In the e-commerce space, the Chinese authorities have been working since 2016 on a comprehensive e-commerce law. The bill is now at its third draft stage, and a public consultation closed at the end of July. The draft bill is now with the National People's Congress standing committee for review, and further revisions may be required.
Businesses which meet the definition of an e-commerce operator are subject to a range of obligations to ensure fair trading practices, protect intellectual property and personal information, and safeguard cybersecurity, among other things. Specific rules are also set out for signing and executing e-commerce contracts, as well as resolving disputes.
The scope of the term 'e-commerce operator' covers businesses that have set up their own website through which they conduct their activities, as well as those that carry out their businesses through third-party platforms, in addition to the e-commerce platform operators themselves. B2B, B2C and C2C activities that reach a sufficient scale and degree of organisation all fall within the scope of the law. Meanwhile, the third draft bill makes clear that the law also applies to selling goods and providing services via live streaming entertainment or WeChat and other social media. The law states that non-business activities, such as transferring personally used second-hand items between end consumers, are excluded. There is also a let-out for natural person e-commerce operators who carry out intermittent transactions for minor amounts of money.
Platform operators have additional obligations, most notably reporting on the activities of third-party traders using their platforms. Platforms must provide third-party trader identity information to the new State Administration for Market Regulation (SAMR), and provide both identity information and a wide variety of tax-related information to the tax authorities. This is expected to have a significant impact on the effectiveness of tax authority enforcement on such traders, particularly in light of (i) the significant investment that the authorities have made in big data analysis capacities, and (ii) the tax data coming on stream from other sources such as the international tax information exchange under the OECD's common reporting standard (CRS) system (China is to commence such exchanges in September 2018).
China's State Council approved, on August 7 2018, the setup of 22 further pilot cross-border e-commerce zones, bringing the total number to 35. This extends the coverage of such zones to central and western China, as the original zones were largely in the east and south. These zones have special regulatory regimes designed to facilitate the seamless import and export of goods sold through e-commerce, which has been growing rapidly in China, as supported by preferential customs and tax policies.