I. Common Criminal Offenses Encountered in Insurance Claims

Common types of criminal conduct seen in insurance claims include fraudulently obtaining indemnity payments, misappropriating surrender or reduction refunds due to policyholders, or under the guise of surety insurance defrauding banks and other financial institutions.

At the application stage, an applicant may fabricate the subject-matter of insurance or falsify underwriting documents. When a loss occurs, the insured may invent a non-existent event, concoct a fictitious cause, or intentionally bring about the loss. During the adjustment phase, the claimant may collude with “claim-hustlers” to inflate damages, forge loss certificates, or bribe adjusters, surveyors and property-valuers to supply false reports. On surrender or reduction of coverage, insiders may exploit the policyholder data and policy files under their control to embezzle the refund proceeds.

II. How to Handle the Criminal–Civil Interface in Insurance-Claim Cases

When an insurance claim is intertwined with suspected criminal conduct, Chinese courts usually adopt one of three approaches:

1.Separate Proceedings

Article 1 of the Provisions of the Supreme People’s Court on Several Issues Concerning the Handling of Economic Disputes Involving Suspicions of Economic Crime (2020 Amendment) provides:“Where the same natural person, legal person or unincorporated organization is involved in both an economic dispute and a suspicion of economic crime on the basis of different legal facts, the economic-dispute case and the criminal-suspicion case shall be tried separately.”

Article 10 provides，“When a people’s court, in the course of trying an economic dispute, discovers clues or materials indicating a suspicion of economic crime that are related to the case but do not concern the same legal relationship, it shall refer such clues or materials to the competent public-security organ or procuratorial organ for investigation and prosecution, while the economic-dispute case shall continue to be tried.”

Article 128 of the Minutes of the National Conference on Civil and Commercial Adjudication provides，“Where the same party is involved in both a civil or commercial dispute and a suspected criminal offense on the basis of different facts, the civil or commercial case and the criminal case shall be tried separately. The following are typical situations: (1) The principal debtor under the main contract is suspected of a crime or has been convicted of a crime, and the creditor seeks to hold the guarantor civilly liable; (2) The act of an individual who, in the name of a legal person, unincorporated organization, or another person, enters into a contract is suspected of a crime or has been convicted of a crime, and the other party to the contract seeks to hold that legal person, unincorporated organization, or other person civilly liable; (3) The official act of a legal representative, person in charge, or other employee of a legal person or unincorporated organization is suspected of a crime or has been convicted of a crime, and the victim seeks to hold the legal person or unincorporated organization civilly liable; (4) The tortfeasor is suspected of a crime or has been convicted of a crime, and the insured, beneficiary, or other indemnity claimant requests the insurer to pay the insurance proceeds; (5) The victim seeks to hold civilly liable a party other than the individual suspected of the criminal offense.”

As the foregoing provisions make clear, separate handling of civil and criminal cases is premised on the two proceedings involving different legal relationships or different legal facts.

Whether the circumstances constitute the “same fact” is to be determined—according to opinions expressed by Justices of the Supreme People’s Court and established judicial practice—by examining three elements: the actor and the counterparty, the legal relationship and the act itself.

Judged from the standpoint of the actor and the counterparty. The term “same fact” refers to an act committed by the same person; acts carried out by different persons do not constitute the same fact. For example, if a legal representative, person-in-charge or other employee commits a crime but the legal person itself is not held criminally liable, the subjects of the criminal act and of the civil act are different; consequently, the situation will generally not be deemed the “same fact.”

Determination from the perspective of the legal relationship. If the victim in the criminal case is also the counterparty in the civil legal relationship, the facts will generally be regarded as the “same fact.” For instance, the tortfeasor is suspected of a crime, and the insured, beneficiary or other indemnity claimant requests the insurer to pay the insurance money; or the principal debtor under the main contract is suspected of a crime, and the creditor seeks to hold the guarantor civilly liable. Because these situations involve different legal relationships, neither constitutes the “same fact.”

Determination from the perspective of the constitutive facts. Only when the facts disputed in the civil case are also the constitutive facts of the criminal offence will they be deemed the “same fact.” In an insurance-claim dispute, the facts usually contested between the policyholder and the insurer are whether the insurance contract was validly concluded and whether the insurer is obliged to indemnify. If an employee of the insurer is suspected of embezzling funds, the facts at issue in the criminal case are generally whether the suspect was an employee, whether he or she took advantage of the position, and whether the funds were misappropriated for profit or personal use and not returned for more than three months. The disputed facts are therefore not identical.

2.Criminal Proceedings First

Article 11 of 2020 Amendment stipulates，“Where a case accepted by the people’s court as an economic dispute, after trial, is found not to be an economic dispute but to involve suspicions of an economic crime, the court shall rule to dismiss the action and refer the relevant materials to the public-security organ or the procuratorial organ.”

Understanding and Application of the Minutes of the National Conference on Civil and Commercial Adjudication by the Supreme People’s Court states，“Where a case is filed as a civil or commercial dispute but is ultimately determined in substance to be a criminal offence, and no genuine civil or commercial legal relationship exists between the parties to the civil action, the court shall rule to dismiss the action and refer the entire case to the public-security organ or the procuratorial organ.”

For example, in Supreme People’s Court case (2020) Zui Gao Fa Min Shen No. 6324, a furniture company took out comprehensive property insurance with an insurer for, inter alia, its showroom on the second floor of a commercial complex in Gulou District, Fuzhou. On the evening of 14 May 2015, a fire broke out in the complex, causing a total loss of the insured property. After the incident the furniture company promptly notified the insurer of the fire. However, a third party reported to the public-security authorities that the fire had been started deliberately by Zhou, the furniture company’s legal representative. Zhou was first placed under criminal detention and then released on bail. According to the case file and investigation report submitted by the Gulou Sub-bureau of the Fuzhou Public Security Bureau to the courts of first and second instance, Zhou had been subjected to criminal detention and bail on suspicion of arson, and the bail was lifted on 25 October 2016. The criminal investigation is continuing because other suspects have not yet been apprehended. Zhou, as the legal representative of the policyholder and insured furniture company, remains suspected of intentional arson and insurance fraud, and Huang Jiefeng’s claimed insurance rights had been assigned by the furniture company. Given these circumstances, whether the basis for the property-insurance dispute exists and whether the case is in truth an economic dispute could not be determined. The court of first instance therefore held that the fire and the resulting insurance claim were still tainted by criminal suspicion, and, pursuant to Article 11 of 2020 Amendment, dismissed Huang Jiefeng’s action.

With respect to mass-scale economic crimes such as fundraising fraud or the illegal acceptance of public deposits, the large number of victims, their wide geographic dispersion, the exceptionally high monetary amounts involved, and the extensive social impact seriously affect social stability. Where victims file a civil action against the suspect or criminal defendant based on the same facts, the people’s court shall rule not to accept the case and shall refer the relevant materials to the investigative organ, the procuratorate or the court that is trying the criminal case. Protection of the victims’ civil rights shall be achieved through criminal confiscation and restitution. If a people’s court trying a civil or commercial case discovers clues of any of the above mass-scale economic crimes, it shall promptly refer the clues and related materials to the investigative organ. Before the investigative organ decides to open a criminal case, the civil court shall suspend the proceedings; after the decision to open a case is made, the civil court shall dismiss the civil action. If the investigative organ fails to open a case in a timely manner, the court may, when necessary, report the matter for coordination.

3.Civil Proceedings First

Some procuratorates have proposed that, in handling insurance-fraud cases that straddle the criminal–civil divide, the approach of “civil first, criminal second” should be adopted to ensure the criminal case is correctly resolved.

For instance, Jian, head of a courier-branch outlet, and Han, formerly an employee of the same outlet, were involved in an accident. A light-duty box truck registered in Suzhou was owned by Jian but affiliated with Suzhou Vegetable Basket Produce Distribution Co. Ltd., which, as policyholder and insured, took out both compulsory and commercial motor insurance with an insurer.

On 16 February 2017, Han, driving the truck on Jian’s instructions, struck and fatally injured a pedestrian. Fearing the insurer would invoke the exclusion clause “operation of a commercial vehicle without a transport-administration permit or other requisite certificate,” Han and Jian agreed to submit a forged Road-Transport Practitioner’s Qualification Certificate (purportedly issued by the city transport office but bearing no seal). Relying on that document, the insurer paid RMB 262,754.40 in commercial-insurance compensation to the victim’s family.

During a later audit the insurer discovered the certificate was fake and reported the matter to the police, who opened a criminal investigation for suspected insurance fraud. In March 2019 the police transferred the case to the procuratorate, recommending indictment of Jian and Han for insurance fraud.

While the procuratorate was reviewing the file, the affiliated company “Vegetable Basket” filed a civil action against the insurer on 8 May 2019, arguing that the above-quoted exclusion clause was invalid. It sought the same RMB 262,754.40 that the police claimed had been fraudulently obtained. The court of final instance held that the insurer had failed to give the notice and explanation required for an exemption clause; therefore, the clause was ineffective and the insurer remained liable. It reversed the first-instance judgment and ordered the insurer to pay the RMB 262,754.40.

With respect to this case, the People’s Procuratorate took the view that:

(1) Under criminal-law theory, an “impossible attempt” denotes conduct that objectively creates—nor can ever create—any danger to a legally protected interest; in other words, it poses no threat to the specific social relationship safeguarded by the criminal norm. Because such conduct lacks the essential characteristic of social harm, it cannot constitute a crime.

(2) In “criminal–civil crossover” matters where the facts are clear, but the legal relationships are complex or the technical issues difficult to resolve, the civil adjudication—confirming rights and delineating legal relationships—may serve as the prerequisite for the criminal proceeding, thereby ensuring coherence of the legal order. Here, the court has already held that the insurance-exclusion clause is ineffective, and that the insurer’s denial of coverage is groundless; consequently, Jian and Han could not have inflicted any substantive detriment on the insurer’s interests.

III. Conclusion

In sum, when an insurance-claim case straddles the criminal–civil divide, courts may adopt any of three approaches—simultaneous separate trials, criminal-first, or civil-first. From the insurer’s standpoint, however, especially where the claim is allegedly fraudulent, an employee has misappropriated client funds, or the policy is merely a vehicle for some other crime, insurance companies would prefer the civil action to be stayed while the public-security or procuratorial authorities handle the criminal side first. Such sequencing can both cure the insurer’s information asymmetry and clarify the underlying facts; moreover, if victims obtain partial restitution through criminal confiscation, the insurer’s own liability may be reduced or extinguished.

To minimize the emergence of criminal cases in the first place, insurers are advised to scrutinize claim documents rigorously, maintain close communication with insureds to squeeze out “claim-scalpers,” and strengthen compliance training and internal controls for their own staff.

I. Introduction

On October 28, 2025, the 18th Session of the Standing Committee of the 14th National People’s Congress adopted the newly revised Maritime Code of the People’s Republic of China, which will come into effect on May 1, 2026. Against the backdrop of profound and complex changes in the international environment and severe challenges to the international economic and trade order, the adjustment of the chapter on the Carriage of Goods by Sea in the Maritime Code deserves significant attention.

The modifications to the chapter on the Carriage of Goods by Sea are extensive. This article initially classifies them into three categories based on the degree of modification: Core Revisions, Supplementary Revisions, and Adjustment Revisions. Core Revisions refer to newly added or modified rights and obligations, such as Article 52, which changes “fire exemption” to “fire on board exemption.” Supplementary Revisions refer to the incorporation of relatively mature judicial rules and standards into the new law, such as the addition of the right to suspend transportation in Article 96. Adjustment Revisions refer to modifications in the wording and word order of certain clauses, such as changing “negligence” to “fault” in specific provisions.

Given that Adjustment Revisions mostly do not affect the rules established by the original clauses, this article focuses on Core Revisions and summarizes some effective sources of the Supplementary Revisions to avoid redundancy.

II. Several Issues regarding Core Revisions

(I) Adjustment of the Scope of Application of the Chapter on Contracts of Carriage of Goods by Sea

The new law deletes the second paragraph of Article 2 of the original Maritime Code and adjusts Article 43 accordingly (unless otherwise stated, article numbers refer to the new law). This makes the concept of a contract of carriage of goods by sea cover both international and domestic maritime transport of goods, thus unifying the legal application for domestic and international maritime transport—the so-called “minimal dual-track system.”

However, there are still differences in the rights and obligations of carriers under international and domestic maritime transport contracts. These are mainly reflected in the requirements for the duration of the carrier’s obligation of seaworthiness in domestic maritime transport (covering the entire sea voyage under Article 48, Paragraph 2), the carrier’s statutory obligation of reasonable dispatch (Article 51, Paragraph 1, Sentence 2), and the fact that domestic carriers do not enjoy exemptions for nautical fault and fire on board (Article 52, Paragraph 2).

(II) Identification of Carriers and Changes in Rights and Obligations

1. Rules for the Identification of Carriers and Actual Carriers

Article 80 of the Second Draft of the Maritime Code added a presumptive rule for identifying carriers. However, considering that the corresponding situations are relatively complex and should be judged in practice based on specific circumstances, the new law did not retain this clause. Nevertheless, there are still cases in practice with different judicial reasoning.

