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Greater China Updates – November 2021

  • Draft Measures for the Security Assessment of Outbound Data
  • Hong Kong’s Personal Data (Privacy) (Amendment) Ordinance 2021 comes into effect on 8 October 2021
  • Measures for the Discretion over Administrative Penalties in Foreign Exchange Control
  • Law Enforcement Guide on Medical Cosmetology Advertising

Draft Measures for the Security Assessment of Outbound Data
On 29 October 2021, the Cyberspace Administration of China released the Measures for the Security Assessment of Outbound Data for public consultation. These measures aim at regulating the outbound transmission of data in accordance with the Cybersecurity Law, the Data Security Law, the Personal Information Protection Law, and other laws and regulations.

The measures provide a standardized framework for data processors when they provide overseas with important data collected and generated during their operation within the territory of China and personal information that shall be subject to security assessment according to law.

Hong Kong’s Personal Data (Privacy) (Amendment) Ordinance 2021 comes into effect on 8 October 2021
Doxxing is a term used for the harassment technique of finding and publishing personal information about an individual on the internet or social media. To combat unlawful doxxing acts, the Government of Hong Kong SAR published the Personal Data (Privacy) (Amendment) Ordinance 2021 on 8 October 2021.

Upon the commencement of the Ordinance, any person who discloses personal data of a data subject without the relevant consent of the data subject, with intent or is being reckless as to whether any specified harm would be (or would likely be) caused to the data subject or his/her family member, commits an offense.

Source: https://www.info.gov.hk/gia/general/202110/08/P2021100800392.htm

Measures for the Discretion over Administrative Penalties in Foreign Exchange Control
China’s State Administration of Foreign Exchange enacted Measures for the Discretion over Administrative Penalties in Foreign Exchange Control on 5 November 2021 to standardize the discretion over administrative penalties in foreign exchange control violations. Depending on different circumstances, different ranges of penalties will apply to administrative penalties imposed by foreign exchange control authorities.

It is worth noting that when a financial institution violates the provisions on foreign exchange control, the financial institution’s directors, supervisors, and senior managers who are directly responsible and other directly liable persons will also be given a warning and imposed a fine if the violations fit the specific circumstances stipulated by the Measures.

Law Enforcement Guide on Medical Cosmetology Advertising
In order to regulate and strengthen the regulation of medical cosmetology advertising, the Law Enforcement Guide on Medical Cosmetology Advertising was published on 1 November 2021 by relevant authorities. The Law Enforcement Guide focuses on the crackdown and rectifying various medical cosmetology advertising chaos.

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Finger touch smartphone screen with privacy protection

Protecting China Employees’ Personal Information: Key Points for HR Management

China’s Personal Information Protection Law (“PIPL”) came into effect on 1 November 2021. Accompanying the PIPL, the Cyberspace Administration of China (“CAC”) also published draft Measures for the Security Assessment of Outbound Data for public consultation.

In most cases, multinational companies with operations in China will involve some communication going back and forth between China and the overseas headquarters. These companies need to collect and process information from their existing and prospective employees, from the recruiting process to the end of the employment. Therefore, it is crucial to study the relevant provisions in the PIPL that affect how employers collect and process employees’ personal information. We can foresee a few scenarios where employers should be extra careful:

  • Information transmission between China subsidiaries and overseas related companies involves personal information of employees;
  • The Company’s ERP data, including personal information of China employees, are hosted or being backed up on an overseas server;
  • A third-party service provider is managing China-based employees’ insurance and other benefits outside of China;
  • The subsidiary will be sold or acquired, and the potential new owner is arranging the transaction through a third party overseas;
  • An internal investigation is being carried out, requiring access to the electronic equipment of employees.

In practice, there are certainly more complex cases where a detailed analysis should be conducted. Based on the current development of the data privacy framework, we advise employers to take the following actions:

Explicitly notify employees and obtain their written consent on processing their personal information

It is already common for many employers to obtain “general consent” from the employees during the hiring and induction process. The old practice might merely involve a general statement on the employee’s contracts or staff handbook. However, these clauses are not valid anymore to cover all scenarios. Separate notices should be given to the employees when the employer intends to disclose employee information to a third party, transfer to a location outside China, or process sensitive personal information. In the written consent, employers should explicitly notify employees of specific items:

  • Name and contact information of the data controller;
  • The purposes and methods of processing of personal information;
  • Categories and retention periods of personal information to be processed; and
  • Methods and procedures for employees to exercise their rights enshrined in the PIPL.

Even though the PIPL provides additional grounds to process employee data in certain circumstances without the need to obtain consent, the precise scope of these exceptions is yet to be clarified. Therefore, the best policy is for employers to be prudent in all cases.

Undertake a security impact assessment before transmitting personal information abroad

According to the draft Measures for the Security Assessment of Outbound Data, before employers provide employee’s personal information overseas, they should first carry out data export risk self-assessments, focusing on assessing the following matters:

  • Legality, appropriateness, and necessity of the purpose, scope, and methods of exporting the data and of the overseas’ recipients handling of the data;
  • Volume, scope, types, and sensitivity of the exported data, and protentional risks to national security, public interests, or the lawful rights and interests of individuals and organizations that might be brought on by exporting the data;
  • Management and technical measures, and the capacity of data handlers to prevent risks such as data leaks and destruct;
  • Responsibilities and obligations that the overseas recipient has pledged to undertake, as well as their management and technical measures, and the capacity for performing the responsibilities and obligations, and whether they can ensure the security of outbound data transfer;
  • Risks of leaks, damage, tampering, and abuse of data after the data is transmitted abroad and further transferred;
  • Whether the individuals whose data is transmitted abroad can easily access to the channels to maintain their rights and interests in personal information protection.
  • Whether the agreements signed with the overseas recipient fully specify responsibilities and obligations in protecting data security.

In addition to self-assessments, if the amount of personal information exceeds a certain threshold according to the Measures for the Security Assessment of Outbound Data, a mandatory security impact assessment through the provincial level of CAC will be triggered.

Sign cross-border data transfer agreements with overseas data recipients

The China subsidiary should sign a cross-border data transfer agreement with each of its overseas data recipients. The agreement should provide the responsibilities and obligations for data security protection, including:

  • Purposes and methods of transmitting the data abroad and the scope of the outbound data;
  • Purposes and methods of data processing by the overseas recipient;
  • Location and duration of overseas storage of the data;
  • How to deal with the data after the storage period expires, the purpose agreed upon is completed, or the contract is terminated;
  • Restrictive clauses restricting the overseas recipient from re-transferring the data transmitted abroad to other organizations or individuals;
  • Security measures that shall be taken in case of any substantial change in the actual control right or business scope of the overseas recipient, or any change in the legal environment of the country or region where the overseas recipient is located, which makes it difficult to guarantee data security;
  • Liability for breach of the data security protection obligation, and binding and enforceable dispute resolution clauses;
  • Clauses about properly carrying out emergency measures in case of data leaks and other risks;
  • Clauses about ensuring the smooth channels for individuals to safeguard their personal information rights and interests.

