Under current Chinese law, there are two options available for the employer to reduce its financial obligations to employees based on financial difficulties. The first option, in lieu of dismissing the employee, the employer may negotiate with the employees to adjust the current employment agreement; effectively placing the employee on “holiday status”. The second option would be to simply terminate the current employment contract with the employee.

In light of the financial downturn, many foreign invested companies simply are abandoned by their foreign investors. However with recent guidelines issued by the Chinese government, foreign investors may be subject to more substantial liability, for failure to properly close their FIE. This article sets forth guidelines regarding proper closure of an FIE.