The Maritime Code (Revised Draft for Second Review) once included a presumptive rule for identifying carriers in its Article 80. However, given the complexity of the relevant situations, it was deemed more appropriate to make judgments based on specific circumstances in practice, and the new law eventually did not retain it. Due to the lack of a unified standard, there are still different judicial approaches to the identification of carriers in judicial practice.

In the second paragraph of Article 44, the definition of “actual carrier” has been modified. Accordingly, entities such as port operators will have the status of actual carriers when specific conditions are met, and can thus enjoy the carrier’s exemptions and liability limits. Article 67 of the Minutes of the National Courts’ Symposium on Foreign-related Commercial and Maritime Trial Work (the “Minutes”) dated December 31, 2021, stipulated that if a port operator causes cargo damage during port operations and the shipper or consignee directly sues the port operator in tort, the port operator cannot invoke the unit liability limit. After the implementation of the new law, the original judicial rules in the Minutes will change.

2. Adjustment and Understanding of Carrier Exemptions

First, the adjustment of the fire exemption. Before the implementation of the new law, the judicial rule established by the case in Issue 10, 2007 of the Gazette of the Supreme People’s Court was that “as long as the fire accident leading to the loss or damage of goods occurs within the carrier’s period of responsibility, the carrier shall be exempt from liability regardless of whether the fire accident occurs at sea or on land.” However, under the new law, the location where the fire occurs will be explicitly limited to “on board the ship.”

Second, the understanding of the Act of God exemption. For a long time, “Act of God,” as a concept imported from English law, has lacked clear constitutive elements in judicial practice, especially regarding the boundary between Act of God and force majeure. Professors Si Yuzhuo and Hu Zhengliang have respectively analyzed the differences between Act of God and force majeure in their monographs, while the Shanghai Maritime Court tends to treat both as identical. The new law allows carriers in domestic maritime transport to invoke the Act of God exemption, which may lead to the erosion of the distinct meaning of “Act of God” and its further convergence with the meaning of force majeure.

3. Calculation of the Actual Value of Goods

Article 55 of the original Maritime Code stipulated that the actual value of goods is calculated based on the value of the goods at the time of shipment plus insurance and freight. In Case (2023) SPC Civ. Retrial No. 2157, the Supreme People’s Court pointed out that since Article 55 of the Maritime Code had explicitly stipulated the amount of compensation for damaged goods, general civil law should not be applied to increase the carrier’s liability beyond that provision. Therefore, this article actually stipulates the maximum scope of the carrier’s liability.

However, Article 56 of the new law modifies the calculation method for the actual value of goods: the actual value shall be calculated based on the market price at the time of delivery at the place of delivery; if the market price at the place of delivery cannot be determined, it shall be calculated based on the value of the goods at the time of shipment plus insurance and freight.

This change represents an alignment of contracts of carriage of goods by sea with the carrier’s liability for breach of contract under general transport contracts in the Civil Code, meaning the principle of full compensation should be followed. Consequently, cargo interests may attempt to claim compensation from the carrier for additional inspection fees, disposal fees, etc., incurred due to cargo damage or loss. Meanwhile, it is worth further considering whether the carrier can defend against claims for expectation interests under the transport contract.

4. Changes in Carrier’s Lien

According to Article 87 of the original Maritime Code, it is generally understood that the carrier can only lien goods owned by the debtor. Since maritime transport serves the delivery phase of international trade, the ownership of goods often changes, and this right of the carrier often exists in name only. Article 94 of the new law changes “lien its goods” to “lien corresponding goods,” avoiding the dilemma where the lien cannot be exercised due to the transfer of cargo ownership.

In summary, under the new law, the lien on movables is not limited to movables owned by the debtor; a lien can also be created on movables owned by a third party, and it does not require the creditor’s good faith as a prerequisite. This is consistent with the intent of the first paragraph of Article 62 of the Interpretation of the Supreme People’s Court on the Application of the Security System of the Civil Code, namely, based on the same legal relationship—for example, the transport contract evidenced by a bill of lading—the carrier can lien the goods of a third party (i.e., a bona fide holder of the bill of lading). However, it should be noted that according to the third paragraph, if the movables liened between enterprises and the debt do not arise from the same legal relationship, or are based on different transport contracts or charterparties, obstacles still remain for the carrier to lien the goods of a transferee of the bill of lading.

5. Issues of Electronic Transport Records

Section 5 of Chapter IV of the new law adds provisions for electronic transport records, clarifying their legal status. It stipulates that electronic transport records meeting statutory conditions have the same effect as transport documents; it specifies that the carrier and the shipper may agree to issue and use electronic transport records; electronic transport records should be complete, accurate, accessible for future reference, allow the issuer to be identified, and allow the holder to prove their identity; and electronic transport records and transport documents can be converted into each other.

The development of electronic transport records is an inevitable requirement of technological progress. Initiatives such as BIMCO’s “25 by 25,” the establishment of the FIT Alliance, the DCSA goal to achieve 100% electronic bills of lading by 2030, and GSBN, in which COSCO Shipping is deeply involved, are all beneficial explorations within the industry. However, electronic transport documents still have broad prospects for development in terms of the principle of equivalence, evidence identification rules, document pledges, and the establishment of a unified electronic bill of lading system.

(III) Adjustment of the Positioning of Voyage Charterparties

The new law moves the relevant provisions of voyage charterparties from Chapter IV of the original Maritime Code to Chapter VI, making voyage charterparties a subordinate concept under the chapter on Charterparties, alongside time charterparties and bareboat charterparties. This reflects the differences in cargo composition and transport technology under voyage charterparties compared to ordinary international contracts for the carriage of goods by sea and emphasizes the freedom of contract of the parties.

It is also worth noting that since voyage charterparties were not classified as ship chartering contracts under Chapter VI of the original Maritime Code, the charterer of a voyage charterparty could not enjoy the limitation of maritime liability according to Article 204 of the original Maritime Code. Article 214, Paragraph 2 of the Second Draft of the Maritime Code intended to retain this rule. However, considering that voyage charterers also bear risks of operating ships in the case of sub-chartering, the new law intends to delete this restriction, leaving space for voyage charterers to claim limitation of maritime liability.

(IV) Limitation of Actions and Application of Law

First, the issue of the limitation of actions. In Article 284 of the new law, the limitation period for claims for compensation in the carriage of goods by sea remains one year. However, Article 294 clarifies that the limitation period is interrupted when the claimant makes a demand for performance, files a lawsuit, applies for arbitration, or when the person against whom the claim is made agrees to perform the obligation. Compared with the relatively strict interruption rules in the original Maritime Code, the new law is undoubtedly beneficial to the claimant’s interests. At the same time, the new law clarifies that the starting point of the limitation period for claims by the carrier against the shipper, consignee, or holder of transport documents is when they “know or should have known that their rights have been infringed,” which is distinct from “delivery or scheduled delivery.”

Second, the issue of the application of law. Article 295 of the new law explicitly stipulates that contracts for the international maritime carriage of goods where the port of loading or the port of discharge is located within the territory of the People’s Republic of China are subject to the provisions of Chapter IV of the Maritime Code. Based on this, whether the front or back of the bill of lading stipulates the application of foreign law, or the application of foreign law is claimed by incorporating a charterparty into the bill of lading, such stipulations constitute invalid clauses.

III. Several Issues regarding Supplementary Revisions

First, some rules from the Minutes of the National Courts’ Symposium on Foreign-related Commercial and Maritime Trial Work (December 31, 2021) have been incorporated into the new law, mainly including:

  1. Article 48 of the new law extends the carrier’s obligation of seaworthiness to containers provided by the carrier (refer to Article 53 of the Minutes).
  2. Article 93 of the new law clarifies that the party liable for unclaimed goods at the port of destination is the shipper (refer to Article 61 of the Minutes). It should be further noted that, according to Guiding Case No. 230, the expenses and risks arising from unclaimed goods at the port of destination are borne by the contractual shipper, while the actual shipper bears no liability for compensation.
  3. Paragraph 2 of Article 94 of the new law stipulates that if the transport document states “freight prepaid” or a similar declaration, the carrier shall not lien the goods on the grounds of unpaid freight, unless the consignee is the shipper (refer to Article 60 of the Minutes).

Second, some rules from guiding cases, existing regulations, and international treaties have been incorporated into the new law, mainly including:

  1. In the carrier’s exemptions under Article 52 of the new law, judicial arrests not caused by the fault of the carrier, the actual carrier, or their employees or agents are excluded (refer to Article 139 of the Answers to Questions on the Practice of Foreign-related Commercial and Maritime Trials (I)).
  2. Article 54 of the new law adds that for goods stowed on deck based on an agreement, it should be stated on the bill of lading as deck cargo; if not stated, it cannot be used as a defense against a bona fide third party (refer to Article 24, Paragraph 4 of the Rotterdam Rules).

Third, some supplementary contents are intended to ensure consistency with other clauses, mainly including:

  1. Article 49 of the new law extends the carrier’s obligation of care for cargo to the delivery stage, which matches the carrier’s period of responsibility for goods carried in containers.
  2. Article 67 of the new law adds the shipper’s obligation to deliver goods. This clause may be related to Article 97; if the shipper indeed cannot provide the goods, they may request to terminate the contract before sailing and compensate half of the agreed freight. However, Article 97 does not grant the carrier a unilateral right of termination. There is controversy as to whether the carrier can simply claim compensation with reference to Article 97 if the shipper neither performs the delivery obligation nor terminates the contract, particularly when the carrier finds it difficult to prove actual loss or loss of profits.
  3. In some clauses, the provisions on exemptions are extended to cases of delayed delivery by the carrier, ensuring consistency with Article 51.

IV. One Issue regarding Adjustment Revisions

Article 45 is the “soul” clause of Chapter IV. In the original text, the relationship between the sentence “The clause transferring the insurance interest in the goods to the carrier or similar clauses shall be invalid” and the preceding text was not clear enough, which might lead to the misconception that it adjusts the insurance contract. After the adjustment in the new law, the wording is closer to the original text of Article 3.8 of the Hague Rules, clarifying that an agreement in a transport contract to transfer the right to claim cargo insurance proceeds to the carrier constitutes a breach of the carrier’s minimum liability standard. Therefore, such clauses in transport contracts are invalid, and this does not involve the validity of the insurance contract itself.

V. Conclusion

The maritime transport is a primary object of regulation under the Maritime Code, and the contract of carriage of goods by sea evidenced by a bill of lading is a vital component of this part and holds an important position in China’s international trade. In summary, most of the rules in Chapter IV of the original Maritime Code have been retained and remain highly vital. The new rules added by Core Revisions and the rules clarified by Supplementary Revisions represent a re-examination and re-positioning of the rights and obligations of the parties to a contract of carriage of goods by sea. Stakeholders—including carriers, cargo owners, freight forwarders, and insurers—may take Chapter IV as a starting point for understanding the revised Maritime Code, while keeping in view the organic connections between all chapters of the Code.

I. Introduction

On December 27, 2025, the Standing Committee of the National People’s Congress of the People’s Republic of China promulgated the newly revised Foreign Trade Law, which will take effect on March 1, 2026 (the “2025 FTL”). This legislative act marks a pivotal moment in China’s legal framework governing its economic interactions with the world. Since its initial enactment in 1994, China’s Foreign Trade Law (the “FTL”) has served as the fundamental statute regulating China’s import and export activities, foreign trade order, and related rights and obligations. It has undergone several amendments over the decades to adapt to the world’s evolving economic landscape and China’s deepening integration into the global economy. Among these changes, two revisions stand out as truly transformative: (i) the first major overhaul in 2004, which aligned China’s trade rules with its WTO accession commitments, and (ii) the 2025 FTL, which constitutes the second comprehensive and strategically significant update.

The 2025 FTL arrives at a critical juncture in global economic system. It unambiguously reaffirms the Chinese government and regulatory authorities’ steadfast commitment to the fundamental national policy of “opening-up.” However, this commitment is now expressed through a more sophisticated, rules-based, and proactive legal architecture designed to navigate an ever-evolving international environment. This environment is characterized by the resurgence of multilateral trade controls and geopolitical rivalries, increasingly complex and fragmented global supply chains, and the rapid emergence of novel trade forms propelled by the digital economy and artificial intelligence. The 2025 FTL is not merely an update; it is more of a strategic recalibration, positioning China to engage with the world from a position of growing strength, confidence, and a clear emphasis on sovereign legal governance, particularly in the ambit of intellectual property (“IP”).

The most significant and illuminating aspect of this revision lies in its enhanced provisions concerning IP protection in foreign trade. The addition of a new Article 33 in Chapter V, so named “Protection of Intellectual Property Rights Relating to Foreign Trade” and the enhancement of related clauses throughout the law signify a profound evolution in China’s approach. This evolution moves beyond passive compliance with international minimum standards towards active participation in shaping global IP norms, assertive protection of Chinese rights holders abroad, and the construction of a domestic legal regime capable of handling the intricate interplay between IP, trade, and national strategic interests. This article will provide a brief analysis of the 2025 Foreign Trade Law revision. It will explore the specifics and implications of its IP-related provisions, situate these changes within contemporary global trade disputes and systemic shifts, and outline the critical compliance imperatives it creates for both Chinese and foreign enterprises.