Review and update the company’s data storage and backup policy in China

HR managers in China should work with the IT department to review the current IT infrastructure on data storage, protection, and backup policy. Pay special attention to assessing whether the company should improve the China data backup policy, database management system, data masking, and remote access mechanism.

For more complex cases, it is recommended to conduct a risk analysis to avoid liability. Employers would need to rethink their policies and implement corrections to align with China’s data privacy framework. Amendments should be planned according to each company’s situation to reduce liability exposure and generate trust from the employees.

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Greater China Updates October 2021 (2)

Personal Information Protection Law of China

In recent years, with the continuous development of big data, cloud computing, and mobile internet, data compliance has attracted more and more attention across all industries and government authorities around the globe. Data compliance includes data security, data supervision, data storage, other physical security issues, and all aspects of personal information processing.

The Personal Information Protection Law of the People’s Republic of China (“PIPL”) will come into force on 1 November 2021, marking a new era in China’s personal information protection legislation system. The introduction of PIPL provides a comprehensive and systematic legal basis for protecting personal information rights and interests, the obligations of information Processors, and the functions and powers of competent authorities. In addition, it builds up a protective network of personal information security.

PIPL applies to the processing of personal information within the territory of the People’s Republic of China and the processing of the personal information outside the territory of China for the purpose of providing products or services to natural persons located in China, or analysis and evaluation of natural persons located in China.  

 

IMPORTANT DEFINITIONS

Personal information refers to all types of information on the identified or identifiable natural persons recorded by electronic or other means. Information processed anonymously is not included.

Sensitive personal information refers to the type of personal information that may damage the individual’s dignity, personal safety, or property safety if disclosed or illegally used. Examples of sensitive personal information are biometric identification, religious belief, specific identity, medical health, financial account, traces of whereabouts, and the personal information of minors under the age of 14.

Processing of personal information means the collection, storage, use, processing, transmission, provision, disclosure, and deletion, etc., of personal information.

A Personal Information Processor (“Processor”) refers to an organization or individual that independently determines the purpose and method of the processing of personal information. A personal information Processor must be responsible for the processing of personal information and take necessary measures to ensure the security of the personal information processed.  

 

HIGHLIGHTS

1) Establishing Principles of Personal Information Protection

  • The Processor cannot process personal information through misleading, fraud, coercion, etc.
  • The processing of personal information must be for a definite and reasonable purpose. Furthermore, the way of processing personal information must minimize the impact on personal rights and interests. The collection of personal information should be limited to the minimum scope that achieves its purpose.
  • The Processor should make known to the public about its rules, purpose, method, and scope of personal information processing.
  • The quality of personal information must be ensured. The personal information processed must not infringe personal rights and interests due to its inaccuracy or incompleteness.

2) Establishing Rules for Processing Personal Information PIPL stipulates that under the following circumstances, the processing of personal information is allowed and need not obtain the consent of the individual concerned:

  • When it is necessary for the conclusion or performance of a contract or for the implementation of human resources management according to the labor rules and regulations.
  • When performing statutory duties or obligations.
  • When it is necessary for the response to a public health emergency or for the protection of the life, health, and property safety of a natural person.
  • When it is for the purpose of news reporting and supervision by public opinions and the processing of personal information is within the reasonable scope.
  • When the personal information is already made known to the public due to self-disclosure or other legal means and the processing is within the reasonable scope.
  • Other circumstances prescribed by laws and administrative regulations.

If the processing of personal information is outside of the above scenarios, the Processor MUST obtain the consent of the individual concerned. In addition, the Processor must provide a convenient method for the individual to withdraw his/her consent. If an individual does not agree to process his/her personal information or withdraws his/her consent, the Processor cannot refuse to provide products or services to the individual unless the personal information is necessary for the provision of products/services.

3) Prohibiting Big-Data-Enabled Automated Decision-Making System Based on Individual’s Personal Characteristics

“Automated decision-making” refers to the use of computer programs to automatically analyze or assess individual behaviors and habits, interests and hobbies, or situations relating to finance, health, or credit status, etc., and engage in decision-making activities. The regulators recognized that certain businesses often use big-data analysis to identify individuals’ personal characteristics and use automatic decision-making systems to impose differential treatment on individuals concerning the transaction price and conditions. The PIPL requires that such information processing must ensure transparency of the decision-making process and fairness of the results. The Processor should provide a convenient way for the individuals concerned to reject that his/her personal information be processed using an automatic decision-making system.

4) Establishing Rules for Processing Sensitive Personal Information PIPL stipulates that the processing of sensitive personal information should be for a specific purpose and necessity, and separate consent must be obtained from the individual concerned. In addition, the Processor must inform the individual of the necessity and impact on his/her rights and interests except for certain circumstances where PIPL excepts the disclosure.

5) Establishing Duties, Scope, and Limit of Processing Personal Information by Authorities PIPL also provides special provisions related to circumstances when Government authorities need to process personal information when performing their statutory duties. In this scenario, the principle of transparency should be applied unless the processing should be kept confidential by law, or the informing will hinder the authorities from performing their statutory duties. If it is necessary to provide personal information to an overseas party, a security evaluation will be conducted before transmitting the personal information overseas.

6) Establishing Rules for Cross-border Provision of Personal Information If a Processor needs to provide personal information outside the territory of China due to business or other needs, the Processor should ensure that it meets any of the following conditions:

  • Pass the security evaluation by the Cyberspace Administration of China;
  • Be certified by a specialized agency for protection of personal information according to the provisions of the Cyberspace Administration of China;
  • Enter into a contract with the overseas recipient under the standard contract formulated by the Cyberspace Administration of China, specifying the rights and obligations of both parties; or
  • Meet other conditions prescribed by laws, administrative regulations, or the Cyberspace Administration of China

Besides meeting one of the above conditions, the Processor should also:

  • inform the individual of the overseas recipient’s name, contact information, purpose and method of processing, type of personal information.
  • Provide the method and procedure for the individual to exercise his/her rights against the overseas recipient; and
  • Obtain the individual’s separate consent.

