Close to 9,000 American companies currently operate in China. Companies operating in this area should understand the nuances of business law in both countries.
Chinese and American business laws, though rooted in the pursuit of fair and ethical commerce, are quite different.
Legal systems
China employs a civil law system, which relies on statutes and regulations.
In contrast, the United States follows a common law system. This means that judicial decisions and precedents play a significant role in shaping legal interpretations.
Contracts and agreements
In China, contracts are a broad framework for business relationships, emphasizing mutual trust and social harmony.
The American approach places importance on precise and detailed contracts. This is to safeguard the interests of all parties involved.
Intellectual property rights
Protecting intellectual property is a cornerstone of business operations in both China and the United States.
China has taken steps to enhance its intellectual property protection, though some challenges persist.
In the United States, a robust system is in place which strongly upholds intellectual property rights.
Regulatory environment
China’s regulatory landscape often requires foreign businesses to navigate through bureaucratic procedures. The government often plays a more direct role in some sectors.
Conversely, the United States has an open market with regulatory bodies. These bodies oversee specific industries to ensure compliance with established laws.
Dispute resolution
Resolving business disputes varies between the two countries. In China, there is a growing emphasis on alternative dispute resolution methods, such as mediation and arbitration, alongside traditional litigation.
In the United States, litigation remains a common approach, though alternative methods are also used.
Corporate structure
Establishing and structuring a business entity differs in China and the United States. China requires a local partner for certain businesses, whereas the United States generally allows foreign entities to operate independently.
While Chinese and American business laws share common goals of fostering fair and ethical commerce, they exhibit distinct characteristics. Adapting to the legal landscape of each country is a step towards successful international operations.