E-commerce in China

E-commerce in China: the short answer

E-commerce in China is the largest online retail market in the world and one of the most closely supervised. Platforms, the merchants that sell on them, live-streaming hosts and logistics providers all have defined legal duties. Foreign investors can generally own e-commerce businesses outright, unlike most other internet sectors, but they must navigate platform rules, consumer protection, pricing regulation, data law and tax reporting. Regulation tightened again in 2025 and 2026: a revised Anti-Unfair Competition Law, new pricing rules for internet platforms, mandatory tax information reporting by platforms, and a draft amendment to the E-Commerce Law itself.

For Chinese platforms and sellers expanding abroad, the picture is changing just as fast. The United States has ended duty-free treatment of low-value parcels, and the European Union is introducing a flat customs duty on small parcels. This page explains the legal framework, recent changes, market entry options for foreign brands, cross-border models, and the issues that most often lead to disputes or enforcement.

The legal framework for e-commerce in China

The core statute is the E-Commerce Law, in force since 1 January 2019. It distinguishes between platform operators, which provide the marketplace; in-platform operators, the merchants who sell through it; and operators that sell through their own websites or other channels. Platforms must verify merchants' identities, publish platform rules and keep transaction records, and they share liability where they knew or should have known of infringements or safety risks and failed to act.

Around the statute sits a dense set of rules:

• SAMR's Measures for the Supervision and Administration of Online Transactions (effective 1 May 2022), detailing registration, information disclosure, marketing and platform duties.
• The Consumer Rights Protection Law and its implementing regulations effective 1 July 2024, including the seven-day no-reason return right for most goods bought online.
• The Anti-Unfair Competition Law, revised with effect from 15 October 2025, which addresses data scraping, fake reviews, traffic hijacking and platform pricing pressure on merchants.
• The Anti-Monopoly Law, amended in 2022, which applies to platform conduct such as exclusivity demands.
• The Personal Information Protection Law (PIPL) and the algorithm recommendation provisions, which govern personalised marketing.
• The Advertising Law and SAMR's Internet Advertising Measures, which cover influencer and live-stream marketing.

What changed in 2025 and 2026

Four developments stand out for anyone running or investing in e-commerce in China.

The NDRC's explanation of the pricing rules emphasises fair competition based on quality rather than aggressive price wars, and transparency for consumers about dynamic pricing. In practice, platforms are reviewing promotional mechanics such as compulsory participation in discount campaigns, lowest-price guarantees demanded from merchants, and automatic price matching.

The tax reporting provisions, published on the State Taxation Administration's regulations database, require platforms to report merchants' and workers' identity details and income each quarter. Low-risk workers such as delivery riders who owe no tax are excluded from income reporting. For merchants, the effect is simple: income earned online is now visible to the tax authorities, and historic under-reporting is a material diligence issue for investors and acquirers.

The E-Commerce Law draft amendment, released by SAMR and the Ministry of Commerce, signals that regulators want more flexible enforcement tools beyond fixed fines, clearer duties for all participants in the platform economy, and provisions supporting international expansion. The final text may change; companies should follow its progress through the legislative process.

Behind these rules lies a broader policy concern with "involution", the destructive price competition that squeezes merchants, couriers and delivery riders. The intense subsidy battle in instant retail and food delivery during 2025 drew public attention from regulators, who summoned leading platforms and urged them to compete on service and quality rather than subsidies. For brands, the practical result is more scrutiny of promotions funded by merchants, more emphasis on fair fee structures, and greater willingness by regulators to intervene in platform-merchant relationships. Businesses should expect these themes to shape enforcement priorities and the final E-Commerce Law amendment through 2027.

Market entry for foreign brands and investors

E-commerce in China is relatively open to foreign capital. Online data processing and transaction processing services (operational e-commerce) are open to full foreign ownership, and a foreign-invested enterprise can sell goods online through its own channels or on third-party platforms. A 2024 pilot further lifted foreign ownership caps on several other value-added telecom services in Beijing, Shanghai, Hainan and Shenzhen, and the Ministry of Industry and Information Technology reported in June 2026 that 166 foreign-invested firms had received pilot approvals. Our page on telecoms and value-added telecom services explains the licences.

Most foreign brands choose one of three models:

1. Cross-border e-commerce (CBEC) imports. Goods are sold to Chinese consumers from abroad or from bonded warehouses under the retail import regime, with lower taxes within annual and per-transaction limits and lighter labelling requirements. This is fast and low-cost to test the market.
2. Domestic flagship stores. A local entity or authorised distributor imports goods through general trade, completes product registrations and Chinese labelling, and operates stores on the major platforms. This suits brands with established demand.
3. Distributor or Tmall Partner-style operators. A third-party service provider runs the store, marketing and fulfilment under contract. Control over pricing, data and brand protection depends on the contract.

Many brands move from the first model to the second as they grow. The legal work changes accordingly: from customs and product eligibility under CBEC to full product registration, labelling and local entity governance. See our page on cross-border e-commerce for the customs models.

Consumer protection, live-streaming and platform disputes

Consumer protection is the area where e-commerce in China generates the most enforcement. Common issues include misleading promotions, fake or incentivised reviews, unclear pricing, failure to honour returns, non-compliant labelling of imported goods, and food and cosmetics claims. SAMR and local market regulators act on consumer complaints, and professional claimants exploit weak points such as labelling errors to seek statutory damages, which can be a multiple of the purchase price.

