Recent Developments Regarding the Establishment of Employee Share Ownership Plans in China

Abstract

As China lacks any national legislation on employee share ownership plans, these have been set up on an ad hoc basis using local regulations. Recently, however, such plans have attracted renewed interest as a means of incentivizing employees. In January 2007 the State Administration of Foreign Exchange (SAFE) promulgated detailed rules for the implementation of measures permitting individuals to invest in shares traded on overseas capital markets as part of an employee share ownership plan. One foreign company that has used these rules is Procter & Gamble. We think that Japanese companies with local subsidiaries in China should also consider this option.

Keywords: ESOP, SAFE, China

JEL Classification: F31, G32