Fears that China’s new social insurance law will mean extra cost for foreign companies, many of which are clients of Australian law firms, could be exaggerated, according to Mallesons Stephen Jaques partner Nicolas Groffman, who is based in Beijing. “The final form of the detailed rules has not yet been issued and local governments have no means to include foreigners. Who knows when they will finalise? At the moment, in some cities, foreigners will be allowed to contribute to individual funds on a voluntary basis, but this is a right, not an obligation despite the wording of the law,” he said.

Over the past week there has been speculation in the main stream media that companies’ bottom lines could be seriously affected when the new law comes into effect on 1 July. Allens Arthur Robinson partner David Wenger pointed out that changes under the law include penalties for late payments of up to a daily fine of 0.5% of the overdue payment and participation by foreigners in social insurance. All of these could be concerning for major international clients, he said.

However, various regions and cities in China already have caps on the amount companies can contribute to social insurance, according to Groffman. “The contribution only goes up to a multiple of the average salary in a particular city and the maximum the social insurance fund will accept is that multiple,” he said. In some areas that is very low.

The law itself only has one article pertaining to foreigners, which is number 97 out of a total of 98. The main aim of the legislation revolves around regulation, protection of property rights and the promotion of social harmony and stability. “The MOLSS is a ministry for improving social harmony in China, and the question of foreigners is low down on their priority list,” added Groffman.