China issued its first nationwide labor contract law on June 29, 2007, which will take effect on January 1, 2008 (the "Labor Contract Law"). The Labor Contract Law will not replace the existing Labor Law of China but supplement it. However, any local regulations that conflict with it will be superseded. The Labor Contract Law will not affect existing employment contracts that are executed before January 1, 2008, except for calculation of severance pay to employees upon expiration or termination of existing employment contracts.
The legislative intention of the Labor Contract Law, which came out after a series of incidents of severe abuse of workers in China, is to better protect the lawful rights of workers and form more stabilized employment relationship. As a result, the Labor Contract Law emphasizes the execution of written employment contracts, execution of contracts with an open term when certain conditions are met, termination by employers only for causes set forth by law
