Date 14/10/20 –

Steps to set up a company in China

The Chinese Civil Code brings together legal provisions and judicial interpretations that affect various personal and property rights, which also has clear implications for the regulation of the e-commerce industry.

On May 28, 2020, the Civil Code of the PRC was adopted and promulgated. The Civil Code comprehensively enshrines various personal and property rights and interests closely related to the daily life of citizens.

In this article, we will briefly introduce the code and its specific implications for the e-commerce industry in China.

What is the Civil Code?

To understand the legal provisions regarding various personal and property rights and interests in the PRC, such as property rights after marriage, or what you should look out for when renting a new apartment, or compensation claims that you can file if your top is flooded your apartment with water – you will have to look for some of the following laws of the People’s Republic of China: Marriage Law, Contracts Law, Property Law Law, Tort Crimes Law, etc.

However, from January 1, 2021, all these provisions will be included in the unified Civil Code.

The PRC Civil Code has a total of 1,260 articles and consists of seven parts (see table below) and additional provisions. Of the 1260 articles, only about 148 articles were re-added, the rest were modified or paraphrased based on existing laws and judicial interpretation, or copied directly from there. Therefore, after the entry into force from January 1, 2021, the relevant laws of the related parts (see table below) will be canceled at the same time.

What are the implications for ecommerce?

The term “electronic commerce” refers to the business of selling goods or providing services over the Internet and other information networks. It includes a range of service transactions, from ordering food, buying clothes and bags to ordering door-to-door cleaning services through apps; investing your money in financial products via P2P platforms, etc.

The following terms are key to understanding which types of business and business transactions will be affected by the legal provisions regarding electronic commerce in the PRC Civil Code.

  • E-commerce business operators: Consists of e-commerce platform operators, business operators using the platform and other e-commerce business operators.
  • E-commerce platform operators:refers to legal entities or non-legal entities that provide online business premises, transaction matching, information dissemination services, etc. for both parties or multiple parties in e-commerce transactions to facilitate both or more parties to conduct transactions independently.
  • Business operators using e-commerce platforms: refers to operators who sell goods or provide services through an e-commerce platform.
  • Other Affected Business Operators: Please contact operators selling products or providing services through their own website or other network services other than the e-commerce platform.

So, imagine that you ordered lunch through the app, but your dish never arrived. You do not need to worry as you are protected by a contract or multiple contracts (for example, a contract between you and a restaurant and a contract between you and the platform) at the time you made your order. You are eligible to at least receive a refund of your lunch fee, and if the platform / restaurant has also promised additional compensation due to late arrival, you may receive such compensation as well.

2. What is considered “delivery”?

When working with e-commerce businesses, the delivery of goods / services is one of the most important issues between the parties involved – delivery time is the key to separating or defining the rights, responsibilities and risks of each party.

An obvious improvement in the Civil Code is that it clearly spelled out provisions on e-commerce deliveries, while there are no specific provisions in contract law to this effect.

3. Is my personal information secure in e-commerce?

Unlike other businesses, which may have a limited need to collect personal data, e-commerce operators are required to access and use massive personal data and even sensitive personal data. For example, if you are using a takeout service app, you must enter your personal address (in order to deliver the food to your person) and your personal phone number (in order to contact you when needed). Other information, such as date of birth, may also be collected to trigger discounts or provide additional information to tailor the app’s algorithm to better suit your tastes. An online clothing store will ask you not only for your address and phone number, but also for your gender, height, weight, age, etc. The online pharmacy will even know the physical health of the buyers. In practice, e-commerce activities not only affect your personal data, but more importantly, your privacy.

Take a recent case where a courier company tried to deliver a document to a lady’s home address, but found she was not at home at that moment. The courier company went through their database and found the lady’s “office address” and then delivered the document to the office where she worked. However, the document delivered itself was from another employer of the lady, which was thus disclosed to the current employer. The lady was fired by her employer for working in two companies at the same time. To compensate for this loss, she sued the courier company, citing a violation of her privacy. The court upheld her claim and ordered the courier company to compensate her with 10,000 yuan (approx. $ 1,480).

One of the advantages of the Civil Code is that it not only confirms the right of citizens to their personal data, but also for the first time stipulates in detail the right to privacy. While previous and current laws have referred to “privacy” and recognized “the right to privacy,” the Civil Code is the first such codified law to formally define “privacy.” It also contains detailed articles that list prohibited behaviors that could violate people’s privacy.

