Guidance

Overseas business risk: China

Updated 11 March 2022

1. The Opportunity

China is the world’s second largest economy, and an important trading partner for the UK. The value of our bilateral trade was £94.5 billion in the four quarters to the end of Q3 2021. This supports jobs and sustains livelihoods across the UK.

Explore opportunities for exporting to China in our country guide on great.gov.uk.

The Chinese government is now seeking to rebalance the economy away from investment-led growth and towards consumption. The emerging focus on innovation, higher-end consumer goods and services represents a significant opportunity for UK companies.

However, doing business in China can be challenging. According to the World Economic Forum China ranks 28th on the Global Competitiveness Index. While China has started to open up its economy in some areas, there are restrictions on the extent to which foreign companies can operate in large areas of the economy. Personal relationship networks can exercise significant influence. There is a widely held perception that local companies may also enjoy greater political protection, including from local courts.

Through Department for Business and Trade (DBT) China and the Enhanced International Support Service, we can support and advise UK businesses who are considering entering the Chinese market. The China-Britain Business Council (CBBC) is useful commercial resource.

2. Latest Regulatory updates

See the quarterly China Commercial Regulatory Summary, highlighting key regulatory updates.

2.1 Tariffs

China’s Simple average MFN applied tariff rate is 7.5%, which is slightly higher than the EU rate (5.1%). You can find more detailed information on China’s tariffs on the World Trade Organisation (WTO) China tariff profile.

2.2 Laws

2.2.1 Foreign NGO Management Law

China’s Foreign NGO Management Law came into effect on 1 January 2017. The law applies to all non-profit, non-government organisations legally established overseas (including Hong Kong, Macao, Taiwan) that wish to register offices or conduct activities in mainland China. Organisations that do not register or report activities under the law will not be able to legally operate in mainland China or transfer funds to locally-established NGOs.

2.2.2 e-Commerce Law

China adopted its first e-Commerce Law from 1 January 2019. The law clarifies legal responsibilities of platform operators and merchants. It also outlines requirements around consumer protection, cyber security, market competition, credit evaluation, intellectual property (IP) protection and cross-border e-commerce.

2.2.3 Foreign Investment Law

China passed its first unified Foreign Investment Law in March 2019. The law sets out a basis to create a level playing field between foreign and domestic firms, which includes banning forced technology transfer, protecting IP, and granting foreign firms equal rights to participate in government procurement and standard setting. The law took effect from 1 January 2020 and an English version of is available here.

Around the same time, China also amended a series of IP laws and regulations in line with some of the main principles of the Foreign Investment Law, including:

• The Trademark Law to tackle bad faith trade mark filing
• The Anti-Unfair Competition Law and Administrative Licensing Law to enhance trade secret protection
• Regulations on Technology Import and Export Administration to address concerns over forced technology transfer.

2.2.4 Foreign Investment Screening Mechanism

On 18 January 2021, China implemented its new Foreign Investment Screening Mechanism (FISM), which covers acquisitions and Greenfield investment in China (including Hong Kong, Macao, and Taiwan). The new legislation established a foreign investment security review agency to undertake reviews of foreign investments across a wide range of sectors including (but not limited to): Defence (military products), important agricultural products, important energy and resources, major equipment manufacturing, critical national infrastructure, important transport services, important cultural products and services, key information technologies and internet products and services, Important financial services, and key technologies.

2.2.5 Anti-Foreign Sanctions Law

On 10 June 2021, The National People’s Congress Standing Committee (NPCSC) passed an “Anti- Foreign Sanctions Law”. The law’s stated aim is to “safeguard national sovereignty, security and development interests and protect the legitimate rights and interests of [our] citizens and organizations”. It asserts that China “has the right to employ corresponding countermeasures” when “foreign nations violate international law and basic norms of international relations to constrain or suppress China under any kind of pretext”. Entities to be sanctioned are “persons or organisations that directly or indirectly participate in the drafting, decision-making, or implementation” of foreign sanctions on China, though countermeasures may also extend to third parties, including immediate relatives of those sanctioned, senior managers of organisations sanctioned, and organisations whose senior managers or actual controllers are sanctioned.