Where there are international treaties or agreements in place, the relevant provisions on the conditions for the provision of personal information outside China may prevail. It is worth noting that PIPL also extends its application to overseas organizations or individuals if they are found to be infringing the personal information rights and interests of Chinese citizens or endangering the national security and public interests of China. Under such circumstances, the overseas organization or individual concerned may be added, by the Cyberspace Administration of China, to the list of subjects prohibited or restricted from receiving personal information. Any Processor outside China should designate a representative in China to be responsible for handling matters relating to personal information protection. The representative’s name and contact information should be submitted to the relevant authorities in China.

7) Strengthening Obligations of Personal Information Processors

To protect personal information, PIPL requires Processors to take the following actions:

  • Formulate internal management systems and operating procedures
  • Categorize personal information
  • Implement encryption and de-identification method
  • Conduct personal information security education and training
  • Devise emergency plans for personal information security incidents
  • Conduct compliance audits regularly on its processing of personal information
  • Conduct an impact assessment on personal information protection beforehand under certain circumstances listed by PIPL

OUR RECOMMENDATIONS

Following the promulgation of China’s Civil Code, Cyber Security Law, and E-commerce Law, China subsequently rolled out the Data Security Law and Personal Information Protection Law, signifying its commitment to construct a comprehensive legal framework for data compliance in a steadfast manner. We envisage there will be more laws and regulations on data compliance in the near future. The implementation of PIPL will raise a higher level of compliance requirements to be met by foreign companies operating in China. All foreign-invested companies should set up a specialized task force to carry out data compliance work and establish relevant rules and regulations for handling the personal information of employees, customers, suppliers, and other relevant stakeholders. In particular, we have listed a few recommended actions:

  • Educate the management and employees about the PIPL
  • Improve the company’s internal policy regarding employee’s personal information processing and protection
  • Review the current IT infrastructure and apply necessary upgrades to the IT system based on the requirements mandated by PIPL.
  • Review the company’s business processes and identify areas where personal information of its business partners (such as suppliers or customers) is processed and make amendments to relevant external documents to ensure the fulfillment of its disclosure obligations
  • Carry out an impact assessment on the use of sensitive personal information for automated decision-making, public disclosure, and cross-border transmission
  • Formulate emergency response measures on personal information incidents

Written by the China Consultancy Team, CW CPA

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Personal Information Protection Law of China (2)

Greater China Updates – October 2021

  • China to impose higher fines to businesses operating in Mainland without a local legal entity from 1 March 2022
  • Personal Information Protection Law coming into force on 1 November 2021
  • Supervision and Administration of Cosmetics for Children to be enforced on 1 January 2022
  • Administrative Provisions on Commodity Classification of Imports and Exports
  • Credit Investigation Business on the rise in China

China to Impose Higher Fines to Business Operating in Mainland without a Local Legal Entity from 1 March 2022
Any company running a business in Mainland China which needs to hire staff must establish a legal entity. Violators will be subject to higher fines, which will go from RMB 10,000 to RMB 100,00 from 1 March 2022 onwards.  

Foreign companies that employ individuals or independent contractors to explore the China market will be targeted as well. Even though the authorities might not be able to impose the penalty on a foreign entity, they could decide to blacklist the foreign company, pushing local Chinese business partners such as suppliers and customers away from them, which can negatively impact the foreign company’s business in the Chinese market.  

Moreover, locally established entities hiring employees through an entity in one city but deploying the staff to perform duties in another city (such as one hiring an employee via an entity in Shanghai to carry on business in Guangzhou) might be liable and punished. 

 

Personal Information Protection Law Coming into Force on 1 November 2021
The Personal Information Protection Law (“PIPL”) will come into force on 1 November 2021, setting requirements for the processing of personal information of natural persons within the territory of China. PIPL also applies to the processing of the personal information of natural persons within China that takes place outside the territory of China under the circumstances where the purpose is to provide domestic natural persons with products or services or analyze domestic natural persons’ activities.

For a more detailed analysis of the PIPL, please read our article Personal Information Protection Law in China.

 

Supervision and Administration of Cosmetics for Children to Be Enforced on 1 January 2022
To strengthen the supervision and administration of cosmetics for children, the National Medical Products Administration has organized the formulation of the Provisions for Supervision and Administration of Cosmetics for Children (“Provisions”), which will come into force as of 1 January 2022.

All businesses in the production and operation of cosmetics for children in China should comply with these provisions. The term “cosmetics for children” refers to cosmetics that are applicable to children below 12 years old (inclusive) and have the effects of cleaning, moisturizing, refreshing, and UV-blocking. Products marked with words such as “for the whole population” or “for family use” or implied by trademarks, designs, homophones, letters, Chinese pinyin, numbers, symbols, packaging forms, etc. that the users of the products are children shall be subject to administration as cosmetics for children.

As of 1 May 2022, any cosmetics for children that are applied for registration or filed for record shall be labeled and marked in accordance with the Provisions. For any cosmetics for children that are applied for registration or filed for record previously but fail to be labeled and marked in accordance with the Provisions, the cosmetics registrant or record-filing party shall update the product label before 1 May 2023 to bring the product in compliance with the Provisions.

 

Administrative Provisions on Commodity Classification of Imports and Exports
The Administrative Provisions of the Customs of the People’s Republic of China on Commodity Classification of Imports and Exports (“Provisions”) will come into force on 1 November 2021. The adoption of these Provisions has caused extensive concern of import and export companies. These provisions focus on adjusting and clarifying the scope of management, legal basis, management requirements of commodity classification. Some highlighted provisions include:

  • In examining and determining the commodity classification of the goods as declared by a consignor/consignee or the agent, the Customs may require the consignor/consignee or the agent to provide necessary samples and materials related to the goods, including Chinese translations of the materials in foreign languages.

  • Suppose the materials provided to the Customs involve any trade secret, undisclosed information, or confidential business information, and the Customs is requested to keep such materials confidential. In that case, the consignor/consignee or the agent should make a written request to the Customs detailing the contents that need to be kept confidential. Otherwise, no consignor or the consignees or the agents thereof may refuse to provide relevant materials to the Customs on the ground of trade secrets.

  • When necessary, the Customs may test and examine the attributes, ingredients, contents, structure, quality, specifications, etc., of imported and exported goods and take the test and examination results as the basis for commodity classification following the national and industrial standards.

 

Credit Investigation Business on the Rise in China
The People’s Bank of China has issued the Administrative Measures on Credit Investigation Business (“Measures”), which will come into force on 1 January 2022. These measures will apply to businesses that collect, collate, maintain, process credit information of companies and individuals and provide such information to users. The Measures stipulate that the credit investigation agencies must obtain the information subject’s consent and state clearly the purpose before collecting personal credit information.

