25 February 2003

Sophie Antoniou

On 1 February 2003, Guangdong province in southern China became the first Chinese province to have any form of standard e-commerce law, by enacting the Guangdong Regulations on Electronic Transactions (the “Guangdong Law”). Up until February, the local governments of Shanghai, Beijing and Hainan had passed certain rules on e-commerce relating to prices, digital certificate authentication and supervision but no local government had passed a law which encompasses all of these issues and the many more which go to making up a comprehensive e-commerce law.

Current e-commerce regulation in China

This lack of focused e-commerce law has not been simply a local problem in China. Currently there is no formal centralised regulation of e-commerce or State e-commerce law. There are e-commerce regulation agencies (see below) which provide some regulation by issuing rules and notices on internet information services; online advertising; website administration; e-business registration; online security; and online banking and securities trading etc. However, each agency or government department may have a different focus with respect to its particular regulation and there is no national law or standard to guide them.

The Guangdong Law – what it contains

The Guangdong Law has 34 articles which deal mainly with digital certificate authentication; electronic transactions and the registration of e-commerce service providers.

All e-commerce service providers are required to register with the Guangdong IT Industry’s Supervisory Authorities. They must provide customers with up to date and accurate information concerning their legal status. Customers must also be informed of the risks involved in making purchases over the internet. In addition, e-commerce service providers are not allowed to disclose any information about their customers to third parties without the customer’s express permission.

The law also covers specific regulations for e-commerce certification agencies and confirms the legal status of an electronic signature. This latter issue was previously touched upon superficially in the Contract Law of March 1999 and then in other local rules in 2001 and in 2002. However the Guangdong Law makes it plain that in e-commerce transactions, an electronic signature has the same effect as a written signature.

Why is it necessary?

Due to the non-centralized way in which China’s e-commerce law is developing and the fact that it encompasses the provisions of the local rules of other provinces and cities, the Guangdong Law may not interact well with existing and future local provisions. However, as often happens in China, the Guangdong Law may be used as a pilot scheme upon which a national e-commerce law could be developed and in fact represents the first step towards standardizing the myriad of regulations that currently exist.

Guangdong province is well suited to such a test. It is one of China’s most prosperous provinces with rapid growth in the technology sector. Guangdong generates one eighth of China’s total e-commerce turnover. Last year, Guangdong’s e-commerce turnover more than doubled to RMB20 billion (US$2.4 billion).

The way forward

Investors in China are currently trying to balance taking advantage of an emerging market while not holding themselves out as guinea pigs for what is also an emerging legal system. The advantage of local government leading the way in instituting legal change is that investors can communicate any teething troubles with new laws to local government (with whom they are much more likely to have close ties) and work out practical solutions.

E-commerce in China already has a strong presence in industries such as foreign trade, customs, banking, taxation, and distribution. Successful e-commerce service providers include the China Commodities Exchange Network, the Ordering System of China Commodities, the China Technology Export Trade Fair and the Electronic Exchange Network of China Stocked Commodities.

As soon as the whole of China has settled and homogenous rules regarding e-commerce then further interest will be shown by investors in opening up further industries to e-commerce.

Chinese Governmental Agencies

Below are the main governmental agencies which are currently responsible for regulating e-commerce:

  • Ministry of Information Industry (MII)

The MII was created in the midst of the bureaucratic reshuffling of March 1998 by merging the former Ministry of Post and Telecommunications and the Ministry of Electronics and Information. The MII is charged with the primary responsibility of overseeing telecommunications, multimedia, broadcasting, satellites and the internet.

  • Ministry of Foreign Trade and Economic Cooperation (MOFTEC)

MOFTEC is the government agency responsible for the regulation of foreign trade and investment activities. It has the authority to examine and approve projects involving, amongst other things, foreign investment and the import of foreign goods and technology.

  • State Administration for Industry and Commerce (SAIC)

The SAIC is responsible for company registration and regulates the business activities of all internet companies, both domestic and foreign investment enterprises in China.

  • State Council Information Office (SCIO)

The SCIO is directly under the State Council and regulates foreign media operations and the internet in China. It is directly linked to the CCP’s Propaganda Department, which supervises and guides news coverage and editorial content for all media in China.

Important - The information in this article is provided subject to the disclaimer. The law may have changed since first publication and the reader is cautioned accordingly.