Legal analysis: China does not prohibit related party transactions, but it does harm the interests of the company. Because of the interest relationship between the two parties in related party transactions, it will actually reduce the transaction costs of both parties, but at the same time, related party transactions will make the company lack competitiveness in the future market and have a certain impact on the long-term interests of the company.
Legal basis: People's Republic of China (PRC) Company Law.
Article 21 The controlling shareholders, actual controllers, directors, supervisors and senior managers of a company shall not use their related relationships to harm the interests of the company. Anyone who violates the provisions of the preceding paragraph and causes losses to the company shall be liable for compensation.