They should also carry out a necessary review on information sources, information quality, information security, and information subject authorization. In addition, the users of credit information should use such information for legitimate purposes and obtain the explicit consent and permission of the information subject. The Measures are entirely in coherence with the Personal Information Protection Law provisions coming into effect on 1 November 2021.

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Greater China Sep

Greater China Updates – September 2021

  • Greater Bay Area launches Wealth Management Connect
  • One Record Filing for Multiple Outbound Remittances
  • Cancelation of the Local Tax Surcharges related to Withholding Value Added Tax (VAT) and Consumption Tax (CT)
  • China’s Crackdown against Cryptocurrencies
  • Hainan Releases Guidelines for Venture Capital Investment in Hainan Free Trade Port
  • Application of Simplified Procedures for the Unilateral Advance Pricing Arrangements
  • The Urban Maintenance and Construction Tax

Greater Bay Area launches Wealth Management Connect

On 10 September 2021, the People’s Bank of China, the Hong Kong Monetary Authority (HKMA), and the Monetary Authority of Macao announced the implementation details of the Wealth Management Connect scheme that links Guangdong, Hong Kong, and Macau.

Under the scheme, there are an aggregate quota of RMB150 billion in each direction and an individual investor quota of RMB1 million, which enables the residents of Greater Bay Area Mainland cities to invest in certain eligible products sold by banks in Hong Kong and Macau via designated investment accounts.

 

One Record Filing for Multiple Outbound Remittances

On 29 June 2021, the State Administration of Taxation & State Administration of Foreign Exchange issued an announcement relating to the filing requirements of outbound remittances.

Domestic institutions and individuals making multiple outbound remittances under the same contract would only be required to conduct the tax record filing once before the first remittance payment. Further, the official interpretation clarifies that if the tax record filing for outbound remittance has been conducted before the issuance of this Announcement, no record filing for outbound remittance would be required for the subsequent remittances under the same contract.

 

Cancelation of the Local Tax Surcharges related to Withholding Value Added Tax (VAT) and Consumption Tax (CT)

Transactions subject to VAT and CT in China are generally subject to local tax surcharges (i.e., Urban Maintenance and Construction Tax, Education Levy and Local Education Levy).

However, effective from 1 September 2021, import of goods; or labor, services or intangible assets sold by overseas entities or individuals to domestic entities would not be subject to local tax surcharges.

 

China’s Crackdown against Cryptocurrencies

On 24 September 2021, the People’s Bank of China and other nine authorities released the Circular about Further Preventing and Tackling the Risks of Speculating Cryptocurrencies.

Virtual currencies such as bitcoin, ethereum, and USDT coins are not legally reimbursable and should not and cannot be used as currencies in the market. Virtual currency-related business activities are considered illegal financial activities. It is also unlawful for domestic residents to be offered virtual currency exchanges from overseas service providers through the Internet.

 

Hainan Releases Guidelines for Venture Capital Investment in Hainan Free Trade Port

Hainan issued the Guidelines for Venture Capital Investment in Hainan Free Trade Port (2021 Edition), which sets the filing conditions of venture capital firms and published the preferential policies for venture capital companies to be registered in Hainan.

Among the preferential policies, if a venture capital firm is established in Hainan Free Trade Port, it can apply for 70% deductions on its taxable income based on its investment in small and medium-sized tech firms and tech startups; it can pay a lower tax rate of 15% on enterprise income tax.

 

Application of Simplified Procedures for the Unilateral Advanced Pricing Arrangements

China’s State Administration of Taxation announced the application of simplified procedures for unilateral advance pricing arrangements (APAs), which are arrangements between companies and tax authorities, seeking to obtain certainty in the pricing of cross-border business.

In the general procedure, it is necessary to complete the following steps: pre-filing meeting, intention for an APA, analyses and evaluation, formal filing, negotiations and signing, and monitor and execution.

The new simplified procedure involves only three steps: evaluation of application, negotiation and signing, and monitoring and execution. However, companies intending to adopt the simplified procedure must satisfy a few conditions. Among them, an applicant must have related-party transactions of more than CNY 40 million (approximately USD 6.2 million) for the three years before the tax year in which the tax authorities accept the case.

 

The Urban Maintenance and Construction Tax
Approved last year in August, the Urban Maintenance and Construction Tax Law (UMCT) was approved by the Standing Committee of the National People’s Congress, which has taken effect starting in September of 2021. Recently, the relevant authorities have issued a clarification on the calculation rate for UMCT.

One of the most significant changes was the additional specifications on how to decide the taxpayer’s location. For example, the location is deemed as the domicile or any other location-related where the taxpayers carry out their business activities. Although the rates remain the same, further clarification was issued. For example, for businesses in cities or urban areas, the rate will remain at 7%, for county or town areas, it will be 5%, while for any other regions different from the previously mentioned, the rate will be 1%. 

Written by Marant Caballero and Luz Deneb Martínez, Latin Department, CW CPA

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greater china

Greater China Updates – August 2021

  • The FDI increases in China, despite tensions worldwide
  • The FDI enters into China through Cross-border E-Commerce
  • The new Stamp Duty Law in China
  • Companies in Shanghai will no longer have their Corporate Income Tax based on a general assessment
  • Data Security Law (DSL) will take effect on 1 September 2021
  • E-contracts for employees in China

The FDI increases in China, despite tensions worldwide
The global pandemic, the financial crisis, and the trade tensions have not stopped China from becoming a leader in attracting foreign investment again. Some of the existing foreign investments in the market are currently struggling. Meanwhile, others and expanding, and thousands of new ones are being established, reaching a new all-time high again. Many of these are non-financial investments and reinvested profits of existing ones. Regarding foreign trade, the half-year of 2021 has been the best performance in history, thanks to its rapid recovery from COVID.

In June alone, there has been an increase of 26% in import-export. China will continuously review the Negative List again for FDI to accelerate the growth, announced on 24 June 2021. The new regulations will optimize the interchange of products to benefit the local market and allow Western goods to be sold in the biggest middle class in the world.

The FDI enters into China through the Cross-border E-Commerce
According to the Ministry of Commerce, China will expand pilot zones to create new competitiveness in foreign trade. Many cities across China have proactively submitted applications to establish pilot zones and compete with their neighbors. As a result, this industry has been expanding faster than expected, and businesses are aware of its potential, creating new opportunities for all agents in the supply chain. There are now more than one hundred cross-border e-commerce pilot zones in China, making cross-border e-commerce a significant driver of the economy.

