This China Newsletter provides an overview of key developments in the following areas:
- Antitrust
- China Issues New Fair Competition Review Regulations in Effort to Improve Business Environment
- Compliance
- China Releases New Consumer Protection Rules
- China Introduces New Guideline for Identifying Sensitive Personal Information
- Corporate
- China Enhances Beneficial Owner Filing System
- Provisions on Implementation of Registered Capital Management System under the Company Law
- Foreign Investment
- Foreign Investment Market Access Management Update
- International Trade
- China Passes New Tariff Law
Antitrust
China Issues New Fair Competition Review Regulations in Effort to Improve Business Environment
国务院发布《公平竞争审查条例》，自 8 月 1 日起施行。
On June 6, 2024, the State Council of China promulgated the final version of the Fair Competition Review Regulations, which took effect Aug. 1, 2024. These regulations aim to unify the domestic market by ensuring fair competition between state-owned and private enterprises. Grounded in the principles of China's Anti-Monopoly Law, the regulations mandate that administrative authorities conduct fair competition reviews while drafting laws, administrative regulations, local regulations, rules, normative documents, and policy measures.
1. Core Provisions of the Regulations
- Market Access and Exit: The regulations strictly prohibit including content that may directly or indirectly restrict market access or exit. This includes illegally establishing approval procedures outside the negative list for market access, unlawfully granting franchise rights, and imposing unreasonable or discriminatory conditions for market entry or exit.
- Free Flow of Goods and Resources: The regulations disallow any measures restricting the entry of non-local or imported goods and resources into local markets or hindering their export. They also prohibit discriminatory fees, standards, prices, or subsidies for non-local or imported goods and resources.
- Production and Business Costs: Without a legal or administrative regulatory basis, authorities are barred from granting selective tax incentives or subsidies that could affect production and business costs. This includes preferential treatment in obtaining resources, administrative fees, or government funds.
- Production and Business Activities: The regulations prevent authorities from compelling or facilitating monopolistic behavior, setting government-guided prices beyond legal limits, or intervening in market-regulated price levels.
2. Exemptions and Review Procedures
The regulations provide specific exemptions where restrictive content may be included in policy measures, provided there is no alternative with a lesser impact on fair competition. These exemptions apply in scenarios such as safeguarding national security, promoting scientific and technological progress, and achieving social public interests like environmental protection.
Policy measures must undergo a fair competition review by the relevant government authority, which varies depending on the drafting unit. The review process requires consultation with relevant operators, industry associations, and the public, particularly when public interests are involved. The State Administration of Market Regulation (SAMR) oversees the fair competition review system and maximizes compliance.
3. Business Environment Implications
The introduction of these regulations is part of China's long-term strategy to establish a "national unified market," aimed at dismantling local protectionism and standardizing rules across regions. While the regulations address concerns of fair competition for private and foreign companies, the exemptions provide local governments some latitude to enact discriminatory laws under certain conditions. This may pose challenges for foreign and non-local companies in contesting policy measures.
Foreign investors should exercise caution and ensure that all agreements align with national regulations to avoid potential nullification. The regulatory environment seeks to create a level playing field but may introduce uncertainties for companies relying on preferential treatments as part of their investment strategy.
Compliance
Strengthening Consumer Protections: New Regulations for E-Commerce and Retail in China
国务院发布《中华人民共和国消费者权益保护法实施条例》，自 7 月 1 日起施行
The People's Republic of China (PRC) enacted the Consumer Rights and Interests Protection Law in 1993 and amended it in 2009 and 2013. With the rapid expansion of e-commerce and platform-based commerce in China, new challenges have arisen, including false advertising, price discrepancies, refusal to accept returns, and automatic subscription renewals.
On March 19, 2024, the State Council of the PRC introduced the Implementing Regulation on the Consumer Rights and Interests Protection Law (the Regulation), which took effect July 1, 2024. This regulation aims to enhance and clarify existing legislation and strengthen the regulatory framework to protect consumer rights across all channels. The key takeaways of the Regulation include:
- Obligations of Sellers and Business Operators: Under
the Regulation, sellers and business operators must:
- ensure business premises and facilities meet safety requirements.
- display warning signs and provide quick assistance in emergencies.
- clearly display business name and logo, even when leasing or selling online.
- provide a 30-day written notice before closing or relocating.