II. Background and Imperative for Change

China’s original FTL of 1994 was a product of its early reform and opening-up period, establishing a basic framework for managing a trade sector that was rapidly liberalizing from state monopoly. The 2004 revision was a direct and extensive response to the requirements of China’s membership in the World Trade Organization (“WTO”), which commenced in 2001. That amendment systematically incorporated WTO principles such as national treatment, most-favored-nation treatment (“MFN”), and transparency into domestic law. It also established legal mechanisms for trade remedy investigations (anti-dumping, countervailing, and safeguards) and introduced preliminary provisions on IPR protection in foreign trade, primarily aimed at prohibiting the trade in IP-infringing goods, consistent with the Agreement on Trade-Related Aspects of Intellectual Property Rights (“TRIPS”).

Within this volatile context, IP has moved from a peripheral trade issue to the very core of economic security and technological competition. IP is no longer just about protecting creative works or inventions; it is a strategic asset, particularly in the industrial sectors of semiconductors, information and communication technology (“ITC”), and biotechnology, determines control over critical technologies, dictates positioning in global value chains, and underpins national competitiveness. Developed economies, led by the U.S. and the EU, have long used robust IP regimes and aggressive trade tools like the U.S. Section 337 investigations and anti-trust investigations to maintain their technological edge and comparative advantages. Chinese companies, particularly during global business expansion, have consistently encountered various legal and regulatory challenges. For instance, enterprises from China frequently face costly IP litigation, exclusion orders, and market access restrictions abroad, which collectively place them in a comparatively disadvantaged position within the global economic landscape.

In addition, the global IP enforcement landscape has become a complex battlefield. In areas like Standard Essential Patents (“SEPs”) for telecommunications, litigation tactics have grown increasingly aggressive, with parties seeking anti-suit injunctions (“ASIs”) to paralyze parallel proceedings in other jurisdictions, leading to countermeasures like anti-anti-suit injunctions. These legal maneuvers transcend mere private disputes; they represent state-backed or state-tolerated strategies to assert jurisdictional dominance and influence global technical standards.

For instance, the 2025 WTO dispute between the European Union and China concerning anti-suit injunctions in SEP cases serves as a perfect real-time illustration of the principles underpinning the new law. The EU challenged China’s judicial practice of issuing ASIs, arguing it violated the TRIPS Agreement by undermining the rights of patent holders. China’s defense was robust, detailed, and grounded in a systematic interpretation of international law and the need to prevent jurisdictional abuse and ensure fair proceedings. In this case, China did not reject the WTO system. Instead, it engaged with it proficiently, while also supporting alternative mechanisms like the Multi-Party Interim Appeal Arbitration Arrangement (“MPIA”) to reform and sustain it. The upshot of the case is that the WTO panel dismissed the majority of the EU’s claims, finding that China’s measures in the specific cases presented did not constitute a violation of its TRIPS obligations. This portrays China as a “responsible stakeholder” seeking to reform, not dismantle, the system. The dispute moved China from a traditional defendant in WTO cases to a party actively shaping the interpretation of international rules in cutting-edge areas like SEP litigation and injunctive relief.

It is against this backdrop of external pressure, internal development needs, and a fragmented global rules-based order that the 2025 FTL was conceived. The law aims to provide Chinese enterprises with a stronger legal shield and sword in international trade, to safeguard China’s “developmental security” in key industries, and to articulate China’s vision for a more fair and equitable international trade system, which demands reciprocal treatment and a voice in rulemaking process.

III. The IP Revolution in Chapter V and 18-Article Regulation

One of the major changes in the 2025 FTL is the newly added Article 33 in Chapter V. It is not just an added clause, but also a programmatic statement of intent, providing that the state shall carry out international exchange and cooperation on intellectual property rights related to foreign trade, actively promote external negotiations on intellectual property rights related to foreign trade, establish and improve overseas intellectual property rights early-warning and rights protection assistance information platforms, and enhance the intellectual property rights compliance level and risk response capability of foreign trade operators.

This new provision outlines a comprehensive, four-pillar national strategy:

  • International Engagement: Proactive participation in bilateral and multilateral IP dialogues and negotiations. This moves China from a rule-taker to a rule-shaper, seeking to influence international IP norms that reflect its interests.
  • Diplomatic Negotiation: Using trade diplomacy to address systemic IP barriers faced by Chinese companies abroad, potentially linking market access issues to IP protection.
  • Systemic Support Infrastructure: Building official “early-warning and rights protection assistance information platforms.” This signifies a state-backed effort to collect intelligence on overseas IP risks, legal changes, and potential disputes, providing actionable guidance to Chinese firms. It mirrors the kind of institutional support businesses in advanced economies have long enjoyed.
  • Enterprise Capacity Building: Mandating the enhancement of IP compliance and risk management for all foreign trade operators. This creates a bottom-up pressure for Chinese companies to internalize IP best practices, moving away from a reactive, cost-driven approach to a strategic, proactive one.

On top of that, the 2025 FTL is closely related to the State Council Regulation on the Handling of Foreign-Related Intellectual Property Disputes (the “18-article IP Regulation”), which came into force on May 1, 2025. This 18-article IP Regulation operates at the administrative level, providing detailed procedures for the commerce department to handle foreign-related IP disputes that affect trade order.

The 2025 FTL elevates and enshrines these principles at the higher legislative level of the Standing Committee of the National People’s Congress. This creates a significant “closed-loop” system on legislation, detailed as the 18-article IP Regulation provides the detailed procedural regarding how investigations and measures will be taking, while the 2025 FTL provides the overarching statutory authority and policy consisting of the new strategic mandates of Article 33.

This two-tiered structure offers both flexibility and strength. The 18-article IP Regulation can be adjusted more readily to address emerging tactics, while the 2025 FTL can offer stable, high-level authority and direction. Together, they form a cohesive shield for the domestic market and a support mechanism for outbound investment, directly addressing the call for enhancing the autonomy, controllability, and resilience of industrial and supply chains.

IV. Clarifying the “China’s Section 337” Debate: Rule of Law versus Administrative Action

The enhanced IP enforcement powers have inevitably drawn comparisons to the United States’ Section 337 of the Tariff Act of 1930, a potent tool used by the U.S. International Trade Commission (“USITC”) to exclude IP-infringing imports through relatively fast administrative proceedings. Some commentators have prematurely labeled the new Chinese provisions as “China’s Section 337.”

This analogy, however, is somewhat misleading and overlooks fundamental philosophical and procedural differences. The U.S. Section 337 regime is fundamentally an administrative trade remedy process. While it adjudicates IP claims, its primary aim is to protect U.S. industries from “unfair acts” in importation. Its procedures are distinct from federal court litigation, often faster, and can result in general exclusion orders enforced by Customs. Its critics argue it can be used strategically to hinder competitors.

By contrast, the IP enforcement framework under China’s revised Foreign Trade Law is explicitly grounded in the principle of “rule of law” and reciprocity. Its stated foundation is the protection of “foreign trade order” and “fair competition,” not merely the interests of domestic rights holders. The law provides a legal basis for investigations and measures, but these are intended to operate within China’s established judicial and administrative system.

As mentioned above, the linkage between the 2025 FTL and the 18-article IP Regulation is crucial. According to Section 14 of the 18-article IP Regulation, the competent commerce department is entitled to investigate specific acts that harm trade order, which includes countries or regions that fail to provide adequate IP protection or national treatment to Chinese persons or goods. This creates a reciprocal or mirroring mechanism. Upon encountering systematic discriminatory treatment against Chinese rights holders in a foreign market, the Chinese government now possesses a clearer and more logically grounded legal mandate to investigate and, where appropriate, adopt proportionate measures against entities originating from that jurisdiction. This constitutes a calibrated instrument of diplomatic and legal leverage, designed to secure and promote mutual respect for IP rights. It also reflects China’s commitment to employing structured legal processes to respond systematically to violations of national treatment or MFN obligations.

V. Implications and Compliance Imperatives for Enterprises

The 2025 FTL creates a new operational reality for all businesses engaged in cross-border trade with China.

For Chinese Enterprises Going Global:

1. Strategic IP Transformation: The age of treating IP as an afterthought or a cost center has long gone. Companies must develop forward-looking, global IP portfolios. This includes proactive patent filings in key markets, rigorous freedom-to-operate (“FTO”) analyses, and sophisticated IP licensing schemes.

2. Leveraging State Resources: Enterprises must learn to actively utilize the new state-provided resources—the early-warning platforms, rights protection assistance, and training programs mandated by the 2025 FTL. Engaging with industry or trade associations and government-led IP initiatives becomes a strategic imperative.

3.Compliance as a Competitive Advantage: High levels of IP compliance and robust internal risk management systems are no longer optional. They are essential for mitigating risks abroad and for qualifying for potential state support. Understanding foreign laws on data, sanctions, and export controls is equally critical.

For Foreign Enterprises Entering the Chinese Market:

1. Revisit Chinese IP Policy: Foreign firms must understand that the new environment is not a simplistic copy of a U.S. regime, but a maturing, complex legal ecosystem. The focus should be on comprehensive compliance, not fear of an additional procedure.

2. Conduct Rigorous IP Due Diligence: Before entering the Chinese market, a thorough audit of the company’s own products, technologies, and brands is prerequisite. This includes:

  • FTO Analysis: Ensuring products do not infringe valid Chinese IP rights including but not limited to patents, software copyrights, and trademarks. According to the World Intellectual Property Indicators 2025, China leads the world with 1.8 million patent applications.
  • Registration and Protection: Securing Chinese IP rights (patents, trademarks, design patents) for core assets. It is noteworthy that China adopts a first-to-file system for both patents and trademarks, necessitating foreign enterprises seeking market entry to proactively formulate strategic IP protection measures in advance.

3. Embrace Holistic Compliance: Legal preparedness must extend beyond pure IP. A successful market entry strategy must integrate:

  • Cybersecurity Law, Data Security Law, and PIPL[1]: Ensuring strict compliance with data localization, cross-border transfer rules, and personal information handling standards. Data compliance is now inextricably linked to market access.
  • Anti-Unfair Competition Law: Avoiding commercial disparagement, trade secret misappropriation, and confusing marketing practices.
  • Anti-Monopoly Law: Being mindful of dominance, restrictive agreements, and merger control filings, especially in technology sectors.

4. Invest in Professional Expertise: Navigating this landscape requires specialized knowledge. Companies should either develop in-house legal and compliance teams with deep China expertise or retain reputable local law firms and consultants. The complexity of China’s legal environment now matches that of other major developed economies, treating it with less seriousness may pose a profound legal and compliance risk. 

VI. Conclusion

The 2025 FTL is a landmark event with far-reaching consequences. It is a definitive legislative declaration that China’s “opening-up” in the era of strategic competition will be guided by its own legal sovereignty, strategic interests, and a demand for reciprocity. By placing a supercharged focus on IP protection within the trade context, China is addressing a key vulnerability of its past development model while asserting its right to participate as an equal in shaping the global economic rules of the future. Particularly through Article 33, it establishes a state-backed, systematic approach to empowering Chinese enterprises on the global stage. Its integration with prior administrative regulations creates a formidable domestic legal toolkit.

In addition, the successful defensive outcomes achieved by both enterprises confronting foreign governmental trade sanctions and the national system within WTO proceedings demonstrate that China’s evolving IP and trade practices constitute a sophisticated and legally-articulated endeavor to advance its interests within the framework of existing international law, while concurrently developing domestic legal capacities commensurate with its economic standing.

For the global business community, the Chinese market remains open, but the terms of engagement are maturing rapidly. Compliance is no longer a bureaucratic hurdle but a strategic scheme. The 2025 FTL, especially its IP provisions, is not a wall but a gateway—one that requires a detailed map, expert guidance, and a profound respect for the complex and sophisticated legal system that now governs the world’s second-largest economy. In this business and legal dynamic, both Chinese and foreign enterprises should recognize and adeptly respond to this profound shift towards rules-based, IP-centric trade governance.

Note：

[1] PIPL stands for Personal Information Protection Law of the People’s Republic of China.

In the international insurance market, a syndicate is Lloyd’s operational unit for conducting insurance business. It is financially supported by one or more Lloyd’s members and routinely managed by a specialist Managing Agent. These Lloyd’s members are the actual insurers of the relevant insurance policies.

Section 8(1) of the English Lloyd’s Act 1982 provides that:

“An underwriting member shall be a party to a contract of insurance underwritten at Lloyd’s only if it is underwritten with several liability, each underwriting member for his own part and not one for another, and if the liability of each underwriting member is accepted solely for his own account.”

According to the above provision, for any risk underwritten by a syndicate, each underwriting member bears individual liability according to their respective share. Under traditional English law, syndicates themselves are not legal persons and cannot, in principle, be parties to litigation. Consequently, different jurisdictions have developed different approaches to resolving the issue of their litigation standing in disputes arising from policies issued by Lloyd’s syndicates. This article provides a preliminary overview of these approaches.