2.3 Negative List Ruling system

To be able to invest in China, foreign businesses should consult two negative lists: the Foreign Investment Negative List (FINL) and the Market Access Negative List (MANL). A negative list describes restricted or prohibited activities. Any business areas not listed are considered to be open to foreign companies.

FINL

In 2017, China introduced a “FINL + pre-entry national treatment” mechanism to govern foreign investment. With the exception of those sectors listed in the FINL, foreign businesses will be treated equally with Chinese domestic firms. The latest addition of the FINL was released on 27 December 2021, the FINL contains 31 items (reduced from 33 in 2020) and this is updated on an annual basis.

MANL

China published its first national Market Access Negative List on 25 December 2018. The list highlights those sectors (items) where access is prohibited or where there are conditions on private investment, both domestic and foreign. It builds upon the Foreign Investment Negative List, which highlights those sectors limiting foreign participation.

In 2020, the list of industries that were either restricted or prohibited was cut to 123, compared with 131 sectors on the 2019 list.

3. Politics

3.1 Decision-making

The Chinese Communist Party (CCP) is the founding and ruling political party of the People’s Republic of China. The CCP’s Politburo Standing Committee (PBSC) is China’s highest and most powerful decision-making body. Current members, formally appointed at the 19th Party Congress in October 2017 and some of whom were appointed to leadership roles of the PRC state institutions at the convention of the 13th National People’s Congress in March 2018, are (listed in order of seniority):

• XI Jinping, General Secretary of the CCP, President of the People’s Republic of China, and Chair of the Central Military Commission
• LI Keqiang, Premier of the State Council of the People’s Republic of China
• LI Zhanshu, Chairman of the Standing Committee of the National People’s Congress
• WANG Yang, Chairman of the National Committee of the Chinese People’s Political Consultative Conference
• WANG Huning, First Secretary of the Central Secretariat of the CCP
• ZHAO Leji, Secretary of the Central Commission for Discipline Inspection
• HAN Zheng, First Vice Premier of the State Council of the People’s Republic of Chi

3.2 Anti-corruption Campaign

Since 2013 the leadership has been undertaking a large-scale anti-corruption campaign. The campaign targets officials at all levels: a number of high-level officials have been investigated, expelled from the Party and banned from public office, and sentenced to death or lengthy prison sentences.

4. Economics

Since the economic reforms and ‘opening up’ policy of the late 1970s, China has experienced a period of rapid economic growth, averaging almost 10% per annum for the three decades up to 2010. Over this period China’s economy effectively doubled in size every eight years.

China has the second largest economy in the world and is currently ranked an upper middle income country. It grew 8.1% in 2021 and has a per capita income of over $10,000. It ranks 85th in the world in the UN’s Human Development Index.

Our Financial Services Policy team publishes a quarterly Financial Policy Focus.

5. Commercial/ Legal Disputes and Travel Bans

As the number of foreign enterprises investing in China and doing business with Chinese partners has increased so has the number of commercial disputes. For companies who are seeking to invest in China, it is always wise to conduct thorough due diligence, understand local regulations and negotiate for a comprehensive agreements with business counterparts.

There are various options available to settle a commercial dispute, principally litigation, arbitration and mediation. The most appropriate option will always depend on the circumstances of the case (parties of disputes, jurisdiction and the amount of the disputes, etc.), and companies should seek the advice of a lawyer who specialises in the laws of the People’s Republic of China (foreign law firms and lawyers working in foreign law firms based in China are not in the best position to offer advice on Chinese law), in case companies aim to settle the disputes in China.

