Meaning
Choice-of-law rules governing real rights over physical property assign exclusive legal jurisdiction to the court of the place where the asset is physically situated. Under the lex situs doctrine, Chinese courts apply local property law to determine ownership rights, security interests and creation formalities for assets located within mainland territory. Article 36 of the Law on the Application of Law to Foreign-Related Civil Relations codifies this principle for real property.
Parties cannot override this rule by choosing foreign governing law in collateral contracts covering Chinese real estate or equipment.
Movable Application
Physical location determines the law governing the creation and perfection of security interests over machinery, inventory and raw materials. When movables cross international borders, Chinese courts apply the law of the location where the property rested when the legal right was created or transferred. The lex situs doctrine prevents foreign lenders from enforcing foreign law security interests over Chinese factory equipment without complying with local registration requirements.
Validity of mortgage creation depends entirely on compliance with Chinese statutory filings. Courts reject foreign contractual designations when resolving property rights disputes over local assets.
Conflict Rule
Contractual obligations and property rights remain legally distinct under Chinese private international law. While parties may select foreign law to govern underlying loan contracts, property rights over local assets remain strictly subject to Chinese law. Foreign judgments affecting physical assets located in China cannot transfer legal title without recognition by a Chinese court applying local property rules.
Judicial Recognition
Cross-border property claims encounter immediate dismissal if the underlying encumbrance violates mainland real right statutory definitions. Local courts evaluate physical asset claims exclusively through domestic statutory frameworks.
