China - 5-Protection of Property Rights China - Protection of Property Rights
The Chinese legal system mediates acquisition and disposition of property. Foreign companies have complained that Chinese courts have inconsistently protected the legal real property rights of foreigners.
Land is entirely owned by the State. The State can issue long-term land leases to individuals and companies, including foreigners, subject to many restrictions. China’s Property Law stipulates that residential property rights will renew automatically, while commercial and industrial grants shall be renewed if the renewal does not conflict with other public interest claims. A number of foreign investors have reported that their land use rights were revoked and given to developers to build neighborhoods slated for building by government officials. Investors often complain that compensation in these cases has been nominal.
In rural China, land use rights are more complicated. The registration system chronically suffers from unclear ownership lines and disputed border claims, often at the expense of local farmers who are excluded from the process by village leaders making “handshake deals” with commercial interests. In 2016, the central government announced plans to reform the rural land registration system so as to put more control in the hands of farmers, but some experts remain skeptical that changes will be properly implemented and enforced.
China’s Securities Law defines debtor and guarantor rights, including rights to mortgage certain types of property and other tangible assets, including long-term leases. Chinese law does not prohibit foreigners from buying non-performing debt, which can only be acquired through state-owned asset management firms. However, in practice, Chinese official often use bureaucratic hurdles that limit foreigners’ ability to liquidate assets, further discouraging foreign purchase of non-performing debt.
Intellectual Property Rights
Following WTO accession, China updated many of its laws and regulations to comply with the Agreement on Trade Related Aspects of Intellectual Property Rights (TRIPS) and other international agreements. However, there are still aspects of China’s IPR legal and regulatory regime that the U.S. government believes fall short of international best practices and, if improved, would provide greater protection to IPR. Furthermore, effective enforcement of China’s IPR laws and regulations remains a significant challenge.
Generally speaking, criminal penalties imposed by Chinese courts for IPR infringement are not applied on a frequent and consistent enough basis to significantly deter ongoing infringement. Furthermore, when administrative sanctions are issued, the basis for the sanctions is inconsistent and non-transparent, and penalties applied are insignificant, further weakening any deterrent effect. In addition, the award for IPR damage is very low, making civil litigation against IPR infringements an option with limited effect. For detailed information on China’s environment for IPR protection and enforcement, please see the following reports:
Office of the U.S. Trade Representative’s (USTR) 2017 Special 301 Report (see section on China)
USTR’s 2016 National Trade Estimate Report on Foreign Trade Barriers in China (see section on China)
USTR’s 2016 Report to Congress on China’s WTO Compliance
USTR’s Notorious Market Report (see China)
For additional information about national laws and points of contact at local intellectual property offices, please see WIPO’s country profiles.