Live-streaming commerce has its own risks. Hosts, multi-channel network agencies, merchants and platforms may all be liable for false claims made on air. Contracts with hosts should cover approved scripts, product claims substantiation, advertising disclosures, sales data access and responsibility for returns. Celebrity endorsers face liability under the Advertising Law if they endorse products they have not used or make false claims.

Disputes with platforms are also common. Merchants contest penalties under platform rules, store closures, deposit deductions and search ranking changes. Under the E-Commerce Law, platforms must publish rule changes in advance and consult merchants, and the 2025 pricing rules add protection against unreasonable restrictions. Our pages on consumer protection and anti-unfair competition cover these rules in more depth.

Brand protection and counterfeits

Counterfeits and unauthorised sellers remain a concern for brands engaged in e-commerce in China, although platform enforcement tools have improved considerably. The major platforms operate IP protection portals where rights holders with registered Chinese trademarks, copyrights or patents can file takedown requests, and platforms that fail to act on valid notices share liability. The first step is always registration: trademarks must be registered in China, in the correct classes and in Chinese-character versions, before enforcement is practical. Our page on trademarks explains filing strategy.

An effective programme combines monitoring, test purchases, platform notices, administrative complaints to market regulators for larger sellers, and civil litigation or criminal referrals against repeat offenders and manufacturers. Grey-market sales of genuine products are harder to address and usually depend on distribution contracts, authorised-seller programmes and product traceability rather than IP law alone.

Competition law and platform power

Competition law shapes the conduct of the major platforms. In 2021, SAMR fined Alibaba RMB 18.228 billion for imposing exclusivity on merchants (the so-called "choose one of two" practice), and later fined Meituan RMB 3.442 billion for similar conduct. These cases established that forcing merchants to deal exclusively can be an abuse of dominance. Merchants and brands that face exclusivity pressure, discriminatory treatment or unfair fee structures now have several possible routes: platform complaint processes, regulatory complaints, and civil claims. See our page on abuse of dominance.

Data, payments and tax for e-commerce in China

Personal information is central to online retail. Operators must obtain valid consent, allow consumers to refuse personalised recommendations, and avoid using data to set unfair prices for different customers in the same circumstances. Cross-border transfer of customer data, for example to a global CRM system, must follow one of the routes under the March 2024 cross-border data rules: security assessment, standard contract, certification or an applicable exemption. Our personal information protection page explains these duties.

Payments run through licensed non-bank payment institutions and banks. The Regulations on the Supervision and Administration of Non-Bank Payment Institutions, effective 1 May 2024, govern these providers. Brands should check how settlement, refunds and chargebacks are handled, and how funds collected in China are repatriated. Tax compliance covers VAT, corporate income tax, withholding on payments to overseas parties and, for cross-border sales, customs duties and import VAT and consumption tax under the CBEC regime.

Due diligence checklist for e-commerce acquisitions

Investors acquiring or funding businesses engaged in e-commerce in China should look beyond revenue growth. Key questions include:

• Are the business's licences, including value-added telecom licences and any food, cosmetics or medical device permits, held by the right entity and current?
• Has income been fully reported for tax, given that platforms now report merchant income each quarter?
• What share of sales depends on a single platform, and what do the platform agreements allow the platform to change unilaterally?
• Are there regulatory penalties, consumer complaint trends or professional claimant cases?
• How is customer data collected, stored and transferred, and does the target have records of consent and cross-border transfer filings?
• Are relationships with live-stream hosts, agencies and store operators documented, and who owns the store accounts?
• Are social insurance and housing fund contributions paid for staff and, where relevant, for platform workers?

Chinese sellers and platforms going global

Chinese platforms and brands have become major forces in global retail. They now face a tightening environment abroad. The United States ended duty-free de minimis treatment for low-value shipments from China in May 2025 and for all countries in August 2025. The EU has agreed a flat EUR 3 customs duty on low-value parcels under EUR 150, applied from 1 July 2026 as an interim measure before wider customs reform. The EU also regulates large online marketplaces under the Digital Services Act and product safety rules, and has investigated major Chinese platforms.

For sellers, the practical consequences include changing fulfilment models toward local warehouses, higher landed costs, stricter product safety and responsible-person requirements in the EU, and more scrutiny of marketing claims. For platforms, obligations include risk assessments, trader verification, and cooperation with regulators. Our page on overseas compliance for Chinese enterprises covers building a global compliance programme.

Worked example. A Shenzhen consumer electronics seller that relied on direct-to-consumer parcels into the United States and Europe redesigns its model. It ships in bulk to bonded or local warehouses, appoints an EU responsible person and checks product compliance and labelling, reviews its marketing claims against local consumer law, and sets up a local entity for VAT and returns handling. It also updates contracts with its platforms and logistics providers to allocate customs and compliance costs.

How TRW & Co helps

From our Shenzhen representative office, TRW & Co helps brands, platforms and investors in e-commerce in China and in Chinese cross-border selling. We design market entry structures, negotiate distributor, store operator, logistics and platform agreements under Hong Kong, English and other non-PRC laws, and conduct cross-border due diligence on e-commerce businesses. For outbound sellers we coordinate EU, US and Southeast Asian counsel on customs, consumer and product compliance. Where PRC legal advice, regulatory filings or PRC court and arbitration representation are required, we work with licensed PRC law firms and manage the workstream. Contact us to discuss your plans.