Before entering into a contract in China, companies should take appropriate legal advice on including suitable dispute resolution mechanisms and governing law clauses in commercial contracts. It is important to consider how, where and under what law any disputes would be resolved. Chinese law includes restrictions on foreign-related commercial contracts (please refer to the Art. 4 and Art. 5 of the Law of People’s Republic of China on Choice of Law for Foreign-related Civil Relationships; Chinese Contract Law; and Foreign Investment Law of People’s Republic of China). Even though there is limited restrictions towards the types of resolution mechanisms that can be used in foreign related commercial contracts, the enforcement of arbitral awards rendered by international arbitration institutions, or judgments issued by foreign courts could be an issue for parties. Therefore, it is suggested that companies need to be careful when drafting contracts with Chinese parties. Contracts entered into in the United Kingdom are not generally enforceable by Chinese courts.

Many foreign companies seek to resolve disputes by arbitration rather than litigation. Although it is possible for parties to reach agreement on arbitration after a dispute arises, in most cases an arbitration clause is better included from the outset. Joint ventures operating within China are considered to be domestic Chinese entities and disputes involving joint ventures will mostly be considered to be domestic disputes to be arbitrated in China.

5.1 The Chop System

Under Chinese law, any entity legally registered in China must have an official company chop and a financial chop. Chops are red stamps which act as an official seal. There are several other chops with specific functions. They are used as a form of signature that is accepted as legally binding. Chops have to be made by a specialist company and registered with the local Public Security Bureau.

The holder of an official chop can bind a company in important transactions even where they have not been authorised by the legal representative or shareholders. If chops or other corporate documents such as business licences are lost or stolen a company may be unable to sign contracts, pay wages or withdraw funds.

5.1.1 Lost or Stolen Chops

If a chop is lost or stolen an announcement must be published in an official journal recognised by the local authorities. This makes it possible to request the cancellation of the lost or stolen chop, to have it remade and to register the new chop with the Public Security Bureau. A company must present its original business licence in order to register a new chop. If the licence has also been lost or stolen companies must request a replacement.

It is possible to file a complaint with the police with evidence a theft has occurred. However, public security officers can be unwilling to intervene in what they regard as commercial disputes and filing a complaint generally requires the company chop.

5.1.2 Risks

The most common risk is that someone will use the chops and/or official documents to take control of a company without the knowledge of its owner or a joint venture partner. Owners based outside China are at a particular risk if no regular checks are carried out on the company. If the perpetrator is the company’s legal representative or CEO/General Manager it can be very difficult for shareholders to remove them and declare their removal to the authorities without access to chops and corporate documents.

5.1.3 Preventative Measures

The consequences of the loss or theft of chops can be extremely damaging and hard to correct. It is therefore essential to put in place preventative measures and effective internal controls. This should ensuring chops can only be accessed by trusted individuals who need them as part of their job, that no one individual (other than the company owner) holds or has access to them all, that they are kept under lock and key and that documents that bear the company chop are checked and recorded.

5.2 Legal Liability

Directors and senior managers may face civil, administrative or criminal liability if they act in breach of Chinese law, administrative regulations or a company’s Articles of Association and cause losses to the company.

A stricter liability applies to the company’s Legal Representative – an individual with broad powers and potentially unlimited liability. An individual appointed as a Legal Representative may be held personally liable in Chinese law for a company’s debts. The legal representatives of some foreign companies in China are individuals who have never set foot in China.

5.3 Intimidation and threatening behaviour

There have been incidents of foreign nationals being subject to threats and intimidation as part of a business dispute with a Chinese partner. In some cases facilities have been surrounded by employees or casually-hired support who have refused to allow the foreign partner to leave until a payment is made. Threats of violence are common although actual violence is rare. Stand-offs can last hours or days. The police may be reluctant to intervene and generally will not do so unless a situation does turn violent. If you or your family are threatened in the course of a commercial dispute, you should report it to the local police and obtain a police report.

