China’s new e-commerce law will take effect from January 1, 2019. The new law is set to “protect legal rights and interests”, and “maintain the market order”. This is the first part of our analysis.
E-commerce is growing rapidly in China, and to further facilitate its healthy development China has been carrying out a number of changes to its regulatory and administrative functions that directly relate to the various e-commerce activities.
The new law （电子商务法）was officially approved by China’s legislative body on August 31, 2018. The first draft — “Draft E-commerce Law” — was published on 27 December 2016 to solicit public opinion; with subsequent drafts reviewed and published by the NPC Standing Committee in October/November 2017 and then June 2018.
In less than three years, China has announced the third phase of its comprehensive pilot zones development, with 22 newly established cross border e-commerce zones, totalling 35 in July 2018.
In November 2018, the limit for Chinese consumers purchasing retail goods via cross border e-commerce was raised from ¥2,000 ($290 USD) to ¥5,000 ($720) per transaction. While the annual limit rose from ¥20,000 ($2,880) to ¥26,000 ($3,740) per person per year. This quota will be further adjusted in the coming years as needed, in line with the increase of per capita income.
According to the General Administration of China Customs (GACC), China’s retail imports value through cross-border e-commerce was ¥56.6 billion RMB ($8.3 billion USD), up 75.5% year-on-year, in 2017. Between January and October 2018, retail imports through cross-border e-commerce increased 53.7% year-on-year, reaching ¥67.2 billion RMB ($9.8 billion USD).
The new e-commerce law will recognise four types of business entities:
- platform operators (such as JD.com, Tmall)
- operators on e-commerce platforms (i.e. third party stores on online marketplace)
- social e-commerce sellers (through Wechat, Douyin and the like)
- online retailers selling through their own websites
It requires that all e-commerce operators fulfill their obligations to protect consumers’ rights and interests. The law also highlight the important of personal information data protection, China’s new law also highlights the importance of intellectual property rights (IP), cybersecurity, and — similarly to the GDPR policy rolled out this year — the importance of personal information data protection.
The new law requires platforms and sellers to share accountability.
China has introduced new regulation that will hold e-commerce operators across the board responsible for counterfeit goods, and jointly responsible for such goods sold by third parties on their sites. It is the e-commerce operators’ legal requirement to examine necessary documentations for any goods to be sold on the platform and ensure that these meet the compliance requirements.
Customer first & data protection
The regulation ensures greater rights for online shoppers to make complains. E-commerce operators are not allowed to delete negative reviews or create fraudulent reviews, and doing so can result in fines up to a maximum of ¥500,000 ($73,000).
Consumer’s privacy has also been highlighted. E-commerce platforms can still show personalised search results, but must also provide an opt-out of personalised advertising that is not tied into viewers’ online history and shopping habits.
Regulating Unfair Competition
The new e-commerce law forbids e-commerce operators from restricting and limiting market competition through their market positions, and creating a monopoly by imposing unreasonable restrictions, conditions, or fees on merchants. The new law is designed to protect merchants — levelling the playing field between large and small players — and to protect the customers, offering them more platforms to choose buying from.
The new law requires e-commerce operators to fully and accurately disclose to potential consumers information about their registered status, and also the goods and services provided. All e-commerce operators have to be registered and licensed with the State Administration for Industry and Commerce (SAIC), and publicly disclose their license information on their own and/or e-commerce platform’s website.
This apply to all operators, including large platforms, third party online stores hosted on marketplaces, and also independent online merchants (including those selling through social e-commerce).
China accounts for more than 40% of global e-commerce transactions. It’s one of the fastest growing industry in China and a great contributor to fulfilling China’s domestic need for imported products.
The new e-commerce law will impose stricter regulations on e-commerce businesses, offering a better business environment for fair competition and better consumer protection. It requires greater protection on IP, as a shared responsibility for e-commerce operators, while creating great opportunities for foreign businesses looking to sell into China.
“No matter what sector you are in, don’t ignore the importance of E-commerce in enhancing your export strategy for China”Anita Zhang, CEO
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Throughout 2019, together with our partners, we will be running a series of events, practical workshops, and webinars on e-commerce and the new e-commerce law specifically. Don’t forget to subscribe to our newsletter to receive updates, alterts, and breaking news.