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China: Cross-Border E-Commerce – Conditions and Challenges

China has in recent years developed into the largest and fastest growing e-commerce market worldwide. This development is not only driven by China‘s huge population but mainly due to shopping habits that differ drastically compared to the rest of the world: Chinese citizens shop and pay online via their smartphones.

To Chinese online shoppers, cross-border e-commerce (“CBEC”) has become a supplement to domestic e-commerce channels. For foreign companies, this offers promising opportunities to step into that market. While the sheer size of the market may look promising, businesses should not overlook the risks that come along with the engagement in CBEC with China. Besides commercial risks immanent to any business activity, companies face legal challenges as the Chinese legislative authorities are still in the process of implementing a comprehensive legal framework for CBEC. Currently applicable and publicly available PRC laws and regulations provide for certain record-filing and registration requirements both in regard to the enterprise conducting CBEC and the products sold through such business. Further, companies are well advised to assess certain requirements in regard to the location of their servers used for CBEC and rules and regulations in regard to CBEC payment methods.

The following types of business models can be considered common for conducting CBEC and they vary in the degree of cooperation between foreign and domestic Chinese companies:

  • B2C Direct Purchase Import through a Stand Alone eShop
  • B2C Platforms (online malls such as TMall)
  • B2C Multi Brand Retailers (hypermarkets such as Suning)
  • B2C Private Sales Shopping Clubs
  • C2C Market Places (e.g. market places such as TaoBao)

Laws and regulations concerning CBEC in the PRC are promulgated by various authorities, among others the Administration of Quality Supervision, Inspection and Quarantine (“AQSIQ”), customs authorities, tax authorities and the State Administration for Foreign Exchange (“SAFE”). These rules and regulations apply where a company qualifies as a “CBEC operator”, triggering certain record-filing and registration requirements. An enterprise is considered “CBEC operator” where it “engages in CBEC, including enterprises distributing CBEC commodities, logistics and storage enterprises for such commodities, enterprises operating CBEC trading platforms, and enterprises relating to CBEC.” (see Art. 2 “Working Rules for the Recordation Administration of Cross-Border E-Commerce Businesses and Commodities” promulgated by AQSIQ and in effect as of 1 January 2016 (《跨境电子商务经营主体和商品备案管理工作规范》).


China-Cross-Border E-Commerce-Conditions and Challenges .pdf