5.4 Travel bans

The Chinese government may prohibit a foreign national involved in any kind of business or legal dispute from leaving China until the matter is resolved which in some cases can take years. This is known as a travel ban and can last for an indefinite period. Individuals might not be aware they are subject to a travel ban prior to trying to leave the country when they may be stopped, interviewed and refused boarding. If you are the subject of a travel ban, you should immediately inform the British Embassy or local Consulate-General and seek legal advice.

5.5 Unreliable Entity List

In May 2019, the Chinese Ministry of Commerce (MOFCOM) announced the creation of an “unreliable entities list”. The policy is designed to address “Foreign enterprises, organisations and individuals that do not comply with market rules, violate the spirit of contract, block or cut supplies to Chinese firms with non-commercial purposes, and seriously damage the legitimate rights and interests of Chinese enterprises.” At this early stage, the implications of being placed on this list remain unclear. Please contact the UK’s Trade Policy team if you have concerns.

6. Business and Human Rights

In September 2013 the UK launched its action plan on business and human rights, becoming the first country to set out guidance to companies on integrating the UN Guidelines on Business and Human Rights into their operations. China is currently listed as a country of concern in the FCDO’s annual Human Rights and Democracy Report.

6.1 Xinjiang

We are seriously concerned about the widespread and systematic human rights violations in Xinjiang. These violations include – but are not limited to – the extrajudicial internment of over 1 million Uyghurs and other ethnic minorities; severe restrictions on culture, religion, and language; pervasive surveillance and monitoring; the use of Uyghurs and other ethnic minorities in forced labour; and the enforcement of birth prevention policies. The FCDO’s Annual Human Rights Report provides further details.

Evidence of gross human rights violations including extra-judicial detention and forced labour has been growing, including leaks of China’s own classified and internal documents. The UK Government has repeatedly called on China to end these practices, and uphold its national laws and international obligations.

On 12 January 2021, the Foreign Secretary announced a package of measures to help ensure that British organisations, whether public or private sector, are not complicit in, nor profiting from, the human rights violations in Xinjiang.

These measures are designed to send a clear signal to China that these violations are unacceptable. The measures announced include a review of export controls as they apply to Xinjiang and plans to introduce financial penalties for businesses that do not comply with the Modern Slavery Act. Further measures include increasing support for UK public bodies to exclude businesses complicit in human rights violations from their supply chains. Together these measures will help UK organisations ensure that they are not contributing to the abuse of the Uyghur Muslims or other minorities in Xinjiang.

On 22 March 2021, under the UK’s Global Human Rights sanctions regime, the UK Government imposed asset freezes and travel bans against four Chinese government officials, as well as the Public Security Bureau of the Xinjiang Production and Construction Corps, the organisation responsible for enforcing the repressive security policies across many areas of Xinjiang. These measures were taken alongside the US, Canada and the EU.

Further coordinated international action is needed to address the risk of forced labour entering global supply chains, and the UK is working closely with its partners on this issue and keeping all options under review.

In view of these risks, businesses that directly or indirectly provide goods and services to authorities in Xinjiang, or that have supply chain links to the region, are at risk of unintentionally facilitating or being otherwise complicit in human rights violations.

Businesses with supply-chain links in Xinjiang face particular reputational, economic and legal risks due to extensive and credible evidence of forced labour programmes targeting Uyghur and other ethnic minorities. This includes economic costs linked to reputational risks. Such programmes may operate in internment camps (known as ‘Vocational Training and Education Centres’), prisons, in factories outside of internment camps, and in factories elsewhere in China. Media and non-governmental organisation reports indicate that Uyghurs and other ethnic minorities have been forced to work in the cotton industry, as well as factories producing textiles, automobiles, and electronics. There is also evidence that some companies involved in the supply chains of solar equipment and polysilicon may be linked to forced labour.

Businesses engaging in joint-research and development activities in the fields of surveillance, biometrics, or tracking technology are at heightened risk of facilitating human rights violations due to evidence that invasive surveillance is being used in Xinjiang.