- Quality Guarantees and Return Policies: Defective
products pose safety risks and can damage a company's finances
and reputation. Sellers should implement preventive measures, such
as recall campaigns, and clearly indicate any exclusions from
no-hassle return policies. Sellers must inform customers of these
exclusions at checkout.
Recent guidelines allow for refund-without-return policies for defective products, preventing unfair competition and collective actions like "store-bombing." - Pricing Transparency and Payment Terms: Algorithms and
loyalty measures affect the consumer market, especially online,
which may lead to price variations. Sellers must clearly
distinguish charges for each item, ensuring information is
authentic and accurate. Sellers should not set different prices for
the same product under the same conditions.
Goods and services offered in bundles must be clearly marked. Prepayments and deposits require a written contract outlining the product features, price, refund process, and breach liabilities. - Consumer Personal Information Protection: Since June 2023, confidentiality of personal information has been a condition of business transactions. The Regulation prohibits excessive data collection and targeted marketing without explicit consent, allowing customers to opt out at any time.
- Handling Complaints and Disputes: The Regulation aims to reduce cases handled by government hotlines and courts by providing clear guidelines on each party's rights and obligations. Authorities must accept and address complaints and encourage reporting of illegal transactions. Complainants have a seven-day period for appeal receipt, and public officers have up to 60 days for mediation. In addition, consumer rights associations play a role in optimizing complaint management and ensuring fair outcomes.
The Regulation sets rigorous standards for business-to-customer activities in China. Sectors like food and beverage, consumer goods, apparel, and luxury items may face increased scrutiny from authorities and informed consumers.
China Introduces New Guideline for Identifying Sensitive Personal Information
关于发布《网络安全标准实践指南——敏感个人信息识别指南》的通知
On Sept. 18, 2024, the National Technical Committee 260 on Cybersecurity of Standardization Administration of China issued the Network Security Standard Practice Guideline-Sensitive Personal Information Identification Guideline (SPI Guideline). The SPI Guideline supplements the definition for sensitive personal information (SPI), which follows a risk-of-harm approach, by introducing specific identification methods, intending to provide organizations clearer guidance to self-assess whether or not certain data qualifies as SPI based on risk-of-harm rather than a prescriptive list. Prior to the SPI Guideline, businesses faced uncertainty in identifying SPI, relying on non-exhaustive sample lists from the Personal Information Protection Law (PIPL) and suggestive national standards, such as GB/T 35273- 2020 Personal Information Security Specifications, which made compliance with heightened obligations for processing SPI – including stricter consent requirements, enhanced security safeguards, and crossborder transfer filing mandates — challenging.
The SPI Guideline defines SPI the same as the PIPL, i.e. "personal information that, once leaked or illegally used, may easily cause harm to the dignity of natural persons or grave harm to personal safety or property security." Furthermore, it elaborates on three methods for identifying SPI:
- Single-factor identification: whether the personal information by itself may lead to harms on individual dignity, personal safety, or property security if unlawfully disclosed or used;
- Single-factor identification by Exemplar List: commonly seen SPI listed in Appendix A of the Guidelines;
- Multi-factor identification: whether the personal information, when combined or assessed with other types of personal information as a whole, may cause harm to an individual if unlawfully disclosed or used (the entire set of personal information, including any derived information, shall be considered SPI);
- Types of personal information identified under relevant laws and regulations, such as the Administrative Regulations on the Credit Reporting Industry, which prohibits credit reporting entities from collecting individuals' religion, genetic information, fingerprints, blood type, and medical history; or the Measures for the Supervision and Administration of Online Transactions, where ecommerce operators must obtain customers' consent before processing information containing personal biological features, medical health data, financial accounts, or personal movements.
Exemplar List
The Guideline also provides an Exemplar List of common SPIs in eight categories:
- Biometric data used for unique identification;
- Religious beliefs;
- Special identity information (such as disability or military status);
- Medical health information (the final Guideline specifies that only examination and testing data from health care services may be classified as SPI, not all data from medical devices);
- Financial account information;
- Movement information (includes only information indicating a continuous track of movements over time, rather than any location information of an individual);
- Personal information of children under 14 years old; and
- Other sensitive information that may cause harm to individual.
It is uncertain to what extent China's data protection regulators will rely on the finalized SPI Guideline for enforcement due to its non-binding nature. However, given the continued emphasis on the "risk of harm" approach in defining SPI in China, businesses should consider proactively adopting a case-by-case, riskfocused approach in identifying SPI, emphasizing context and potential harm to individuals.
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