Ⅰ. Legal Practice in jurisdictions of the United Kingdom and the United States

Under English law, where a dispute arises from an insurance contract underwritten by a syndicate, the syndicate members, rather than the syndicate itself, should in principle be the parties to the litigation. In practice, one member would typically participate in proceedings representing both itself and the other members.

This approach was illustrated in Pan Atlantic Insurance Co Ltd v Pine Top Insurance Co [1989] 1 Lloyd’s Rep 568. In this case, the plaintiff insurer brought proceedings on behalf of itself and other syndicate members. The defendant contended that the plaintiff had no standing to bring proceedings in such representative capacity, but this contention was rejected by the English Court of Appeal.

In Lloyd v Google LLC [2022] 2 All ER 209, Lord Leggatt of the UK Supreme Court cited the Pan Atlantic case and summarized that “[I]n the case of insurance underwritten by Lloyd’s syndicates, which are not separate legal entities, it is standard practice for a single member of the syndicate (usually the leading underwriter) to be named as a representative claimant or defendant suing, or being sued, for themselves and all the other members. There is no difficulty in awarding damages for or against the representative in such proceedings, as the calculation of any damages which the members of the syndicate are collectively entitled to recover or liable to pay does not depend on how the risk is divided among the members of the syndicate.”

This position has also been adopted in other common law jurisdictions, including the United States.

For example, in Roby v Corp. of Lloyd’s 796 F. Supp. 103, Fed. Sec. L. Rep. (CCH) P96,825, 1992 U.S. Dist. Decision, heard by the United States District Court for the Southern District of New York, investors in an investment dispute brought proceedings against multiple defendants including the Lloyd’s itself. These defendants included certain Lloyd’s syndicates.

The syndicate defendants raised a defense claiming they were not suable legal entities and accordingly sought dismissal of the claims against the syndicates. After hearing the issue, the court found that under both English law and New York law, the syndicates had no legal existence, and on this basis dismissed the claims against the syndicates.

That said, there are small number of English cases permitting syndicates to participate directly in litigation in their own name, such as Engelhart CTP (US) LLC v Lloyd’s Syndicate 1221 for the 2014 Year of Account and others [2018] EWHC 900 (Comm).

Ⅱ. The Issue of Syndicates’ Litigation Participation Before PRC Courts

Chinese law does not recognize the “syndicate” as a distinct legal entity.. Therefore, under PRC law, there is currently no clear legal provision regarding whether a syndicate could be a eligible defendant and how parties should be identified in disputes concerning insurance policies underwritten by syndicates. PRC courts have yet to develop a consistent judicial practice on this issue.

Based on the our preliminary research, syndicates may participate in litigation before PRC courts in three different approaches:

  1. Individual syndicate members directly participate in proceedings, as in case (2015) Da Hai Shang Chu Zi No. 376 （（2015）大海商初字第376号）;
  2. The syndicate itself participates in proceedings as a party, as in cases (2017) Hu 72 Min Chu No. 3448 and (2020) Hu 0115 Min Chu No. 4842（（2017）沪72民初3448号、（2020）沪0115民初4842号）; and
  3. The syndicate’s managing agent represents the syndicate in defending proceedings, as in case (2017) Liao 72 Min Chu No. 585（（2017）辽72民初585号）.

Therefore, in any litigation involving a Lloyd’s syndicate in China, the appropriate party or parties to the proceedings should be determined on a case-by-case basis.

With respect to the first approach, Lloyd’s does not generally disclose the specific member list of syndicates. Accordingly, if one wishes to sue syndicate members directly, it may first request the syndicate’s managing agent for disclosure, and then, having obtained the member list, bring proceedings before the People’s Courts against these members.

With respect to the second approach, although Lloyd’s syndicates lack standing as parties to litigation in common law jurisdictions, there is nonetheless a plausible legal basis under Chinese law for recognizing the syndicate as a direct party to court proceedings

Article 51 of the PRC Civil Procedure Law provides that parties to civil proceedings in China should be “citizens, legal persons, or other organizations”. Article 52 of the Interpretation of the Supreme People’s Court on the Application of the PRC Civil Procedure Law (the “Interpretation”) provides that “the ‘other organizations’ referred to in Article 51 of the Civil Procedure Law means organizations that are lawfully established and have certain organizational structures and property, but do not possess legal person status, including: (1) sole proprietorships that have been registered and obtained business licenses in accordance with the law; (2) partnerships that have been registered and obtained business licenses in accordance with the law; (3) Chinese-foreign contractual joint ventures and foreign-funded enterprises that have been registered and obtained Chinese business licenses in accordance with the law; (4) branches and representative offices that are established by social organizations in accordance with the law; (5) branches that are established by legal persons and have obtained business licenses in accordance with the law; (6) branches of commercial banks, policy-based banks and non-banking financial institutions that are established and have obtained business licenses in accordance with the law; (7) enterprises run by towns and sub-districts that have been registered and have obtained business licenses in accordance with the law; (8) other organizations meeting the requirements set out in the present article.”

Although a Lloyd’s syndicate does not possess legal personality, it operates as a legitimate underwriting unit within Lloyd’s and maintains a defined organizational structure and identifiable assets. As such, it arguably satisfies the substantive criteria for an “other organization” under Article 52 of the Interpretation and may fall within the scope of paragraph (8) thereof, namely, “other organizations meeting the conditions stipulated in this provision.”

Moreover, in the event of a dispute with a syndicate that necessitates litigation within China, a plaintiff may also consider naming the syndicate itself and/or its managing agent as co-defendants. However, this approach currently lacks judicial precedent, and it remains uncertain whether Chinese courts would accept such a pleading.

As Chinese insurers continue to expand their cross-border operations, disputes involving Lloyd’s entities are expected to arise with increasing frequency. Such cases often raise complex legal issues concerning, among others, the recognition of foreign litigating capacity, enforcement of judgments, and cross-border procedural coordination. We look forward to closely monitoring, analyzing, and actively contributing to the evolving jurisprudence and practical developments in this emerging area of law.

I. Introduction

In recent years, following a period of explosive growth, China’s internet industry has gradually entered a stage of stock competition. Driven by intense internal performance metrics and the lure of substantial financial gain, cases of employees exploiting their positions, system vulnerabilities, or management deficiencies to commit crimes to seek illicit profits have become increasingly common. Such incidents not only inflict significant economic losses on companies but also severely erode corporate culture and business credibility. For internet enterprises, establishing a compliance framework capable of effectively identifying, preventing, and addressing internal criminal risks has shifted from being an “option” to a “necessity.”

Against this backdrop, this article aims to analyze the most common criminal charges and emerging trends in cases involving internet companies and to provide professional suggestions for corporate criminal risk mitigation. It is intended as a reference for readers, particularly practitioners within the internet industry.

II. Current Status and Trends of Criminal Cases Involving Internet Companies

  1. Multiple Internet Companies Issue “Anti-Corruption Announcements”

To strengthen the internal governance of corruption and fraud, several leading internet companies have established dedicated oversight bodies, such as Anti-Corruption Investigation Departments, Corporate Discipline and Ethics Committees, or Internal Control and Compliance Divisions. Upon identifying employee misconduct through these channels and reporting mechanisms, companies typically publicize the details through “Anti-Corruption Announcements” to demonstrate their zero-tolerance stance.

In January 2025, a prominent internet company publicly disclosed its anti-corruption governance results for 2024. The report indicated that the company had investigated over 100 integrity policy violations during the reporting period, leading to the dismissal of more than 100 employees involved. Of these, over 20 individuals suspected of criminal offenses were referred to judicial authorities for investigation. The report also detailed the handling of several serious cases involving commercial bribery and misappropriation of company funds.

In June 2025, a leading e-commerce group’s 2024 ESG report disclosed that the company had completed internal investigations into 221 corruption cases during the reporting cycle, comprising 191 cases of commercial bribery and 30 cases of misappropriation; it also addressed 12 conflict-of-interest incidents. Furthermore, 20 employee corruption cases (including those referred in previous years) that the company had referred to judicial authorities were concluded within this period.

In September 2025, a renowned internet technology company, through its Ethics and Discipline Committee, announced the outcomes of employee disciplinary actions for the second quarter of that year. The announcement stated that 100 employees had been dismissed for serious violations of company policies. Among them, 18 were publicly named due to suspected criminal activity or intentional harm to company interests; an additional eight individuals, suspected of criminal offenses, had been transferred by the company to judicial authorities.

These announcements from leading internet companies indicate that the domestic internet industry faces significant risks of internal fraud and criminal conduct, with corruption cases occurring frequently. Some implicated personnel have been transferred to judicial authorities on suspicion of criminal offenses. Simultaneously, “Anti-Corruption Announcements” have become a crucial method for companies to respond to public concerns and showcase their commitment to compliance governance.

  • Distribution of Corruption Case Charges Involving Internet Companies from 2020 to 2024: – A Study Based on Judicial Data from Haidian District Court

In May 2025, the Beijing Haidian District People’s Court, in conjunction with the Internet Society of China, released the White Paper on Corruption Crimes Committed by Internal Personnel of Internet Companies[1], disclosing trial data and trend analysis for related cases within its jurisdiction over the previous five years.

The White Paper data reveals that the internet industry has become a high-incidence area and key risk zone for internal corruption crimes. From 2020 to 2024, Haidian District Court concluded 350 cases of corruption crimes involving non-state functionaries, of which 127 cases involved internal personnel of internet companies, accounting for 36.28% of the total. The total amount involved reached approximately RMB 305 million.

In terms of specific charges, corrupt practices within internet companies primarily manifested in the following forms:

Judicial data from the Haidian District Court over the past five years clearly indicates that internal corruption crimes in internet companies not only represent a high proportion of cases and involve substantial sums but also exhibit distinct characteristics, being predominantly bribery by non-state functionaries and misappropriation. These figures highlight the prominent contradiction between new forms of rent-seeking power under the platform economy model and lagging internal governance.

  • Emerging Crime Pattern: “Platform Power Rent-Seeking”

With the deepening development of the “Internet Plus” model, corrupt practices within internet companies have acquired new characteristics marked by deep integration with technology, rendering criminal methods more diverse and concealed. Beyond traditional forms of bribery and misappropriation, the exploitation of unique internet platform resources for “power rent-seeking” has become a breeding ground for new types of crime.

In the realm of bribery, aside from traditional practices like accepting kickbacks, a growing number of cases involve the abuse of platform operational privileges to secure concealed benefits for others. This includes providing improper assistance in areas such as traffic allocation, search ranking, account permission management, and content recommendation, in return for illicit gains. In the “Case of Guo for Accepting Bribes by Non-state Functionaries”[2] , Guo, an e-commerce live-stream operations employee at an internet company, exploited his duties in live-stream management and account maintenance. Under the pretext of loans, home purchases, or car acquisitions, he solicited or illegally accepted property from several e-commerce hosts under his supervision, providing them with favors such as expediting account reinstatement and prioritized “whitelisting”.

In cases of misappropriation, beyond misappropriating company assets through traditional methods like fabricating expenses or siphoning funds, perpetrators now also employ novel tactics such as creating fictitious transactions, tampering with data, and fraudulently obtaining subsidies or coupons. These methods directly exploit platform rules and technical vulnerabilities for illegal profit. Owing to their technical sophistication and stealth, such schemes often evade detection by conventional auditing methods. For instance, in the “Case of Li for Duty-Related Embezzlement “[3] , the defendant Li, during his tenure in the e-commerce department of an internet social platform company, utilized his position to facilitate false transactions on the company’s platform through a third-party company controlled by Zhang, thereby defrauding the victim company of subsidies totaling over RMB 1.5 million.

‌III. Analysis of Commonly Occurring Offenses

As previously mentioned, corruption risks within internet companies exhibit trends of high frequency and concealment, primarily involving the crimes of Accepting Bribes by Non-state Functionaries, Duty-Related Embezzlement, and Misappropriation of Funds. These criminal acts increasingly demonstrate distinct industry characteristics in judicial practice. Drawing on typical cases, this article briefly analyzes the criteria for identifying and the manifestations of common offenses in the anti-corruption domain of internet enterprises.

  • Crime of Accepting Bribes by Non-state Functionaries

    According to Article 163 of the Criminal Law, the Crime of Accepting Bribes by Non-state Functionaries is defined as follows: it refers to an act where a staff member of a company, enterprise, or any other entity, by taking advantage of their duties, either 1) demands or illegally accepts money or property from another person to seek benefits for that person; or 2) in the course of economic exchanges, violates state provisions by accepting rebates or service charges in various forms and taking them for their own personal ownership, provided that the amount involved is relatively large. The core of this crime lies in the act of a non-state functionary leveraging their position for benefit exchange, infringing upon the normal management activities of the company/enterprise and the order of fair competition.

