Transfer pricing in China is governed by the Income Tax Law, and The Law Concerning the Administration of Tax Collection.
Furthermore, the State Administration of Taxation has issued a number of rulings on the issue. The most important one is Guoshuifa [2009] No.2.
The Chinese government has also adopted international principles. Accordingly, inter-company transactions should be priced according to the “arm’s length principle”. If firms are regarded as associated, which they are if one of the entities are owned or controlled by another entity, then the assets must be priced according to the arm’s length transaction principles.