The table below shows what the PRC Civil Code defines as personal data and confidentiality.

In this way, your personal data (as well as your privacy) will be protected not only in the course of e-commerce activities, but also in other daily activities, especially after the entry into force of the Civil Code.

General E-Commerce Regulation in China – Frequently Asked Questions

While the Civil Code is a comprehensive code governing quite a few issues related to civil relations, it does not regulate all aspects of any particular issue.

There are also various laws and regulations for e-commerce, in addition to the Civil Code, which provide further and deeper legal provisions governing this area of ​​activity.

1. What if I were a foreign investor looking to invest in e-commerce in China?

Since June 19, 2015, e-commerce in China has been open to 100 percent foreign direct investment (Ministry of Industry and Information Technology circular lifting restrictions on foreign capital in online data processing and transaction processing (for-profit e-commerce), MIIT [2015] No 196).

In other words, since 2015, Foreign Investment Enterprises (“FIEs”) that are also wholly owned by foreigners have been allowed to do e-commerce in China.

Unlike the part of the Civil Code that regulates relations between equal individuals and / or legal entities, which is considered as “private law”, the rules concerning foreign investments are “public law” governing relations between state bodies and their counterparties. Such “public laws” include, but are not limited to, administrative provisions on foreign funded telecommunications enterprises, administrative measures for information services provided over the Internet.

They set specific requirements for FIEs operating in e-commerce, as briefly explained below:

  • The main foreign investor of the FIE must have a good track record and experience in this area.
  • The minimum registered capital for an FIE to carry out e-commerce nationwide or across provinces is 10 million RMB ($ 1,479,925).
  • The minimum registered capital of a provincial-level FIE e-commerce is 1 million yuan ($ 147,992).
  • Where e-commerce activities relate to the press, publishing, education, healthcare, pharmaceuticals and medical instruments, the FIE also obtains approval from other relevant government agencies.

2. What general obligations do I have when doing e-commerce in China?

The Law on Electronic Commerce is more specific and detailed in the field of electronic commerce than the Civil Code.

For the various roles mentioned in the previous paragraphs, the Electronic Commerce Law contains provisions on their respective obligations, as summarized in the table below.


Recall that the Civil Code officially and clearly confirmed (again) the unique form of contracts (through the exchange of electronic data) in electronic commerce. This will promote the development of e-commerce in China, as well as confirm the existence and protection of people’s right to privacy and their personal data.

Although the Civil Code itself has a comprehensive scope of application, it does not and cannot regulate all aspects of specific issues. When examining a regulatory framework for a specific industry or business in China, it will be necessary to study several laws in order to have a general understanding of compliance expectations as well as rights and obligations.

If you have any questions, wishes or suggestions after reading this article, leave them in the comments. The answer will not keep you waiting long. Visit the site as often as possible, interesting and useful information regarding business in China is regularly added here.

If you have any questions or wishes while reading this article, leave them in the comments.

Author: Donfil Huang

3. What other areas should e-commerce subjects look out for?

Activities in the field of e-commerce give rise to many aspects of legal relations and therefore cannot be fully regulated by only one law. The PRC Civil Code regulates partial issues that usually apply to electronic commerce. For example, contracts, the right to privacy and the right to personal data protection. The Electronic Commerce Law mainly illustrates the requirements and obligations of the electronic commerce operators. Other specific laws, such as the Cyber ​​Security Law, as well as a number of statutory standards for the protection of personal data, which establish specific and even technical requirements, constitute the most important elements of the regulatory system that regulates e-commerce in China.

As we have learned from the above, collecting and using personal data intelligently and legally is very important to e-commerce operators in their day to day business activities. Any negligence or non-compliance can result in huge damage to their business and reputation.

Personal data protection is a deep and comprehensive topic that requires a separate article on this topic. In a nutshell, subjects who control and / or process personal data are required to adhere to certain principles throughout the entire processing cycle of personal data.

Apparently, as operators of e-commerce platforms, the obligations of firms are heavier than in the case of other operators of e-commerce businesses. To use the mall metaphor, business operators using the platform are like individual store operators who can simply focus on their own transactions and compliance. Whereas an e-commerce platform operator is like a shopping mall operator who must not only take care of their own business, but also keep a close eye on all stores to make sure they are doing business properly.

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