    Within internet companies, this crime may manifest in various forms, such as accepting kickbacks from suppliers, demanding bribes from partners by exploiting traffic allocation authority, or seeking illegal gains through unauthorized data access or algorithm manipulation. If these acts constitute a crime, offenders shall be punished based on the amount involved and the severity of the circumstances, facing penalties ranging from criminal detention to fixed-term imprisonment to life imprisonment, along with fines.

    Typical Case: In the case of “Liu et al. for Acceptance of Bribes by Non-state Functionaries”[4] tried by the Shanghai Qingpu District People’s Court, the defendant Liu, while serving as Senior Director of the Big Data R&D Center (later the Big Data and New Technology R&D Center) from November 2017, exploited his positional authority in recommending and selecting IT service suppliers to secure improper benefits for Company B by helping it obtain project orders. He repeatedly accepted bribes totaling over RMB 6.67 million from Luo, the actual operator of Company B, who acted in collusion with Wang and others. The court ruled that Liu had committed the crime of Accepting Bribes by Non-state Functionaries, sentencing him to four years’ imprisonment and a fine of RMB 500,000.

    Analysis: In this case, defendant Liu, serving as a Senior Director of the company’s Big Data Center, held authority over supplier referrals and decision-making. His act of exploiting this position to secure project orders for Company B and accepting substantial benefits fulfills the constitutive elements of “illegally accepting any money or property from any other person and seeks benefits for any other person by taking advantage of duty”. This conduct severely undermined the fair competition environment and management order within the IT procurement field. In internet companies, technical decision-making roles often directly control substantial procurement and collaboration resources, rendering such positions high-risk areas for the Crime of Acceptance of Bribes by Non-State Functionaries.

    • Crime of Duty-Related Embezzlement

    According to Article 271 of the Criminal Law, the Crime of Duty-Related Embezzlement is defined as follows: it refers to an act where an employee of any company, enterprise or any other organization unlawfully takes possession of the money or property of the organization by taking advantage of duty, provided that the amount involved is relatively large. The core of this crime lies in the perpetrator exploiting the convenient conditions afforded by their position within the organization to unlawfully appropriate property that rightfully belongs to the organization, thereby infringing upon the organization’s ownership rights over such property.

    Within internet companies, potential manifestations of this crime include falsifying records to embezzle company funds; exploiting access privileges to steal or resell company virtual assets or platform subsidies; or tampering with backend data to misappropriate company funds. Where such acts constitute crimes, offenders will face penalties ranging from criminal detention to fixed-term imprisonment or even life imprisonment, along with fines, based on the amount embezzled and the severity of the circumstances.

    Typical Case: In the case of “Zhang for Crime of Duty-Related Embezzlement”[5] concluded by the Shanghai Xuhui District People’s Court, the defendant Zhang joined a Shanghai-based technology company as a Direct Sales Manager in January 2018. Between December 2019 and August 2021, he exploited his position in direct client development by falsely designating the direct client “Adam” as a channel client. Through a company in Shanghai where his girlfriend, Zuo, was employed, he thereby siphoned off over RMB 600,000 in rebates that the technology company had intended for agents. The court found Zhang guilty of Duty-Related Embezzlement and sentenced him to ten months’ imprisonment, suspended for one year, and a fine of RMB 8,000.

    Analysis: In this case, the defendant Zhang exploited his position as a Direct Sales Manager by creating a fictitious channel agent and fabricating transaction layers. He thereby illegally diverted sales profits, which should have accrued directly to the company, by channeling them into non-existent “channel rebates.” The essence of his actions constituted the illegal appropriation of the company’s property, thereby satisfying all elements of the crime of Duty-Related Embezzlement. This case exposes potential internal control weaknesses within internet companies, particularly in sales channel management, agent qualification verification, and the disbursement of incentive funds.

    • Crime of Misappropriation of Funds

    According to Article 272 of the Criminal Law, the Crime of Misappropriation of Funds is defined as follows: it refers to an act where an employee of any company, enterprise or any other organization, by taking advantage of duty, misappropriates the funds of the organization for personal use or for lending to others, if the amount is relatively large and the funds are not repaid after three months, or if the amount is relatively large and the funds are used for profit-making activities or illegal activities even though the period is less than three months. The core of this crime lies in the perpetrator’s unauthorized placement of organizational funds under personal control, thereby infringing upon the organization’s rights to possession, use, and beneficial interest in such funds.

    Within internet companies, this crime may manifest in several forms, including diverting marketing funds for personal investment or wealth management purposes; lending company advances intended for cooperative projects to third parties for their temporary liquidity needs; or making short-term personal use of platform revenue. Where such an act constitutes a crime, the punishment is determined by the amount misappropriated, the duration of the misappropriation, and the purpose for which the funds were used—ranges from fixed-term imprisonment to criminal detention.

    Typical Case: In the case of “Zhao for Crime of Misappropriation of Funds”[6] concluded by the Beijing Haidian District People’s Court, the defendant Zhao served as an operations staff member in the BPO Business Department of a Beijing technology company commencing in May 2019. In this role, he was responsible for cash settlement and used a personal bank card to handle company operational funds. Between August and October 2022, Zhao exploited this position to embezzle over RMB 1.2 million belonging to the victim company from this bank card for personal use and failed to repay it for more than three months. The court ruled that Zhao committed the crime of Misappropriation of Funds, sentencing him to one year imprisonment, suspended for one year and six months.

    Analysis: In this case, defendant Zhao exploited his position to misappropriate over RMB 1.2 million of company funds for personal use, failing to return the amount for more than three months. This conduct satisfied the key statutory elements of misappropriation of funds: “a relatively large amount” and “failure to return for over three months.” A critical point is that the defendant, who was responsible for the company’s cash settlement operations, used his personal bank account to hold company funds for operational convenience. This practice exposed significant flaws in the company’s fund management system. The case serves as a critical warning to all enterprises: they must strictly implement the principle of separating public and private funds to prevent large company sums from being placed under unsupervised personal control.

    • Crime of Infringing upon Trade Secrets

    According to Article 219 of the Criminal Law, the Crime of Infringing upon Trade Secrets is defined as follows: it refers to (1) obtaining a right holder’s trade secrets by theft, bribery, fraud, coercion, electronic intrusion or other improper means; (2) disclosing, using or permitting others to use a right holder’s trade secrets obtained by the means mentioned in the preceding item; or (3) violating the confidentiality obligation or the right holder’s demand for keeping trade secrets, disclosing, using or permitting others to use the trade secrets he has controlled, if the circumstances are serious. The core of this crime lies in the infringement upon the right holder’s exclusive rights to trade secrets through improper means, thereby damaging the market competition order.

    Within internet companies, potential manifestations of this crime include copying source code, algorithm models, or key technical documents before leaving employment; illegally providing customer lists or core operational data to competitors; or disclosing sensitive business strategies or project plans in breach of confidentiality agreements. If the act constitutes a crime, the punishment ranges from fixed-term imprisonment to criminal detention and may also include the imposition of a fine.

    Typical Case: In the case of “Wu et al. for Crime of Infringing upon Trade Secrets, Crime of Infringement of Copyright”[7] tried by the Beijing Haidian District People’s Court, the defendant Wu, while serving as a Senior Development Manager at a Zhuhai software company in 2010, violated his confidentiality agreement. In exchange for other game engines from defendant Li, Wu unlawfully transmitted the source code for the company’s copyrighted online game “Sword World” to Li via QQ email. Between June and October 2011, Li arranged for the compilation of the illicitly obtained source code into the server-terminal program for the game “Qing Yuan Jian Xia”. He then conspired with the defendants Sun and Song to rent overseas servers, privately set up the game infrastructure, and create and operate a website for “Qing Yuan Jian Xia”. They solicited customers to register and log in to this private server game website as players or members, profiting by collecting recharge fees through in-game top-up features via third-party payment platforms. The court ruled that Wu committed the crime of Infringing upon Trade Secrets, sentencing him to two years imprisonment and a fine of RMB 200,000.

    Analysis: In this case, defendant Wu, a senior manager at a software development company, knowingly breached his confidentiality obligations by disclosing core company software source code to others for personal gain. This act satisfied the constitutive element of “violating the confidentiality obligation and disclosing the trade secrets he has controlled.” His actions infringed upon the right holder’s technical secrets, which ultimately led to the source code being used to operate unauthorized game servers. This severely disrupted the legitimate game market’s operational order and resulted in significant economic losses. The case underscores the high risk of trade secret leakage in key technical positions, such as R&D and operations, within internet companies. Consequently, beyond executing confidentiality agreements, enterprises should enhance the tiered and categorized management of digital assets like source code, improve operational log auditing, and systematically block leakage channels through a combination of technical and managerial measures.

    Ⅳ. Corporate Risk Control and Compliance Response Suggestions

    Given the current prevalence of internal corruption cases within internet companies, enterprises should shift from reactive investigations to proactive prevention and control, establishing a systematic compliance risk management framework integrating “policies, technology, and investigations” to effectively identify, prevent, and address internal criminal risks.

    • Strengthening the Internal Compliance Framework

      Companies should formulate and continuously refine internal regulations such as the Anti-Corruption and Business Conduct Guidelines, clearly defining behavioral boundaries and accountability for violations to ensure all operations are conducted according to established rules. Concurrently, regular compliance training and awareness programs should be organized for employees at all levels. Beyond covering senior management and key positions in procurement, operations, and sales, these initiatives should extend to all frontline roles to comprehensively prevent corruption “explosions” at the grassroots level of the organization. Companies may also integrate compliance performance into their performance evaluation systems to strengthen employees’ compliance awareness. Furthermore, independent and confidential reporting channels must be established, accompanied by robust whistleblower protection and incentive mechanisms to effectively encourage internal oversight and eliminate employees’ concerns about reporting misconduct.

      • Enhance Technical Prevention and Control Measures

      Enterprises should establish strict hierarchical permission management and access audit mechanisms. Implement the principle of least privilege and dynamic adjustments for core data, financial systems, and backend operations to ensure all actions are traceable and auditable. Simultaneously, leverage financial process automation and big data analytics to establish risk rules and anomaly detection models for transaction logs, expense claims, and supplier payments. This enables automatic identification and real-time alerts for suspicious or related-party transactions. Additionally, enhance background checks on partners and suppliers while conducting dynamic evaluations of their performance to mitigate fraud risks arising from external collaborations.

      • Optimize the Internal Investigation System

      Enterprises should establish internal investigation teams comprising members from multiple departments such as compliance, legal affairs, internal audit, and information security to ensure investigations are conducted professionally, compliantly, and efficiently. During investigations, emphasis should be placed on comprehensively and systematically collecting and preserving evidence, encompassing not only electronic data but also written documents, physical evidence, and testimonial evidence. For electronic evidence, specialized tools should be used to perform complete extraction and backup, with detailed documentation of the evidence collection process and key operational information. This ensures the authenticity, integrity, and continuity of evidence, meeting the review requirements of judicial authorities. After obtaining preliminary evidence, cases should be promptly transferred to public security organs or other judicial authorities in accordance with the law, and the company should actively cooperate with subsequent investigative work. This achieves effective coordination between internal risk management and external judicial procedures.

      • Conclusion

      Internal criminal risk prevention and control within internet companies constitutes a long-term and systematic management endeavor. Currently, crimes such as Accepting Bribes by Non-state Functionaries, Duty-Related Embezzlement, Misappropriation of Funds and Infringing upon Trade Secrets remain prevalent, with perpetrators continually evolving their methods to exhibit new characteristics of concealment and technological sophistication. Companies should systematically build compliance frameworks across multiple dimensions—including institutional development, technological safeguards, and investigative response—to embed risk prevention within business processes. This enables effective coordination among preemptive prevention, real-time control, and post-incident resolution. Only by establishing routine compliance management mechanisms can enterprises effectively mitigate criminal risks within complex and dynamic commercial and legal environments, thereby ensuring healthy and stable development.

      [1] See https://mp.weixin.qq.com/s/5xF9VnzTrUGCP2z30OI_IA?scene=25&sessionid=#wechat_redirect

      [2] See https://mp.weixin.qq.com/s/BnilwHP48vJs7Hm6uwJ2Pg

      [3] See https://mp.weixin.qq.com/s/5xF9VnzTrUGCP2z30OI_IA?scene=25&sessionid=#wechat_redirect

      [4] See Criminal Judgment No. 820, First Instance, (2022) of the Shanghai Qingpu District People’s Court.

      [5] See Criminal Judgment No. 857, First Instance, (2023) of the Shanghai Xuhui District People’s Court.

      [6] See https://mp.weixin.qq.com/s/W1LEAvuPXbCBnk_NAVn_nQ

      [7] See Criminal Judgment No. 3240, First Instance, (2012) of the Beijing Haidian District People’s Court; Criminal Ruling No. 5321, Final Instance, (2012) of the Supreme People’s Court.

      Introduction

      Protecting the integrity of networks and data has become a global imperative. China, recognising this, has promulgated the “Administrative Measures for the Reporting of National Cybersecurity Incidents ” (“Measures“; effective 1 November 2025). The Measures outline a comprehensive approach to reporting cybersecurity incidents, aiming to minimise losses, incentivise legal compliance, protect national cybersecurity, and align with existing legal frameworks. This article provides an analysis of the Measures’ key provisions and offers insights into China’s rapidly evolving cybersecurity framework.

