（Author: Jennifer Jiang, Chief Attorney of Bilingual Lawyers)

I. General Rules

The parties to a foreign-related contract may choose those laws applicable to the settlement of contract disputes, unless stipulated otherwise by law.

II. Default Rules
Where the parties concerned in a contractual dispute fail to choose a law applicable thereto, the law of the country or region in closest connection with the contract shall be the applicable law.

With respect to determination of the law applicable to a contractual dispute in accordance with the principle of closest connection, a people's court shall choose the law of the country or region having the closest connection with the contract as the governing law of the contract based on the particular nature of the contract and the factor that the contractual obligations performed by one party concerned could best embody the essential characteristic of the contract, etc.

(1) In the case of a purchase and sale contract, the law of the place where the seller is domiciled at the time of the conclusion of the contract shall apply or otherwise, the law of the place where the buyer is domiciled shall apply, if the contract is negotiated and concluded at the place of the domicile of the buyer, or if the contract explicitly specifies that the seller must fulfill the delivery obligation at the place of the domicile of the buyer.
(2) In the case of a contract on processing with supplied materials or assembling with supplied parts, or any other toll processing contract, the law of the place where the processor is domiciled shall apply.
(3)  In the case of a contract on supplying complete sets of equipment, the law of the place where the equipment is installed shall apply.
(4)  In the case of a contract on the sale, lease, or mortgage of real property, the law of the place where the real property is located shall apply.
(5)  In the case of a contract on the lease of movable property, the law of the place where the lessor is domiciled shall apply.
(6)  In the case of a contract on the pledge of movable property, the law of the place where the pledgee is domiciled shall apply;
(7)  In the case of a loan contract, the law of the place where the lender is domiciled shall apply.
(8) In the case of an insurance contract, the law of the place where the insurer is domiciled shall apply.
(9) In the case of a financial leasing contract, the law of the place where the lessee is domiciled shall apply.
(10) In the case of a construction project contract, the law of the place where the construction project is located shall apply.
(11) In the case of a warehousing or custody contract, the law of the place where the warehousing or custody service provider is domiciled shall apply.
(12) In the case of a guaranty contract, the law of the place where the guarantor is domiciled shall apply.
(13) In the case of an entrustment contract, the law of the place where the trustee is domiciled shall apply.
(14) In the case of a contract on the issuance, sale, or transfer of bonds, the law of the place where bonds are issued, sold, or transferred shall apply respectively.
(15) In the case of an auction contract, the law of the place where the auction is held shall apply.
(16) The law of the place where the broker is domiciled shall apply in the case of a brokerage contract; and
(17)  In the case of an intermediary service contract, the law of the place where the intermediary is domiciled shall apply.

If any of the above contracts are obviously in closer connection with another country or region, the law of such other country or region shall prevail.

III. Exception—Exclusive Application of the PRC law

The performance of any of the following contracts within the territory of the People's Republic of China shall be governed by the law of the People's Republic of China:

(1) Contract on a Sino-foreign equity joint venture enterprise;
(2) Contract on a Sino-foreign cooperative joint venture enterprise;
(3) Contract on Sino-foreign cooperative exploration or exploitation of natural resources;
(4) Contract on the transfer of shares in a Sino-foreign equity joint venture enterprise, a Sino-foreign cooperative joint venture enterprise, or a wholly foreign-owned enterprise;
(5) Contract on the operation by a foreign natural person, foreign legal person, or any other foreign organization of a Sino-foreign equity joint venture enterprise or a Sino-foreign cooperative joint venture enterprise established within the territory of the People's Republic of China;
(6) Contract on the purchase by a foreign natural person, foreign legal person, or any other foreign organization of any equity interests held by a shareholder in a non-foreign-invested enterprise within the territory of the People's Republic of China;
(7) Contract on the subscription by a foreign natural person, foreign legal person, or any other foreign organization of any increased registered capital of a non-foreign-invested limited liability company or joint stock company within the territory of the People's Republic of China;
(8) Contract on the purchase by a foreign natural person, foreign legal person, or any other foreign organization of any assets of a non-foreign-invested enterprise within the territory of the People's Republic of China; and
(9) Other contracts governed by the law of the People's Republic of China as specified in a law or administrative regulation of the People's Republic of China.