Generally speaking, foreigners are protected the same as Chinese nationals under Chinese labor law. However, the situation can be very different for foreigners in Shanghai. While other cities follow the general rules that would apply to PRC Nationals, Shanghai and its First Intermediate Court in Shanghai (which covers Pudong), has a different interpretation. If you are employed there, your company may be able to come up with different rules for your labor relationship.
The Court there has said there are generally applicable labor laws in China, but there are also rules and regulations governing the employment of foreign nationals. Akin to the separate rules governing civil servants or people in the military or teachers. This intermediate court has instead said that as long as the employer gives essential protection to foreigners such as minimum wage, health, safety, etc., then the foreigner and the employer are free to contract on other matters however they wish. In other words, the relationship between foreign employee and company is more of a purely contractual relationship rather than a pure employment relationship.
As a practical matter, this means that termination can be done for any reason and without notice so long as the employer has these rights expressly outlined in the contract (overriding the default provisions in the law). Thus, these contractual provisions are enforceable in the first intermediate court so long as they are explicitly in the contract.
If the contract is silent on severance payment, then arguably, severance is still due under the Labor Contract Law. Although perhaps a bit harsh (and whether you agree with it or not) - the rationale for making a distinction is simple. Foreigners are here as guests and have the choice to leave. So companies and foreigners should engage more on the principle of freedom of contract.
One final note, remember as a practical matter, while you may have a three-year contract, your employer will usually have to cooperate in renewing your work permit each year and that, in turn, gives them quite a bit of leverage in any negotiations and interpretation of the applicable over contract terminations anyway. These rules discussed here just make it potentially even more challenging.
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