      Purpose

      Article 1 of the draft describes the rationale behind these Measures. It emphasises the Measures’ alignment with foundational privacy, data, and cyber security laws in China, such as the Cybersecurity Law, Data Security Law, Personal Information Protection Law, and Regulations on the Protection of the Security of Critical Information Infrastructure.

      Scope

      Article 2 sets the Measures’ scope of application to entities involved in development (Note: The meaning of the Chinese also captures planning, deployment and putting-into-service.), operating, or providing services through networks within the PRC (“Network Operators“).

      Defining Cybersecurity Incidents

      Article 12 of the Measures clarifies that cybersecurity incidents are events that causes harm to a network, information system, or its data and business application due to human factors, cyberattacks, vulnerabilities, software or hardware defects or malfunctions, force majeure, or other causes, resulting in adverse impacts on the State, society, or the economy.

      Regulators

      Under Article 3, the national cyberspace authorities coordinate and supervise national cybersecurity incident reporting. In contrast, local cyberspace administrations coordinate and supervise cybersecurity incident reporting within their administrative regions.

      Incident Classification

      Article 4 contains requirements for reporting incidents categorised as significant or higher, namely: (1) incidents impacting critical information infrastructure, (2) incidents impacting central or state authorities, and (3) incidents impacting other Network Operators.

      The sole Annexe to the Measures provides granular guidelines for incident classification based on severity, impact and extent, as described below, in descending order of severity:

      Particularly Major Cybersecurity Incidents: These can be identified by important networks and systems facing widespread failure, causing large scale paralysis and loss of functionality, core data, important data or a massive amount of personal information being lost, stolen, tampered with or counterfeited, posing a particularly serious threat to national security and social stability, and the occurrence of other particularly serious threats such as:

      • Party and government websites at the provincial level or above or enterprises and public institutions or news platforms at the central level are inaccessible 24 hours or more.
      • Critical infrastructure failure for over 6 hours or main function disruption for 24 hours or more.
      • Impact felt by over 50% of a province’s populace.
      • Impact on transport, amenities and utilities affecting over 10 million individuals.
      • Leakage, theft, tampering or counterfeiting of important data posing a particularly serious threat to national security and social stability.
      • Leakage of personal information affecting 100 million individuals or more.
      • Impact on Party and government information systems at the provincial level or above or key news websites at the central-level resulting in the extensive dissemination of illegal or harmful information (i) for six hours or more on a homepage or 24 hours or more on other pages, (ii) involving 100,000 or more reposts on social platforms, (iii) involving 1 million clicks or views, or (iv) the CAC determines large scale dissemination to have occurred.
      • Direct economic losses exceeding CNY100 million.
      • Other particularly serious threats.

      Major Cybersecurity Incidents: These can be identified by important networks and systems facing partial failure or prolonged functionality interruptions, core data, important data and a large amount of personal information being lost, stolen, tampered with or counterfeited, posing a serious threat to national security and social stability, and the occurrence of other serious threats, such as:

      • Party and government websites at the prefectural level or above or enterprises and public institutions or news platforms at the provincial level are inaccessible for 6 hours or more.
      • Critical infrastructure failure for over 1 hours or main function disruption for over 3 hours.
      • Impact felt by over 50% of a prefecture’s populace.
      • Impact on transport, amenities, and utilities affecting over 1 million individuals.
      • Leakage, theft, tampering or counterfeiting of important data posing a relatively serious threat to national security and social stability.
      • Leakage of personal information affecting over 10 million individuals.
      • Impact on Party and government information systems at the prefectural level or above or key news websites at the provincial-level or above resulting in the relatively large scale dissemination of harmful information (i) for 2 hours or more on a homepage or 12 hours or more on other pages, (ii) involving 10,000 or more reposts on social platforms, (iii) involving 100,000 clicks or views, or (iv) the CAC determines large scale dissemination to have occurred.
      • Direct economic losses exceeding CNY20 million.
      • Other serious threats.

      Significant Cybersecurity Incidents: These can be identified by important networks and systems facing significant system losses, impacting operational capabilities, important data and a large amount of personal information being lost, stolen, tampered with or counterfeited posing a relatively serious threat to national security and social stability, and the occurrence of other significant threats, such as:

      • Disruption to Party and government websites at the prefectural level or above or enterprises and public institutions or major news platforms at the provincial level for 2 hours or more.
      • Critical infrastructure failure for over 10 minutes or main function disruption for over 30 min.
      • Impact felt by over 30% of a prefecture’s populace.
      • Impact on transport, amenities and utilities affecting over 100,000 individuals.
      • Leakage or theft of important data posing a significant threat to national security and social stability.
      • Leakage of personal information affecting over 1 million individuals.
      • Impact on Party and government information systems at the prefectural level or above or key news websites at the provincial-level or above resulting in the relatively large scale dissemination of harmful information (i) for 30 min or more on a homepage or 2 hours or more on other pages, (ii) involving 1,000 or more reposts on social platforms, (iii) involving 10,000 clicks or views, or (iv) the CAC determines relatively large scale dissemination to have occurred
      • Direct economic losses exceeding CNY5 million.
      • Other particularly serious threats.

      General Cybersecurity Incidents: These can be understood as not meeting the criteria of any of the above categories. This is, in essence, a residual category.

      Reporting Deadlines

      Cybersecurity Incidents involving critical information infrastructure should be reported to the relevant regulator and the public security authorities within one hour.

      Network Operators who are central or state authorities or their direct affiliates must report incidents within 2 hours.

      Other Network Operators must report incidents categorised as significant or above to the provincial-level cyberspace authorities of their locality within 4 hours.

      We note that 12387.cert.org.cn, the official cybersecurity incident reporting platform, only provides the following categorisation options: Particularly Major, Major, and Significant. This appears to suggest that General Cybersecurity Incidents might not be subject to reporting obligations. However, as there is currently no explicit exemption provided under Measures, organisations may wish to report General Cybersecurity Incidents until the CAC provides further guidance if they wish to take a more cautious approach to handling Cybersecurity Incidents.

      Industry Specific Requirements

      Where industry specific reporting requirements apply, they apply in addition to the Measures.

      Crime Reports

      The Measures clarify that where illegal or criminal activities occur, reports must also be promptly made to the public security authorities.

      Entrusted Processing

      Article 5 of the Measures requires Network Operators to require their entrusted processors providing network security, system operation, maintenance or other services to promptly report any incidents they detect and assist Network Operators in making reports.

      Detailed Reporting Requirements

      Article 7 of the Measures outlines the information Network Operators must include in their reports as follows:

      • The name of the entity involved and basic information about the relevant systems or facilities;
      • The time and place of discovery or occurrence of the cybersecurity incident, type and level of the incident, as well as the impact and harm caused, and the measures taken and their effectiveness; for ransomware attacks, information such as the demanded ransom amount, payment method, and date shall also be included;
      • Trends in the development of the situation and potential further impact and harm;
      • A preliminary analysis of the cause of the cybersecurity incident;
      • Clues for traceability investigations, including but not limited to possible attacker information, attack paths, and existing vulnerabilities;
      • Proposed further response measures and any support requested;
      • The preservation of the scene of the cybersecurity incident; and
      • Any other circumstances that should be reported.

      Where the cause, impact, or development trend of a cybersecurity incident cannot be determined within the prescribed time limits, Network Operators should make an initial report containing the information outlined in (1) and (2) and may report other matters later and in a timely manner.

      Where important new circumstances arise after a report is made, a supplementary report should be submitted.

      We note that the official cybersecurity incident reporting platform provides a reporting form. A translated version of that form is shown below.

      Cybersecurity Incident Report Form
      I. Basic information of the entity where the incident occurred
      * Name of the unit 
      * The location where the incident occurred 
      Head of cybersecurity 
      Cybersecurity lead phone number 
      Fax 
      2. Initial assessment of cyber security incidents
      * Type of initial incident 
      * Initial event level 
      Criteria for judgment 
      * Basic information about the entity where the incident occurred and the facility where the cyber security incident occurred 
      * Time, location and brief course of events 
      * The impact and harm caused by the incident 
      * Measures taken and effects 
      3. Further assessment of the cyber security incident (if it cannot be determined within 4 hours of the incident, a supplementary report must be made within 72 hours after the first report.)
      Initial determination of the cause of the incident 
      The development of the situation and the possible further impact and harm 
      Other additions 
      4. Basic information of the reporter
      * The organization to which the presenter belongs 
      * Name of the reporter 
      * The reporter’s mobile phone number 
      Reporter’s landline phone 

      Incident Disposal Reports

      Article 8 mandates Network Operators to conduct a thorough analysis and summary within 30 days of the incident, covering incident causes, emergency response measures, harm caused, liability, rectification status, lessons learned, and other relevant matters (“Incident Disposal Reports”). Incident Disposal Reports should be submitted through the original reporting channel.

      Reporting Channel

      Article 9 states that the cyberspace authorities should establish the 12387 hotline, as well as websites, email, fax, and other channels, to uniformly receive reports of cybersecurity incidents. Based on a press release by the Cyberspace Administration of China, the following reporting channels now exist:

      Tel: 12387

      URL: 12387.cert.org.cn

      WeChat Mini Program: Search for “12387”

      Email: 12387@cert.org.cn

      Fax: 010-82992387

      Enforcement and Consequences

      Article 10 state that Network Operators who fail to report cybersecurity incidents shall be subject to penalties in accordance with applicable law and regulations, while any delay, omission, false report, or withholding of information about cybersecurity incidents which leads to major adverse consequences will result in severe penalties for Network Operators and relevant responsible persons.

      The Personal Information Protection Law (“2021 PIPL”) is the applicable law with the highest penalties. It states the following:

      If the illegal activity… is of a grave nature, the violator will be ordered to make a correction, confiscated of any illegal again, and fined up to [the higher of] CNY50 million, or 5% of last year’s annual revenue… and may also be ordered to suspend any related activity or to suspend business for rectification, and/or be reported to the relevant authority for the revocation of the related business permit or the business license; and any person in charge or any other individual directly liable for the violation will be fined [and banned from certain roles for a time].

      The above should be read with the Provisions on the Application of Discretionary Criteria for Administrative Penalties by Cyberspace Authorities (“Discretionary Criteria”), which describes the factors that the CAC will consider when issuing penalties. Due to the nature of the reporting requirements under the Measures, it seems that there might be less scope for mitigating penalties and more scope for aggravating them under the Discretionary Criteria.

      Safe Harbour

      Article 11 provides for discretionary liability exemptions and reductions for Network Operators who have implemented reasonable and necessary protective measures, handled incidents in accordance with contingency plans, effectively mitigated the incident’s impact, and reported the incident per the Measures. Article 11 can be viewed as an incentive for actively developing and documenting a robust internal compliance framework.

      Conclusion

      China has finalised the Administrative Measures for the Reporting of National Cybersecurity Incidents, which enter into force on 1 November 2025. These Measures oblige any organisation that develops, operates or supplies network services in the PRC to notify significant-or-higher level incidents within 1 to 4 hours, depending on the entity’s status, and to file a full Incident Disposal Report within 30 days.

      Failure to report on time can trigger penalties that, in principle, can reach up to 5 % of annual turnover under the 2021 PIPL, while prompt disclosure and documented mitigation steps may result in exemption or leniency.

      A unified 12387 hotline, portal and e-mail address have been set up to receive filings. These contact details should be saved by DPOs and IT managers.

      Trade secrets have become a critical component of intellectual property (“IP”) rights in China, recognized as a key driver of innovation and market competition.  Over the years, China has strengthened its legal framework to protect trade secrets, addressing challenges such as determining the infringement of trade secrets, difficulty in evidence collection, the need for greater deterrents against infringement, etc.  On August 12, 2025, Beijing Municipal People’s Procuratorate (“Beijing Procuratorate”) has issued the Guidelines on Trade Secrets Protection and Risk Prevention (the “New Guidelines”), which, based on their daily experience, demonstrates common problems regarding trade secret protection and risk prevention reflected in cases of infringement of trade secrets, aiming to foster a better legal environment for technological innovation and industrial upgrading.  This article presents challenges and solutions in protecting trade secrets in China by analyzing the New Guidelines, aiming to offer feasible risk measurements for business parties when needing to protect trade secrets in their operation process. 

      1. Challenges regarding Trade Secrets Protection

      Nowadays, businesses in China need to grapple with legal ambiguities in defining protectable subject matters and ownership of trade secret under the Chinese law.  Furthermore, with the rapid advancement of digital technologies, they must face and manage growing risks associated with infringement of trade secrets in complicated methods.