The new Stamp Duty Law in China
Coming into effect on 1 July 2022, the Stamp Duty Law will replace the prevailing Stamp Duty Provisional Regulations passed by the State Council in 1988.  The Stamp Duty Law covers the definition of taxpayers, taxable scope, stamp duty rates, tax basis, and preferential stamp duty treatment. No fundamental changes are made to the current stamp duty system.

One of the key differences is the levy of stamp duty on security transactions, including the transfer of stocks and stock-based depositary receipts traded on stock exchanges and other national securities trading venues.

Companies in Shanghai will no longer have their Corporate Income Tax based on a general assessment; now, it will be based on the audited accounts
The Shanghai Tax Bureau announced a decision which came into effect on 1 August 2021, confirming that the general taxpayers in Shanghai, including sole proprietors and partnerships, would change their current general method to the audit method of their accounts, which would be the base for the collection of the Corporate Income Tax.

The purpose of this decision is to regulate companies which have handled unreliable accounts, which could easily exploit the general method by not reporting profits correctly. However, up to this moment, it is not clear whether this new measure will affect the small-scale taxpayers.

Data Security Law (DSL) will take effect on 1 September 2021
China’s Data Security Las (DSL), published on 10 June 2021, will take effect on 1 September 2021. DSL states the scope and application, data classification protection, data security mechanisms, protection responsibilities, and penalties for violations. However, DSL itself provides only broad and generic terms and descriptions. It is expected that soon the authorities will release more details on the compliance, implementation, and execution of the DSL.

E-contracts for employees in China
Chinese General Office of the Ministry of Human Resources and Social Security (MHRSS) has issued new guidelines concerning electronic employment contracts on 1 July 2021. The key points of this new set of guidelines are as follows:

  • Contracts should be signed through proper platforms that allow parties to sign the electronic contracts, such as FADADA or Esign.

  • E-contract signing platforms should be able to verify IDs, affix e-signatures, verify permission,  protect data, corroborate the signatory’s confirmation and permission through mobile messages, biometric recognition, and store the confirmation notifications.

  • The protection, generation, and storage should comply with the relevant laws in PRC.

  • The employer must inform the employee of the details of the execution of the e-contract. The notification can be done virtually through WeChat, SMS, emails, or any other app. In addition, the employer must inform the employee how to download the contract and remind him to download and store the e-contract.  The employees must not be charged by the employer for access and use to such platforms.

Written by the Latin Department, CW CPA

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Greater China Updates – July 2021

Greater China Updates – July 2021

  • The world turns the compass to Asia
  • Current and future trends of FDI
  • The e-fapiao and the electronic invoice system of China
  • Tech companies in China: Will there be a tax for the use of data? 
  • China to issue more regional bans on cryptocurrencies mining
  • Cross-border: SAFE issues more QDII quotas
  • Changes in the tax requirements for IP transactions
  • Hong Kong is allowing the registration of foreign funds
  • Agreement between the Asian Infrastructure Investment Bank and the Department of Justice of  Hong Kong
  • Hong Kong traveling updates

The world turns the compass to Asia
Insights on China’s economy in the first half-year give us the result that the foreign direct investment increased by 29% year on year, with the high-tech service industry as the number one sector in terms of growth, an astonishing 43%.

Regarding foreign trade, China also experienced one of the biggest rises in history due to the world’s global demand for Chinese products, by 27%. On the digital side, cross-border e-commerce also experienced a solid expansion with an increase of 29% year on year.

Despite the pandemic, Asia has been the only region globally with positive FDI growth currently, and China was the largest recipient of foreign investment in 2020. At the same time, the government took measures immediately to boost domestic consumption and depend less on overseas demand. For the second half of the year, this steady growth will continue at a higher rate than the global average.

 

Current and future trends of FDI
China will continuously but slowly open up domestic markets that have been restricted for foreign investors. As a result, the negative list will steadily be reduced gradually and allow foreign-invested projects to test the waters in the finance, education, or energies industries. At the same time, some sectors and policies will have to be adjusted to balance income levels and promote domestic consumer spending.

Authorities will adjust policies according to the current situation based on the rest of the world’s economic stability. Therefore, the levels of foreign trade might vary once the countries get stabilized after the pandemic.  Data shows China might reach a 6% of GDP growth but with its challenges that still need to be solved, such as the high number of graduates this year and the slightly higher level of unemployment. In addition, due to economic difficulties during the last months, some households are also more budget concerned, and spending is more controlled. 

The e-fapiao or electronic invoice system of China 
In a constant effort to improve the business environment, the tax bureau of China launched a pilot system to transform their invoicing system into an electronic format. The system intends to implement technology and facilitate daily use for businesses with a high volume of transactions, especially those related to retail and e-commerce. A positive effect of using the electronic system is that the operation cost and time will be reduced. The security will be increased since every invoice will have a unique number that cannot be repeated.

While the program started with a few cities, the scheme has expanded to have nationwide validity. First, it’s important to know the difference between the fapiaos. The general fapiao is non-tax-deductible, while the special VAT fapiao can be used to deduce taxes.

Tech companies in China: Will there be a tax for the use of data? 
A recent debate over data management and security has emerged in China with the current news of banning car-hailing giant Didi Chuxing from the local App stores. While most of the world came to a standstill with the Covid-19 pandemic, the digital business in China was one of the sectors that grew the most. Unlike other parts of the world, in China, a few tech companies dominate the online shopping, mobile payments, delivery services, or car-hailing services landscape. With it, they gather important amounts of data from their user base. It has come to the attention of the authorities that the current data law and antimonopoly practices need to address a few points such as data ownership, and how the users can be protected if the data is taxable, etc. Even though this debate it’s in its early stages, we need to be observant of changes to come for the tech industry. 

China to issue more regional bans on cryptocurrencies mining
The State Council of Financial Stability and Development Committee released a statement on 21 May 2021, indicating that there will be more strict measures to control the bitcoin mining and trading activities, as part of the efforts to fend off financial risks, other provinces, mining hubs in China’s north and southwest regions, such as Sichuan, Inner Mongolia, and Xinjiang have issued an outright ban on cryptocurrency mining, ownership, and trading.  These bans mean that more than 90 percent of China’s bitcoin mining capacity, the world’s biggest Bitcoin mining country, with a total estimated of about 20-30 percent of the world’s Bitcoin computing power, will have to be shut down, at least for the short term.  
Simultaneously, the government is on the way to launch its own centralized digital currency, which serves as a sign of the strong determination to curb speculative crypto trading to control financial risks, despite the economic benefits that they might have for local economies, especially those with chronic electricity supply problems. 

