China: Advertising In China

Do you have plans to conduct marketing in the world's second largest economy and reach some of its 1.38 billion potential new customers? With a growing middle class and a healthy appetite for western goods and services, China presents a very attractive and lucrative market for western businesses.

It has never been more important to adhere to advertising regulation in China. As part of a commitment to strengthening consumer protection, new advertising law came into effect on 1 September 2015 which imposes stricter controls upon advertisers wanting to promote their goods or services in the Peoples Republic.

Advertising regulation

The main piece of legislation regulating advertising in China is the Advertising Law of the People's Republic of China, which was initially adopted in 1994 but restated as of 1 September 2015. The restated law is close to double in length of the previously existing law and was implemented to strengthen consumer protection and impose tougher rules upon advertisers. Some of the key areas of advertising regulation in China are outlined below:

False or misleading advertising

The new restated law prohibits "false or misleading content" and gives examples of what constitutes misleading advertising. Adverts featuring a commodity or service that does not exist or one that contains incorrect information in relation to function, origin, usage, quality, ingredients or price will be considered misleading.

Under the new law superlatives such as "the most" and "the best" cannot be used in any advert. Soon after the new law was introduced, Xiaomi Inc., a Chinese electronics company and the fourth largest smartphone maker globally, was investigated by the Beijing Ministry of Industry and Commerce for using superlative phrases such as "the best" and "the most advanced" on its website. At the time of writing they are being investigated and could face a potential minimum fine of £20,000.

Online advertising

Internet adverts must not interfere with the user's "normal use of the internet". With regards pop-up adverts, it must be clear to a user how to close a pop-up advert and this must be achievable with one click only. Electronically sent adverts, so by email for example, must include the sender's true identity, the contact details of the sender and provide the recipient with an option to reject continuing to receive the advertising.

Comparative advertising

Comparative advertising is allowed in China so long as there are no direct comparisons made with another advertiser. Therefore adverts must avoid making comparisons with specifically named products or services. Comparative advertising must also adhere to all other applicable advertising laws.

References to the State

Under the restated law no "overt or covert" use of the Chinese national flag or national anthem is permitted, nor is the use of the name or image of any public institute.

The law also prohibits adverts containing anything "causing detriment to national dignity or interests", anything "interfering with social stability, or causing detriment to social and public interests" and anything "interfering with social public order, or going against good social norm". It is important to appreciate the cultural context of advertising in the People's Republic of China and to consider if your advert is at risk of running contrary to the provisions mentioned above.

Product endorsement

Celebrity endorsers can be held responsible if they endorse a product or service in an advert that contains false claims and breaches the new advertising law, if they were aware or should have been aware that the product or service contained the false claims. Anyone guilty of this can be banned from endorsing products or services for three years. However, in the case of false adverts relating to life and health products, an endorser can be found guilty regardless of whether they were aware, or should have been aware, of the false claims.

Someone cannot endorse a product that he or she has not used and children under 10 cannot endorse any product. No endorsers can feature in adverts for medicine or medicinal devices or for foods claiming to have health or other benefits.

Advertising to children

As well as prohibiting children under 10 acting as endorsers, the new law introduced a range of regulations upon adverts aimed at children. Most notably, "no advertising activity should be conducted in Kindergarten, primary and middles schools" and both overt and coverts adverts are prohibited in textbooks, as well as on school uniforms and school buses.

Residential advertising

Distributing hard copy advertising to a person's house or transport (car windshield for example) is not allowed without the consent of the recipient.

Industry specific Regulation

Tobacco advertising was revised in 2015 and it is now prohibited to advertise tobacco in the mass media, in a public place or outdoors. It is also prohibited to distribute any form of tobacco advertising to minors.

China's Government wants to encourage breast feeding. To do this the law has been changed to restrict how companies can advertise baby formula. It is now prohibited for an advert to "claim to fully or partially substitute breast milk".

Tougher laws have also been introduced for adverts relating to medicine, health food, medical devices alcohol, investment products and real estate.

Penalties

If an advert is found to be misleading the industry and commerce administration can demand it ceases being published, demand the advertiser takes step to mitigate the influence the misleading advert has had and issue a fine ranging from three to five times of the advertising cost. Where the advertising cost is hard to calculate a fine between 200,000 RMB and 1,000,000 RMB (between £21,000 and £105,000 at the exchange rate at the time of writing) may be issued. Perhaps more worryingly is that a business's licence can be revoked as a penalty for falling foul of Chinese advertising law, although this penalty is reserved for the most serious breaches.

Conclusion

A business planning to market their goods or services in the Chinese market must pay close attention to Chinese advertising regulation. As well as the new law discussed above one might need to also consider trade mark law, other applicable advertising regulation, as well as laws relating to specific goods and industries. This needs to be done at the very earliest stages of the marketing process.

The consequences for non-compliance are severe and can have a catastrophic effect upon a business entering the country. However, with careful planning and sound local advice, marketing a product or service effectively in China can hold the key to entering one of the world's most lucrative and exciting markets.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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