Businesses will also need to consider the risk of exposure to entities that are involved in constructing or providing services to internment facilities in Xinjiang, or that are providing or developing surveillance technologies (including surveillance cameras, mobile phone apps for invasive monitoring, big data systems for ‘predictive policing’, and software for involuntary biometric data collection).

Businesses should be aware that conducting due diligence in Xinjiang is challenging due to: limits on access, including for auditors; the fact that it is highly unlikely that workers will be able or willing to speak freely; and the extent and severity of human rights violations occurring there. There have been reports of auditors being harassed, threatened and detained. Due to the nature of the situation in Xinjiang, traditional due diligence methods may not be effective in identifying human rights violations. UK businesses should take full account of these challenges when considering whether they can implement necessary procedures and internal controls to ensure their operations do not directly or indirectly contribute to human rights violations. Businesses should consider collaborating with industry groups to share expertise and best practice in identifying and addressing risks of human rights violations, including forced labour.

Businesses will also need to consider their corporate responsibilities under the UN Guiding Principles on Business and Human Rights as well as the OECD Guidelines for Multinational Enterprises when examining the risk of forced labour across their supply chains, and in making investment decisions.

Under section 54 of the Modern Slavery Act 2015, certain businesses with a turnover of £36 million or more are required to produce annual modern slavery statements setting out the steps they have taken to tackle modern slavery in their operations and supply chains.

In light of concerns around forced labour and other human rights violations in Xinjiang, other countries are also implementing new policy measures. These include designating individuals and entities under human rights sanctions regimes; restricting trade with specific companies; and prohibiting the import of certain goods.

If you have queries relating to sanctions imposed by the US or other states, you should consult relevant national guidance and legislation. You may also wish to take legal advice as appropriate.

6.2 Child labour

China is a member of the International Labour Organisation (ILO) and has ratified the two core conventions on child labour. The Chinese government condemns child labour. China’s Labour Law prohibits the employment of minors under 16. But reports suggest child labour remains a problem, particularly in the manufacturing and service industries. Education law supports work-study programmes where this does not interfere with normal study, but some internship programmes appear to violate Chinese and ILO standards.

6.3 Ethnic minorities

The Chinese government officially recognises 55 ethnic minority groups in China, in addition to the majority Han Chinese ethnic group. Despite anti-discrimination provisions in Chinese employment law, discriminatory employment practices reportedly persist including against ethnic Uyghur’s and ethnic Tibetans.

6.4 LGBT persons

Chinese Labour Law specifically protects Chinese workers against discrimination on the basis of ethnicity, gender or religion. There are no applicable provisions against discrimination on the basis of sexuality or gender identity.

6.5 Gender

China is committed to preventing gender discrimination in the workplace under the International Covenant on Economic, Social and Cultural Rights, and the Convention of the Elimination of Discrimination Against Women. Domestic laws are in place to promote gender equality and prevent gender discrimination and sexual harassment. China’s report to the Convention on the Elimination of All Forms of Discrimination against Women (CEDAW) in January 2014 acknowledged that problems remain in gender-based employment and pay discrimination, and sexual harassment.

6.6 Migrant workers

China has an estimated 285 million migrant workers, who have moved from rural to urban areas for work. Most are ineligible for many urban public services, and are employed in low-skilled, low-paid jobs in the secondary and tertiary sectors. Minimum wage guarantees are undermined by illegal employment practices. Migrant workers may be employed without a contract, or sign unfair contracts that stipulate a very low basic wage with long overtime needed to earn a living wage. Withholding wages is illegal, but reportedly rife and frequently causes labour disputes. Recent reforms to the hukou system of household registration have alleviated, but not solved, the problem in some cities.

6.7 Working conditions and occupational safety

The Guidelines for occupational health and safety are laid down in the Safe Production Law, which was revised in 2014 to establish a blacklist for companies with poor safety records, and the Occupational Disease Prevention Law, was revised and strengthened in 2013. In addition, enterprises wishing to set-up production in China must obtain a permit from provincial authorities under the Safety Production Permit Regulations, revised in 2013.