Cross-border: SAFE issues more QDII quotas 
On 1 June 2021, China’s State Administration of Foreign Exchange issued a new qualified domestic institutional investor (QDII) quota for an amount of US$10.3 billion, benefiting 17 financial institutions and facilitating the country’s two-way capital market opening-up. These 17 financial institutions include funds, securities firms, banks, and insurers. 

Changes in the tax requirements for IP transactions
On 10 June 2021, the Standing Committee of the People’s Republic of China passed the Stamp Duty Law reform. Effective from 1 July 2022, there will be recent changes in the Stamp Tax Law; this is concerning intellectual property rights. In summary, the changes will apply to certificates (trademark and registration) where the stamp duty of RMB 5 will not be imposed and a diminution of the tax rate charged to IP transactions, such as copyrights and patents, from 0.05% to 0.03%. 

Hong Kong is allowing the registration of foreign funds
On 7 July 2021, the motion for the second reading of the 2021 limited partnership fund and business registration legislation (amendment) bill was proposed. As illustrated in the bill, qualified foreign funds could register and run their businesses in the form of open-ended fund companies/ limited partnership funds in Hong Kong.

The bill’s goal was to stimulate foreign investment funds entry to Hong Kong by refining the system for fund re-domiciliation.  According to the statistics published on 13 July by the Companies Registry, the number of newly established companies was 56,253, which was 11% higher than the previous period. For non-Hong Kong company registrants, the number was 662. 

Agreement between the Asian Infrastructure Investment Bank and the Department of Justice of Hong Kong
On 29 June 2021, the Department of Justice of HKSAR established an agreement with the Asian Infrastructure Investment Bank on a 12-month secondment of its legal officers to the bank’s legal department. Such arrangement is foreseen to deepen local legal officers’ understanding of the operations of international institutions and stimulate knowledge gain from international legal professionals, ultimately benefiting the development of the Hong Kong legal field. Besides, the motion for the second reading of the Sale of Goods (United Nations Convention) bill was put forward on 14 July 2021. The bill introduces the Contracts for the International Sale of Goods, a globally adopted commercial law with 94 contracting states. The bill is intended to solidify Hong Kong’s legal infrastructure and its position for international trade and dispute settlement.  

 

Hong Kong travel updates
From 25 June 2021 onwards, Indonesia is regarded as a Group A1 country, and inbound travelers from Indonesia in Hong Kong are forbidden. A similar arrangement was imposed on the United Kingdom starting from 1 July 2021. The Hong Kong government implemented such measures to prevent the further spread of the Covid-19 Delta variant in the local communityIn addition, Russia was classified as Group A2 on 16 July 2021 by the Hong Kong government. When boarding to Hong Kong, travelers who stayed in Group A2 countries within 21 days are required to provide validations on negative polymerase chain reaction-based nucleic acid test results as well as 21-night booking confirmations on specified Hong Kong quarantine hotels. 

Written by the Latin Department, CW CPA

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Establishing Your E-Commerce Platform in China: ICP Commercial License or ICP Filing?

Anyone establishing a website to provide internet information services in China must know the term “ICP”, short for Internet Content Providers. Yet, not everyone is clear about what type of ICP license is required for the intended business. This article provides a simple explanation.

In China, there are two types of internet information services:

  • Commercial Internet Information Services
  • Non-commercial Internet Information Services

Commercial Internet Information Services require internet users to pay for the information, while Non-commercial Internet Information Services refer to free access to open and shared information. As a result, different registration procedures will apply depending on the above two types of internet information services. Currently, China mandates an ICP filing system for non-commercial Internet information services and an ICP licensing system for commercial Internet information services.

As an Internet Content Provider (ICP) in China, you must ensure compliance with the relevant regulations in the administration of Internet Information Services and Non-Commercial Internet Information Services. A website that has not obtained an ICP filing or an ICP commercial license is prohibited from providing non-commercial internet information services or commercial internet information services.

Non-commercial Internet Information Services – ICP Filing System

To deploy a website in Mainland China for information purposes, you must apply for an ICP Filing (Bei’An in Chinese) from the Ministry of Industry and Information Technology. By obtaining an ICP Filing, your website will be eligible to be accessed in Mainland China. However, the website cannot be used for generating revenue.

Foreign companies with a registered business entity in mainland China or foreign individuals with a fixed residence in China may apply for an ICP Filing. The prerequisite of obtaining an ICP filing is that the website must be hosted on an instance deployed in Mainland China.

Commercial Internet Information Services – ICP Commercial Licensing System

Any website involving paid services such as online forums or charging the merchant for fees such as platform management fees requires an ICP Commercial License. The common forms of paid services are below:

  • E-Business Model
    • Charging the platform users such as membership fee
    • Charging the platform resident sellers such as technical service fee
    • Mixed a) and b) charges
  • Information Services Model
    • Charging the platform users such as paid reading
    • Charging the information service providers such as advertising fee
    • Mixed a) and b) charges

According to the license classification of value-added telecommunication business, there are two common categories, B21 and B25 license. For platforms operating online data processing and transaction processing business, i.e., E-business model, a category B21 license is required, for example, JP.com and Taobao.

For information service business providers who run the information services model, they will need to apply for a B25 license. The common forms of information services include:

  • Information search services (such as baidu.com)
  • Information dissemination platforms (such as 58.com, 51job.com)
  • Information community services (such as weibo)
  • Real-time interactive information services (such as QQ, WeChat)
  • Information protection and processing services (such as internet security, online anti-virus service, encrypt messaging)

Different categories of value-added telecommunications businesses require different license categories and cannot operate beyond the scope of the license. Therefore, if you wish to engage in other telecommunication business categories, applying for a new license for the appropriate category is required; otherwise, you will be fined.

The application for B21 license by e-commerce platforms is commonly referred to as EDI License (Electronic Data Interchange), while the application for B25 license by information service providers is commonly referred to as “ICP” License.

A foreign-invested enterprise in China with 100% foreign capital is able to apply for an EDI License. It means that foreign companies with 100% foreign shares can establish an e-commerce platform in China, providing users with online data processing and transaction processing services through the internet, such as online food ordering platforms, ticket booking systems, B2B exchange of business information. The basic requirements of applying for an EDI License are:

  • Having a company established in China with enough funds (a high level of minimum registered capital will apply);
  • It has a good track record and operation experience in providing online data processing and transaction processing services.

As for the ICP Commercial License for other internet information services, such as charging the platform users paid reading, advertising fee, forum membership fee, and information publishing fee, it requires that the foreign investors not hold more than 50% of the shares of the business entity in China.

