The Supreme People’s Court of the People’s Republic of China has recently issued a judicial interpretation — Interpretation (II) of the Supreme People’s Court on Issues Concerning the Application of Law in the Trial of Labor Dispute Cases (the “Interpretation”), which took effect on September 1, 2025. The Interpretation is expected to have significant implications for all employers in China, including foreign invested enterprises.

On June 27, 2025, the Ministry of Finance, State Taxation Administration, and Ministry of Commerce jointly released Announcement [2025] No.2, titled "Announcement on Tax Credit Policy for Foreign Investors Using Distributed Profits for Direct Investments". Shortly thereafter, on July 31, 2025, the State Taxation Administration released Supporting Announcement No.18. These policies aim to strongly encourage foreign investors to reinvest profits earned in China back into the Chinese market. This combined policy signals the Chinese government’s clear commitment to stabilizing foreign investment and stimulating reinvestment.

In recent years, we have frequently encountered investigations of employee misconduct such as commercial bribery and embezzlement. Due to the clandestine nature of such misconduct, companies often struggle to independently obtain critical evidence of these violations, for instance relevant bank transfer records. Under current judicial practice, the lack of such evidence places companies at a significant disadvantage, whether in pursuing criminal complaints, civil claims, or employment termination.