      According to the Chinese legal system, trade secrets are defined in the Anti-Unfair Competition Law of the PRC (Revised in 2025) (the “Anti-Unfair Competition Law”) as technical or business information consisting of the following features:[1]

      • Secrecy: is not known to the public
      • Commercial value: has commercial value
      • Confidentiality measures: has been subject to reasonable confidentiality measures

      In addition, pursuant to the Interpretation on Several Issues Concerning the Application of Law in Civil Cases Involving Trade Secret Infringement, issued by the Supreme People’s Court on September 10, 2020, business information is further categorized as below:

      • Technical information: information on technique-related structure, raw materials, components, formulas, materials, samples, styles, new plant variety breeding materials, processes, methods or steps, algorithms, data, computer programs and relevant documents, etc.
      • Business information: business activity-related creativity, management, sale, finance, planning, sampling, bidding and tendering materials, customer information and data, etc.
      • Customer information: encompassing information like customer name, address, contact, trading habit, intention and content.

      In the New Guidelines, Beijing Procuratorate displays several typical cases in relation to defining and determining the scope of trade secrets.  We summarize the key take-aways reflected in those cases in the following table.

      In the digital economy era, infringements have evolved beyond physical theft to include cyber-based tactics, making detection and enforcement notoriously difficult.  New types of infringement methods have emerged, which includes but not limited to (a) infringers use malware, remote access tools, and web crawlers to infiltrate cloud storage systems, and (b) employees or partners, so-named “internal ghost”, exploit their access to leak secrets.

      For instance, a case stated in the New Guidelines involves a technology group company which has taken the following measures for managing its confidential information, (a) formulating the overall confidentiality system, (b) require relevant employees to sign confidentiality agreements, and (c) managing information by developing a special data management system, configuring corresponding permissions, and marking corresponding documents.  However, the infringer, a former employee of this company still took advantage of the loopholes in the company’s data management system and further downloaded files from the company’s server database, copied files from personal office computers to public computers by means of network sharing and transmission, and then stole the downloaded files with USB flash drives, mobile hard disks and other devices, causing enormous loss of such company.

      Certainly, Beijing Procuratorate claims that the existence of system loopholes is not an exemption of the infringer.  So long as the measures taken by the right holder for purposes of preventing the information from leaking under normal circumstances are sufficient to do the same, it reflects its confidentiality intention and fulfills its confidentiality management responsibility.

      From the standpoint of individuals, raising awareness of IP protection is critically significant.  Some actions may be guided by our habitual thinking or behaviors that may result from a momentary lapse in our judgements could constitute an infringement of the right holders’ trade secrets.

      In the New Guidelines, Beijing Procuratorate underscores that redlines should not be crossed and presents two cases in this regard.  Those cases clarify that the following acts also constitute infringement: (a) the “iterative” use of the company’s technical information without permission, and (b) employees arbitrarily releasing business secrets to the public platform even if they delete such information then.

      In addition, there are other challenges and difficulties when right holders initiate and proceed with a trade secret infringement litigation.  For example, right holders often struggle to prove the existence of trade secrets and the fact of infringement, especially in cases involving employees or sophisticated technologies.

      1. Feasible Solutions to Protect Trade Secrets

      The New Guidelines, in general, suggest the following solutions for enterprises and entrepreneurs to better manage and protect their trade secrets during the ordinary course of business:

      • Attend to the scope of confidential information, especially the commercial value of relevant information, as well as the pertinent ownership of rights.
      • Employ continuous and targeted confidentiality measures to prevent security risks occurring during the research and development processes.
      • Promote the awareness and ability of rights safeguarding and make full use of legal channels to protect trade secrets.
      • Raise awareness of IP protection and clarify the bottom line that should not be crossed. 
      • Practical Measures to Tackle New Challenges

      To be more specific, the businesses shall classify and manage trade secrets according to the actual situation, in which trade secrets could be categorized and further managed at core level (top secret), important level (confidential), general level (secret) and other levels, and businesses shall consider whether to configure confidential equipment and software can be determined accordingly.  Moreover, Beijing Procuratorate highly recommends that the whole process management of trade secrets from generation to destruction should be implemented, which involves the stages of storage, use and circulation, accurate authorization, allocation of responsibilities and rights, and circulation record traces.  

      In addition, to address risks associated with the adoption of digital technologies, Beijing Procuratorate offers several practical measures as below:

      • Enhancing the management of confidential carriers: computer equipment, electronic equipment, network equipment, storage equipment, software and other carriers can be clearly listed as confidential carriers, and the carriers can be marked, classified and indicated.
      • Making rational use of technological means to restrict the contact subjects and the scope of contact: in confidential files, devices, databases or information systems, abnormal access alerts, operation logs, and digital and physical access restrictions to confidential information can be deployed, and electronic files can be encrypted and backed up regularly.
      • Strengthening the management of confidential areas: in confidential factories, workshops and other production and business places, access control systems can be set up, eye-catching signs can be pasted, security personnel can be equipped as needed, visitors can be restricted or differentiated management can be carried out, external electronic equipment can be restricted, and security mechanisms such as video surveillance and alarms can be set up.
      • Actively fixing technical and administrative vulnerabilities: improve the awareness of safety precautions, and pay attention to checking whether there are technical loopholes or management blind spots at key nodes such as system upgrades, equipment updates, management personnel changes, employee transfers, and employee resignations.
      • Optimizing Employee Management

      As most trade secrets-related cases occurring between the enterprises and their (former) employees, it is always pivotal to strengthen the confidentiality management of employees.  Enterprises should try their best to clarify the scope of trade secrets and remind employees of the relationship between their own knowledge and corporate trade secrets. 

      During daily management, employees are urged to strictly abide by the confidentiality system, go through the approval procedures for the use of confidential information, and are not allowed to use, access, store, copy or disclose confidential information without permission.  Before employees change jobs or leave their jobs, they should promptly withdraw system access and download permissions, delete or change their account passwords, urge them to hand over, return, clear and destroy trade secrets and their carriers, and prevent them from continuing to contact, use or illegally disclose trade secrets and their carriers as much as possible.  

      On top of that, enterprises shall always (i) improve employees’ awareness of the concept of infringement of trade secrets, the specific behaviors of infringement of trade secrets and the legal consequences, and (ii) remind employees not to commit infringement crimes.

      1. Conclusion

      Notably, China’s legal framework for trade secret protection has evolved significantly.  Yet in practice, as the digital economy advances, novel and increasingly covert methods of misappropriating trade secrets have proliferated.  Concurrently, heightened risks of trade secret disclosure stemming from frequent workforce mobility further compound this challenge.  While obstacles remain, the legislative and judicial trends demonstrate a clear trajectory toward stronger, more effective protection aligned with global standards.  Enterprises should proactively implement confidentiality measures and stay informed of legal developments to safeguard their IP rights.

      As China continues to integrate into the global economy, further steps may include drafting a specialized trade secret protection law and improving cross-border enforcement mechanisms.  In particular, several legal scholars and governmental officials have advocated for accelerated trade secret legislation, arguing that current laws are inadequate for protecting digital assets like algorithms in the fields of cloud computing and AI.[3]  Practically speaking, however, several measures stated in the New Guidelines could be deployed for businesses to optimize their management on trade secrets and other IP rights at the current stage and on a continuous basis.

      [1] See article 10 of the Anti-Unfair Competition Law.

      [2] This ground was not supported by the evidence the company showed to the court. 

      [3] See Ma Yide, Deputy of National People’s Congress: Promoting Special Legislation on Trade Secrets, Caijing Magazine, March 10, 2025. 

      The Shanghai Municipal Government recently unveiled a series of incentive policies aimed at fostering the growth of software and information service industries. Notably, a pilot policy allowing game products developed by international game studios based in Shanghai to be classified as domestic games has garnered great attention. Although the implementation details and timeline are yet to be disclosed, this proposed rule directly addresses a major challenge faced by international game companies, thereby attracting substantial attention from global game market.

      Imported Games VS Domestic Games

      Currently, China’s National Press and Publication Administration (“NPPA”) which oversees the gaming industry in China classifies all games into two categories—imported and domestic—when issuing game approvals, also known as ISBNs. Though there is no official definition distinguishing these two categories, imported games are generally understood to be those whose copyright (including game software and content) is held by foreign entities, including foreign-invested companies established in China. While domestic games are those whose copyright is fully owned by Chinese companies or individuals.

      In theory, the NPPA applies the same set of content censorship criteria when reviewing all games and granting the ISBNs. However, in practice, international game developers face more difficulties in obtaining approvals compared to the relatively smoother and faster process experienced by Chinese game companies that seek approvals for domestic games.

      In contrast, the difficulties include:

      -Much less ISBNs for imported titles due to quota control. As indicated below, over the past 4 years, the number of ISBNs for imported titles has averaged less than 10% of the domestic titles, as a result of the quota control implemented by the NPPA. This indicates that obtaining an ISBN for an imported game is considerably more challenging than for a domestic game.

       ISBNs for Domestic GamesISBNs for Imported Games
      20241,306110
      202397898
      202246844
      202167976
      Average85882

      -More complex documentation requirements. While the majority of the required documents and materials for imported and domestic titles are similar, imported titles must include additional information, such as the status of publishing and operation of the game outside of China, as well as the chain of title related to the licensing agreements.

      -Extended and unpredictable timelines. Unlike domestic titles tailored for local users, imported titles must be localized to obtain approvals and meet local users’ expectations. It involves not only text translation but also cultural adaptation and content modifications to satisfy the NPPA’s standards, and such features of localized foreign titles significantly extend the review and examination period. Furthermore, the timing for the issuance of an ISBN for an imported game can be influenced by factors beyond the control of game companies, such as the diplomatic relationship between China and the game’s country of origin.

      –Ineligible for the faster track approval applicable for qualified casual games.  A significant number of domestic casual games can benefit from faster track approval, with ISBNs typically granted within 20 working days. This is designed to accommodate the short lifespan and development cycles of casual games. However, imported casual titles are explicitly excluded from this beneficial treatment according to the NAAP’s current rules, thus it makes little sense to obtain ISBNs for foreign-copyrighted casual or hyper causal games.

      Implications of the New Policy

      This new policy will significantly accelerate the game approval process for titles developed by Shanghai offices of international game companies, allowing them to compete on equal footing with domestic titles, including simultaneous global launches. This initiative aims to encourage international game studios to establish and expand their development teams in Shanghai, as well as to register their game copyrights under their Shanghai entities. Considering China’s rich talent pool and top-tier mobile game production capabilities, this policy is highly appealing to international game companies., in particular, those focus on mobile games.

      Having said the above, it is important to note that the new policy in Shanghai does not fundamentally change China’s game approval regime. International game companies are advised to consider the following factors when deciding whether and when to make new or more investment in development teams in Shanghai:

      –The Shanghai branches cannot apply for the ISBN or publish the games directly. Due to the restrictions on market entry, foreign investors and their subsidiaries in China are not allowed to engage in game publishing and operation business. Consequently, the prevailing model—licensing foreign-copyrighted games to Chinese partners who handle ISBN acquisition as well as game publishing and operation—will remain unchanged. Once the new policy is carried out, an international studio’s Shanghai team will be able to work more closely with its Chinese partner to localize the game and assist with the game publishing and operation to the extent permitted by laws.

      –It is unknown how to define games developed in Shanghai. Pending the implementation details, the specific standards on games developed in Shanghai remain ambiguous. This includes requirements concerning game copyright registration or the size of the development team based in Shanghai. Furthermore, it is unclear what standards would apply if software development occurred in Shanghai but the game is based on other licensed works, such as internationally renowned TV series or novels.

      –It is unknow whether being regarded as domestic titles will ensure the same treatment. As mentioned above, the approval process of an imported game is usually lengthy, untransparent and unpredictable. Beyond quota control, imported titles appear subject to stricter review criteria. Consequently, it is uncertain whether the new policy will place Shanghai-developed games by international companies in an entirely equal position with those from domestic developers, including faster track approval for casual games.

      The announcement of the new policy underscores Shanghai’s long-standing ambition to position itself as a leading game production hub globally. Until the implementation details are clarified or the first domestic ISBN is granted for a game produced by Shanghai team of an international developer, it remains to be seen how the new policy will be carried out and the concrete advantage the international game companies will gain from producing their games in Shanghai.

      The Reinsurance Registration System (the “System”) was established by the former PRC insurance authority–China Insurance Regulatory Commission, now known as the National Financial Regulatory Administration (NFRA), as an essential financial infrastructure to strengthen supervision over the PRC reinsurance market and enhance regulatory efficiency. Officially launched on January 1, 2016, the System has been managed and technically upgraded by the Shanghai Insurance Exchange (SHIE) since February 2018. All overseas reinsurance counterparties planning to cede from PRC entities, are required to register and maintain up-to-date information in the System as a prerequisite for conducting reinsurance transactions within PRC.

      The core objectives of the System are to provide dynamic supervision through the registration of reinsurance counterparties; to ensure robust risk prevention by verifying the qualifications and compliance of counterparties and mitigating risks; and to promote greater transparency in the reinsurance market, advancing alignment with international standards and regulatory practices.

      1. Qualification Criteria

      To be eligible for registration in the System, overseas reinsurers must meet several key requirements:

      • Financial Strength: A financial strength rating of at least S&P A- (or equivalent from Moody’s, A.M. Best, or Fitch).
      • Capital Requirements: Minimum actual capital plus reserves of RMB 200 million (or equivalent in other currencies).
      • Solvency Compliance: Compliance with solvency requirements in their home jurisdiction.
      • Regulatory Record: No major legal or regulatory violations in the past two years.