Although it is possible for foreign companies to apply for an EDI License in China, the requirements, processing times, and procedures of the application impose great difficulties once started. Besides, foreign companies must also pay attention to other rules, such as personal data protection, intellectual property protection, e-commerce law, and ensuring it has adequate funds and professional management in the daily operation of the e-commerce business. Therefore, foreign investors are strongly advised to conduct a complete feasibility study to ensure the fulfillment of the conditions.

If you have any further questions, please contact our China FDI Legal Counsel, Phenix Zheng (phenix.zheng@cwhkcpa.com).

Written by Delilah Li, China Consultancy Team, CW CPA 

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SIAL

SIAL China 2021: Opportunities and Challenges

The SIAL Network is known to be the world’s largest food innovation network. It is a world benchmark for food industry players, with a live community of more than 365,800 global buyers. Today, SIAL is a global brand present in 50 countries worldwide, with events constantly held in 7 countries.  

The SIAL China trade show, as an integral part of the SIAL Network, is co-hosted with China Commerce Development Center (CCDC). The trade show is strategically located in Shanghai and has become Asia’s most important food and beverage exhibition event.   

Many foreign companies consider SIAL China a gateway to tap into the Chinese consumer market. Jim Liu, CEO of SIAL China, said that “SIAL China holds an important place on the industry calendar.” Since the launch of SIAL China, the fair has been an excellent platform for food companies to find partners, subcontractors, discover new products, find out about recent trends and the food market developments in China. In 2019, SIAL China attracted 4,300 global and 117,595 professional visitors. There were 17,251 appointments initiated via SIAL’s matchmaking platform.   

The success of SIAL China has attracted government departments and business associations worldwide to participate as well. Many countries often organize trade missions and set up government funds to support private businesses to attend SIAL China. These government initiatives take advantage of SIAL China to help small businesses in their international market expansion process. Such is the case of Northwest Hazelnut Company, a small US agribusiness that attended the SIAL China trade show through a program coordinated by the Western United States Agricultural Trade Association. Through SIAL China, the company met with dozens of their buyers and eventually achieved a 5% growth in business with China for that year. ICEX Spain Trade and Investment, a Spanish public institution whose mission is to promote the internationalization of Spanish companies, organizes the Spanish Pavilion in SIAL China each year to promote Spanish products and Spanish cuisine, from olives, olive oil, wine to cheese, pork, fish and juice.   

Although SIAL China 2020 was greatly affected by the pandemic, this year’s SIAL China promises to attract more international exhibitors and visitors. However, due to the current travel restrictions, overseas visitors are still unable to travel conveniently. Without the physical presence of many exhibitors, the tradeshow and matchmaking activities must be conducted in a virtual way. The service “Livestreaming visiting SIAL CHINA” launched in the edition of 2020 will be available at the 2021 event. Audiences everywhere in the world can see the display of products, watch the on-site activities, and attend the business matching meetings.  

Live streaming, virtual exhibitions, and online matchmaking meetings are becoming increasingly popular. Yet, given these tools, some companies seeking B2B deals are still experiencing difficulties securing new buyers. For one thing, the COVID-19 has left many B2B buyers in China rethinking their trading terms due to the uncertainty and the changing conditions of the marketplace. B2B contract negotiations are increasingly more challenging than before. For another, the rapid development of the cross-border e-commerce environment in China has transformed many B2B businesses from the traditional trading, buy and sell model to a consulting-based business, focusing more on marketing and sales management, brand strategy, and logistics consolidation. Overseas retailers are encouraged to sell to Chinese consumers directly via cross-border e-commerce as the country continues to implement preferential e-commerce policies nationwide.   

In China, purchasing good quality branded products online is already a lifestyle. Companies that focus on B2B must start to contemplate the possibility of B2C sales in China. For those SIAL China B2B sellers, e-commerce may seem unattractive. After all, why should they sell their products unit by unit if they can sell at once in bulk? The question may be rhetorical if the sellers do not care about branding and direct access to the final consumers. But for those who do care about building brand awareness, don’t just attend SIAL China looking for buyers. Find a reliable partner that will give you access to the most suitable sales channels and be willing to invest in time and resources to do business and grow together.     

Finally, as a side note, CW recently launched a new business division that provides cross-border e-commerce solutions to small and medium-sized firms. The new division is operating under a joint venture MHnCW Limited, partnering with Minihome Media, an omnichannel e-commerce and marketing service provider based in Hong Kong. For more information, please contact our e-commerce project coordinator Delilah Li via delilah.li@cwhkcpa.com.  

Written by Marant Caballero and Luz Deneb Martínez, Latin Department, CW CPA

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E-Commerce

Investing in Cross-border E-Commerce in China

  • CW is pleased to announce that our firm is launching a new business division which provides cross-border e-commerce solutions to small and medium-sized firms. The new division is operating under a joint venture MHnCW Limited, partnering with Minihome Media, an omnichannel e-commerce and marketing service provider based in Hong Kong. 
  • Cross-border e-commerce has attracted a great deal of attention from overseas brands and retailers. The following article provides a general overview of how cross-border e-commerce works in China.

 

Chinese spenders seldom shy away from any opportunity to show off their purchasing power.   According to the China Cross-border E-commerce Market Research Report 2018-2019, China’s cross-border e-commerce transactions have reached RMB 9.1 trillion in 2018 with over 100 million users. It is later reported that the markets transaction volume reached RMB 9.9 trillion in 2019, with a compound annual growth rate of 27%. It is projected to reach RMB 26.8 trillion in 2025, with a compound annual growth rate of 18.1%.  

Although the term cross-border e-commerce may be self-explanatory, it has become increasingly sophisticated in the past decades. E-commerce is generally understood as advertising, sale, and distribution of products through electronic means. From consumers’ perspective, while domestic e-commerce offers products available within the country, cross-border e-commerce enables them to purchase products directly from overseas markets.  

In recent years, the cross-border e-commerce business in China has attracted a great deal of attention from overseas brands and retailers. In terms of policymaking, China truly stands out in the global arena in fostering cross-border e-commerce. Of course, the country has gone through nearly a decade to formulate and adjust its cross-border e-commerce policies and regulations. It has managed to address many different aspects such as tax, logistics, electronic information, intellectual property rights, and data protection.   

 

Cross-border e-commerce vs. general trade 

To understand how “cross-border e-commerce” works in China, one should first distinguish this term from “general trade“.   

General trade often refers to the import and export of goods by an entity legally established in China with an import/export permit. The Chinese entity undertakes the obligations as an importer or exporter. When importing goods, the Chinese entity, acting as an importer, must first buy the products from the overseas seller, handle the customs clearance and pay the duties and taxes on CIF price before the products are sold in the China market. After the customs formalities, the products are often sent to a warehouse or physical shops. Under the general trade model, foreign brands and retailers must either find a Chinese importer or set up a Chinese subsidiary to sell in the China market.   

