • The approval time limit for work permit application (including extension, alteration and cancellation) is shorter (i.e., 5 working days).

II. Engagement certificates (including cross-border secondment letters) are acceptable

To prove the connection between a work permit applicant and a Chinese entity, the entity previously was required by some local policies to provide the authority with a labour contract signed by the entity and the applicant, regardless of the application basis.

Under the new policies, an engagement certificate or a cross-border secondment letter can be acceptable for this purpose under certain applicable circumstances:

  • The engagement certificate is applicable for applicants who are chief representatives or representatives in representative offices of foreign companies, or service providers under an overseas service contract.
  • The cross-border secondment letter is applicable for applicants who are senior management or technological staff seconded by a MNC regional headquarter to a subsidiary or branch company in China.

As a supporting document for work permit application, the labour contract or engagement letter must specify the terms including job location, job description, compensation package, term of engagement and job position.

III. Renewing work permits without exiting China is feasible

Under the new policies, an expat is permitted to renew his/her work permit without exiting China if he/she is under any of the following categories:

  • Being a high-end talent at Category A.
  • Changing employers but the job position (i.e., occupation) remains unchanged, and the residence permit is still valid.
  • Being a dependent of a China citizen and the residence permit is still valid.
  • Being transferred to another employer within the same enterprise group (in which case the group structure must have been filed for record with the approval authority).
  • Complying with relevant criteria of eligibility under the preferential policies for companies in free trade zones or MNCs regional headquartered in China.

IV. Credit management system

Under the new policies, all applicants, Chinese employers and agents are subject to a credit management system. All the applicants will be identified by a single code number through which the governmental authority will file on foreigner’s work history.

Where an employer is recognized by the approval authority as an “integrity model” without bad credit records for 3 continuous years, it may be allowed to provide an engagement certificate (alternative to a labour contract) as one of the supporting documents for work permit application before the applicant enters China.

V. Requirements on invitation letter are removed

Chinese employers previously must apply for a work visa invitation letter issued by an authorized organ (i.e., Department of Foreign Affairs or Commerce Bureau) after obtaining an Employment License and before moving to the step of work visa application at China embassy or consulate overseas. This step is no longer required now.

VI. E-application system is launched

Companies are required to create their online accounts with the SAFEA and then submit expats applications through the online system. Where an agency is involved, the required information of the agency must also be registered online, while the authorization document and the ID card copy of the handling person must be provided on site.

All the original hard copies (along with Chinese translations) of application documents must be uploaded to the designated online system.

If approved, the Approval to Work in China for Foreigners will be generated and available online. The applicant can then print it out and use it as an original copy.

VII. Transitional period

Under the new policies, the Employment Permit and Expert Permit are combined into a single Work Permit. The new approval system has been launched since 1 April 2017 nationwide. The old versions of Employment Permit and Expert Permit will not be issued any more after 1 July 2017.

Foreign employees, who hold the Employment Permit and Expert Permit with the remaining valid period of 6 months or above, may voluntarily apply to change to a Work Permit after 1 October 2017 through the online system.

VIII. Our observation

The new work authorization policies signal a new era of China’s expats employment management. Due to the categorized administration policy of expats at three levels, there is no doubt that it will be more efficient to proceed work permit process for high-end talents at Category A as they are encouraged to work in China, while it will become more difficult for those low-end foreign employees at Category C to obtain work permit to China.

As these new policies are still at the early stage of implementation, it may take a couple of months for the local authorities to come up with detailed practical rules and update the handling system. Additional requirements on procedures may be added. We will keep abreast of the developments of local variations and update you.