      2. Material List

      Qualified overseas reinsurers must prepare and submit a set of documents and information, including but not limited to:

      • Company name, address, and contact details
      • Business license or equivalent documentation
      • Operating permit from their home insurance regulator
      • Audited annual financial reports for the past three years
      • Information on major shareholders
      • Financial strength ratings (optional but recommended)
      • Proof of solvency and regulatory compliance issued by the home regulator
      • Data related to reinsurance business ceded from China (if any)
      • Settlement bank account information

      3. Application Procedure

      The registration process involves the following steps:

      • Submission of Reference Letter:

      A “recommendation institution” (an entity that has, or will have, a reinsurance relationship with the applicant) uploads a Reference Letter to the System. If the applicant has an affiliated enterprise in China, that entity should act as the recommender.

      • Temporary Account Creation:

      The System will automatically send an email containing a temporary username and password to the reinsurer.

      • Submission of Application Materials:

      The reinsurer needs to log into the System and submits all required documents within 15 days of receiving the account credentials.

      • System Review:

      The System will review the materials automatically, and if all requirements are met, the reinsurer will be added to the active list immediately.

      4. Ongoing Compliance Obligations

      Registered reinsurers have the following ongoing compliance obligations:

      • Registrations must be renewed every three months.

      Key documents, such as audited annual financial reports and proof of regulatory compliance, must be updated annually.

      • Reinsurance business data must be updated quarterly.
      • Any significant changes, such as solvency issues, corporate restructuring, or regulatory actions, must be reported within 15 days.

      Registering as an overseas reinsurer in China requires not only meeting the initial eligibility criteria but also careful preparation of documentation and ongoing commitment to compliance. While the process is straightforward, regular renewals are essential to maintaining active status within the System. Once the Registration is done, the reinsurer will enter the active list of the System making it eligible to cede from PRC entities.  

      China’s livestream e-commerce industry has experienced explosive growth in recent years, which has revolutionized traditional retail models by combining information dissemination, real-time interaction, instant purchasing and even the entertainment.

      In the first three quarters of 2024, total retail sales in China amounted to 35.36 trillion yuan, up 3.3 percent year-on-year. Over the same period, online retail sales in China totaled 10.89 trillion yuan, up 8.6 percent year-on-year. Of that amount, online retail sales of physical goods reached 9.07 trillion yuan, accounting for 25.7 percent of total retail sales, up 7.9 percent year-on-year.[1] In particular, both the “Double Eleven” (Nov 11) shopping festival and the midyear “618” shopping carnival, mark the continuous rise in online sales revenue each year. 

      However, this rapid expansion has been accompanied by numerous regulatory challenges, including false advertising, counterfeit goods, and consumer rights violations. In response, China’s State Administration for Market Regulation (“SAMR”) and the Cyberspace Administration of China (“CAC”) jointly issued the Regulations for the Supervision and Administration of Livestream E-commerce (Draft for Comment) (“the Draft Measures”) on June 10, 2025, with public opinion being solicited till July 10, 2025. The Draft Measures employ approaches to addressing unique challenges posed by this emerging business model, representing a significant step toward comprehensive regulation of this dynamic industrial sector.

      I. Dual Governance Mechanism Addressing Regulatory Challenges of Livestream E-commerce

      The rapid expansion and rise of livestream e-commerce has been accompanied by significant regulatory challenges, such as false advertising and exaggerated claims, sales of counterfeit and substandard products, price manipulation and even the data fraud. 

      These issues have prompted regulatory responses at both local and national levels. At the national level, relevant provisions in (i) the E-commerce Law of the People’s Republic of China (“PRC”), (ii) the Measures for the Supervision and Administration of Network Transactions and (iii) the Guiding Opinions on Strengthening the Standardized Management of Network Live Broadcasting can be applicable to governance and compliance matters for livestream sales. 

      Additionally, prior to the Draft Measures, several provinces and municipalities have already implemented local regulations or guiding rules. For instance, Hangzhou’s Livestream E-Commerce Industry Compliance Guidelines (“Hangzhou Guidelines”) have been published on the website of Economy and Information Technology Department of Zhejiang Province on June 24, 2024.[2] Although it is expressly stated in Hangzhou Guidelines that such guidelines are advocacy and guiding opinions and cannot be directly used as the basis for administrative law enforcement,[3] detailed provisions in Hangzhou Guidelines can provide relatively clear guidance to livestream e-commerce participants in such vibrant e-commerce region as well as China’s first pilot zone for cross-border e-commerce. 

      However, with the rise of livestream e-commerce and emergence of new business model in such industrial sector, it is pivotal to stipulate a specific regulation tackling legal risks and navigating compliance guidance in this field.

      The Draft Measures establish a coordinated oversight framework involving both SAMR and CAC along with their local counterparts for better implementing the principle of integrating online and offline supervision. To be specific, SAMR and its local counterparts: primarily responsible for transaction integrity, protection of consumers’ legal rights, product quality monitoring, and fair competition. CAC and its local counterparts: focusing on content governance, data security, and online behavior regulation.[4]

      Detailed approaches of such dual governance mechanism are reflected in the following provisions of the Draft Measures:

      • Hierarchical Supervision: Livestream e-commerce platforms must classify live streams by influence level, applying appropriate scrutiny.[5]
      • Information Sharing: Mandatory data reporting enables coordinated enforcement across domains.[6]
      • Joint Investigations: Both agencies can require platforms to act against violators.[7]

      II. Framework and Key Components of the Draft Measures

      As mentioned above, the Draft Measures represent the first comprehensive national-level regulatory framework specifically targeting livestream e-commerce. The Draft Measures are structured in seven chapters with fifty-seven articles, aiming to establish clear responsibilities and obligations for all participants in the livestream e-commerce ecosystem.

      (i) Main Regulatory Targets and Their Compliance Obligations

      Distinct responsibilities and obligations of each regulatory targets are set below:

      (ii)  Supervision Approaches and Penalty Mechanisms

      The Draft Measures creatively integrate existing legal frameworks while addressing live streaming-specific issues. 

      (a)  Incorporation of existing laws

      The Draft Measures explicitly reference multiple established statutes:

      • E-commerce Law: For platform responsibilities regarding merchant vetting and transaction record-keeping.[21]
      • Price Law: Prohibiting deceptive pricing strategies like artificial price inflation before discounts.[22]
      • Advertising Law: Governing host endorsements and product claims, albeit with adaptations for livestream’s dynamic nature.[23]
      • Anti-Unfair Competition Law: Addressing false transactions, fabricated reputation, and misleading commercial promotions.[24]

      (b)  Innovative penalty provisions

      While leveraging existing laws, the Draft Measures introduce tailored penalties:

      • Platform liability for failure to cooperate with investigations, with penalties up to 100,000 yuan.[25]
      • Fines ranging from 5,000 to 50,000 yuan for violations like inadequate product vetting by livestream room operator.[26]
      • Fines ranging from 5,000 to 50,000 yuan for failure to establish rigorous commodity selection mechanism, pre-review mechanism for hosts’ information or livestream error correction mechanism by livestream marketing service agencies.[27]
      • Cross-platform enforcement through blacklist systems to prevent violators from simply migrating to other platforms.

      III. Special Provisions Dealing with Novel Challenges

      (i) High-Impact Livestreams

      Recognizing the disproportionate influence of top livestream hosts, the Draft Measures introduce differentiated supervision:

      • Enhanced Monitoring Requirements: Platforms must implement “dynamic technical monitoring, manual live monitoring, real-time inspections, and extended content preservation periods” for streams with large audiences, high transaction volumes, or influential hosts.[28]
      • Stricter Compliance Standards: Major hosts may have to face more rigorous oversight, including potential “human/manual monitoring” during broadcasts.[29]
      • Accountability Escalation: Violations by high-profile hosts may trigger cross-platform blacklisting, significantly increasing compliance risks.[30]

      (ii)  AI[31] Applications in Livestreaming Sales

      In recent years, Chinese retail players have invested heavily in generative AI to increase sales and lower costs, as well as enhance customer services during promotions. Those retailers normally master generative AI in three key areas — deepening customer engagement, turbocharging productivity and cost savings, and finding new growth beyond trade, which can further energize customer retention efforts, enabling e-commerce players to hyper-personalize their engagement with consumers and create bespoke shopping experiences for them.[32]

      Notably, the Draft Measures signify one of China’s first attempts to regulate AI applications in e-commerce industry, specifically addressing the following issues:

      These provisions aim to harness AI’s efficiency benefits while mitigating risks of deception brought by the AI application in livestreaming sales.

      IV. Prospects and New Trend on Livestream E-commerce Governance

      In this year’s Government Work Report, China listed vigorously boosting consumption and expanding domestic demand across the board as key priorities for 2025. The Draft Measures represent a sophisticated attempt to address the unique challenges of this rapidly evolving sector. By clarifying participant responsibilities, introducing differentiated supervision for high-impact streams, creatively incorporating existing laws, and pioneering AI governance, the framework aims to transition the industry from its so-named “wild growth” stage to sustainable and high-quality development.

      In addition, the Draft Measures seem to embrace the “regulatory governance” alternative proposed by some legal scholars,[36] emphasizing the following methods:

      • Real-Time Monitoring Over Pre-Approval: Shifting from front-loaded content reviews to dynamic oversight during broadcasts.
      • Application of Information Tools: Leveraging data disclosure requirements and credibility indicators to empower consumer choice.
      • Platform-Mediated Governance: Assigning platforms central roles in enforcing standards through technical means like AI monitoring.

      This transition reflects an understanding that live streaming’s value lies partly in its spontaneity—a quality that excessive pre-approval would stifle. By focusing on ex-post accountability and platform-assisted oversight, the Draft Measures seek to balance innovation with consumer protection.

      Ultimately, the Draft Measures’ success will depend on implementation—whether they can reduce deceptive practices without stifling the creativity and accessibility that made livestream e-commerce revolutionary. If properly calibrated, this regulatory framework could establish China as a global leader in digital commerce governance while ensuring the sector’s long-term vitality. However, it’s encouraging to see another significance step being taken to shape a healthy and favorable livestreaming sale environment and there is no doubt that the issuance of the Draft Measures will serve as a good start for guiding the business operators and participants of livestreaming sales about how to behave orderly, which in turn can better safeguard consumers’ legal rights and benefits as well as supporting the healthy and sustained development of Chinese e-commerce ecosystem. 

      As the deadline soliciting public comment approaches, marketing players in this field should consider how the draft might further refine its balance between innovation facilitation and consumer protection—perhaps by clarifying small business compliance pathways or enhancing provisions against algorithmic manipulation.

      [1] See Zhu Wenqian, Strong sales for high quality livestreaming, China Daily (October 19, 2024).

      [2] The Chinese version of full text of Hangzhou Guidelines can be referred to the following link: https://zj87.jxt.zj.gov.cn/zlzq/web/views/law/law-guide-detail.html?id=242831. 

      [3] See article 50 of Hangzhou Guidelines.

      [4] See article 4 of the Draft Measures. 

      [5] See article 7 of the Draft Measures. 

      [6] See article 13 of the Draft Measures.

      [7] See article 40, 41, 43 and 45 of the Draft Measures.

      [8] See article 6 and 16 of the Draft Measures.

      [9] See article 7 and 14 of the Draft Measures.

      [10] See article 8 and 19 of the Draft Measures.

      [11] See article 11 of the Draft Measures.

      [12] See article 17 and 18 of the Draft Measures.

      [13] This can be referred to as agencies of Multi-Channel Network (“MCN”).

      [14] See article 24 of the Draft Measures.

      [15] See article 27 and 28 of the Draft Measures.

      [16] See article 29 of the Draft Measures.

      [17] See article 33 of the Draft Measures.

      [18] See article 31 and 34 of the Draft Measures.

      [19] See article 36 of the Draft Measures.

      [20] See article 37 of the Draft Measures.

      [21] See article 48 of the Draft Measures.

      [22] See article 52 of the Draft Measures.

      [23] See article 53 of the Draft Measures.

      [24] See article 55 of the Draft Measures.

      [25] See article 49 of the Draft Measures.

      [26] See article 51 of the Draft Measures.

      [27] See article 54 of the Draft Measures.

      [28] See paragraph 1 of article 11 of the Draft Measures.

      [29] See paragraph 2 of article 11 of the Draft Measures.

      [30] See article 14 of the Draft Measures. 

      [31] AI stands for artificial intelligence.

      [32] See Fan Feifei, Tech products, AI services drive Singles Day sales, China Daily (November 12, 2024).

      [33] See article 18 of the Draft Measures.

      [34] See article 28 of the Draft Measures.

      [35] See paragraph 1 of article 30 of the Draft Measures.

      [36] See Liu Xiaochun: The Regulating Governance Shift in the Construction of Platform Trust Mechanism — From the Perspective of the Conflict between Livestream Sale and the Application of Advertising Law, Administrative Law Review, no. 2, 2025.