With the emergence of cross-border e-commerce, selling to China allows overseas brands to take a more direct approach. They do not need to find a trading partner who is willing to pay for imported products before selling them, nor do they need to apply for a Chinese business license to import on their own. Instead, the overseas company can set up an online shop on any cross-border e-commerce platform, so long as they meet the platform‘s requirements. However, the market seems primarily dominated by only a handful of platforms such as Tmall Global, JD Worldwide, and NetEase Kaola. These large platforms usually prefer working with well-known brands with a good reputation, high-quality products, and sound financial strength. There are other marketplaces that cost lower for SMEs. Some are specialty platforms that offer their specialty in selling to a niche market. Regardless, the intricacy in selling to China through cross-border e-commerce is that placing your products on any platform, big or small, doesn‘t guarantee success at all. New entrants must carefully study the Chinese market, the logistics solutions, the regulatory framework and be vigilant in the cost/benefit analysis before moving forward. 

 

  • Logistics models 

On the logistics side, the sellers can choose the direct purchase imports model (B2C) or the bonded imports model (B2B2C)  

If a direct purchase imports model is chosen, all individual parcels are packed and labeled overseas. The seller will then arrange to deliver the products to China via post or express delivery services. Prior to the arrival of goods in China, three documents must be sent to the customs network electronically: the online order, the payment transaction, and the logistics order. The package is then cleared if the information pertained in the three documents all match with each other. Finally, the local express company will handle the last-mile delivery to the buyer.   

Under the bonded imports model, the sellers will first stock their products in a special customs supervision area (such as a bonded warehouse) in China without payment of duties. Upon confirming an order online, the products are picked, packed, labeled, and shipped to the buyer. Compared to the direct purchase imports model, the bonded imports model provides a quicker response in the logistics process. For one thing, the products are already located in China before the buyer places an order. For another, as China continues to extend the geographic coverage of the pilot scheme for cross-border e-commerce retail imports, more and more cities will ramp up efforts to enhance its capability and efficiency in handling cross-border e-commerce retail imports. 

It’s also important to note that cross-border e-commerce is not applicable to all commodities. In 2016, China introduced the first version of the “List of Imported Commodities for Retail in Cross-Border E-Commerce”, which is widely known as the “Positive List“. The list provides transparency and guidance on items allowed to be imported into China through cross-border e-commerce. It was later updated respectively in 2018 and 2019, covering a total of 1,413 items that are in great demand by Chinese consumers.  

 

  • Payments,duties, and taxes  

Another key difference between cross-border e-commerce and general trade is the payment of duties and taxes. Importing goods to China generally involves import tariffs, value-added tax (VAT), and consumption tax. General trade requires the importer to pay for the import tariff, VAT, and consumption tax during import. Under the cross-border e-commerce scheme, the consumers are the taxpayers. When an individual customer places an order online, the e-commerce platform will calculate the applicable duties, taxes, and logistics costs. The customer then pays the total amount via an e-payment system which can be integrated into the e-commerce platform.   

China imposes single and annual transaction limits per person under the cross-border e-commerce scheme. Currently, the tariff-free quota on a single transaction is RMB 5,000, and the annual quota per person is RMB 26,000. Under these limits, even though the import tariff is set at 0%, the VAT and consumption tax are levied at 70% of the standard rate applicable to the type of goods, which is generally referred to as “cross-border e-commerce integrated tax“. Online shoppers who have not exceeded their single and annual transaction quota are subject to an integrated tax rate of 9.1% for most products. For high-end cosmetics, the integrated tax rate is 23.5%. Over these limits, the consumers will need to pay full import tariff, VAT, and consumption tax. Considering that the integrated tax is added to the e-commerce retail price, overseas sellers should be careful in their pricing strategy 

 

Challenges 

Selling to China via cross-border e-commerce is indeed an attractive business model for many overseas brands. Yet, it is not without challenges, such as trademark infringements, identity fraud, payment fraud, and counterfeit goods. China is determined to address these issues and even introduced the E-Commerce Law in early 2019.  

Under the new law, consumers who buy fake goods through cross-border e-commerce can hold direct accountability to either the overseas seller or the platform. As the platform needs to bear joint and several liabilities, the sites must carefully review and supervise the merchants and products to avoid liability for compensation caused by counterfeit goods. Furthermore, new policies on safety, taxation, logistics, after-sales, and other aspects of imported goods are brought upon to ensure strictly following of rules, protecting consumers rights and interests.  

 

Notable platforms and online marketplaces for cross-border e-commerce 

After implementing the E-Commerce Law, the China market has been more welcoming to foreign companies that wish to sell cross-border. With improved standards and structure over the sector, e-commerce continues to be a competitive market ground for brands to sell in China. Here are a few notable platforms and online marketplaces:  

  • TmallGlobal  tmall.hk – This is the sister website of Tmall.com and is currently the largest cross-border B2C platform, owned by Alibaba Group.  
  • JD Worldwidejd.hk – This is the cross-border platform of jd.com.  JD is known to be a major competitor of Tmall  
  • NeteaseKaola kaola.com -NetEase Kaola, launched by NetEase in 2015, is one of the market leaders in the CBEC sector. On 5 September, Alibaba announced to fully acquire NetEase‘s cross-border e-commerce (CBEC) platform NetEase Kaola for about US$2 billion.   
  • Xiaohungshu小紅書or Little Red Book xiaohongshu.com  – Xiaohungshu is a fast up-comer in Chinas crossborder e-commerce business. Over 70% of the users as post-90s. The site focuses on the use of media in promoting various areas in lifestyle, such as beauty, travel, food, and entertainment.  
  • Ymatouymatou.com  – Ymatou was founded in 2009 in Shanghai, focusing on high-quality foreign products and discounted sales.   

The global consumption habits under the pandemic has increased users’ demand and transactions in high-quality crossborder e-commerce. With the favorable substantive policies successively promulgated in China, crossborder e-commerce is forecasted to enter a new stage of development and growth. In no time, China will become the world’s largest and fastest-growing market for crossborder e-commerce.  

On a final note, CW is pleased to announce that our firm is launching a new business division focusing on providing cross-border e-commerce solutions to small and mediumsized firms. The new division is under the operation of a joint ventureMHnCW Limited, partnering with Minihome Media, an omnichannel e-commerce and marketing service provider based in Hong Kong.  

If you are interested in joining our platform, please contact our Delilah Li via delilah.li@cwhkcpa.com 

Written by Delilah Li, China Consultancy Team, CW CPA

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