Allegations of unsafe working environments and workplace abuses in a range of industries remain widespread. These include excessive forced overtime; exposure to hazardous materials and inadequate safety management training. Official statistics show the number of industrial accidents is steadily declining, but approximately 180 people are still killed every day in workplace accidents. Despite new regulations for filing workplace injury compensation claims, procedures remain complicated and time-consuming.

6.8 Rights of Association (Trade Unions)

The right to organise, strike and engage in collective bargaining remains strictly limited in both law and practice. Trade union activity in China must be carried out under the auspices of the All-China Federation of Trade Unions (ACFTU), a quasi-governmental body under the direction of the Communist Party. In recent years Chinese workers have become more assertive at the grassroots level about using collective action to secure their rights: illegal protests and strikes are relatively common and increasing in frequency.

A number of labour NGOs operate informally to advise and support workers in labour disputes. In Guangdong Province, where most strikes occur, regulations on collective bargaining have been introduced. They place a greater obligation on (i) employers to honour minimum wage requirements, working hour directives and social security payments and (ii) the unions to play an engaged role in dispute resolution.

7. Intellectual Property

China has increasingly sophisticated IP and legal systems which are used by large numbers of British companies to obtain IP protection and enforcement relief. However, IP problems still cost British business in China hundreds of millions of pounds each year. Damage is not restricted to businesses in the Chinese domestic market – IP-infringing Chinese businesses often have global export capacity.

One source of risk is that most IP rights are territorial, that is they only give protection in the countries in which they have been granted or registered. If you are thinking about trading internationally, then you should consider registering your IP rights in overseas markets. If you are a UK company selling to China, sourcing from China, or even attending the same trade fairs as Chinese companies, your IP is already exposed to risk of infringement. Given China’s first to file, rather than first to use, system for registering IP rights, we recommend any internationally-facing companies to register their rights in China as early as possible.

Another source of risk is that the Chinese IP system can work differently to in the UK. We provide basic information on IP in China on the International IP Service webpage and a range of factsheets on the British Embassy Beijing IP webpage to help British companies navigate the Chinese IP system. We distribute a monthly newsletter informing companies of IP regulatory updates in China. The Embassy supports over 150 IP cases per year.

For more information on our IP cooperation with China or to discuss possible Embassy support please contact IP Attaché Samuel Stone via email. Legal advice may also be obtained from legal services providers based in both the UK and China.

General information on IP is provided on our intellectual property page. More detailed guidance on protecting IP overseas in other territories is available from the UK Intellectual Property Office.

8. Bribery and Corruption

Bribery is illegal. It is an offence for British nationals or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national or resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

8.1 The UK Bribery Act

The Bribery Act applies to non-UK companies operating in the United Kingdom and to UK companies working overseas. It created four prime offences:

• Two general offences covering the offering, promising or giving of an advantage, and requesting, agreeing to receive or accepting of an advantage;
• An offence of bribing a foreign public official; and
• A new offence of failure by a commercial organisation to prevent a bribe being paid to obtain or retain business or a business advantage (should an offence be committed, it will be a defence that the organisation has adequate procedures in place to prevent bribery).

The Act recognises that no bribery prevention regime will be capable of preventing bribery at all times. A company will have a full defence if it can show that despite a particular case of bribery it nevertheless had adequate procedures in place to prevent persons associated with it from bribing. Companies must therefore make sure that they have strong, up-to-date and effective anti-bribery policies and systems in place to prevent bribery by persons associated with them.

8.2 Bribery and Corruption in China

Since coming to power in China, Xi Jinping has launched a wide-ranging anti-corruption drive. While the main focus has been on corruption and discipline within the Party and Government it has also targeted foreign and domestic companies in key sectors including energy, pharmaceuticals and transportation. It is likely that the anti-corruption drive will continue.

China has enacted extensive anti-bribery legislation. For serious cases this allows for up to life imprisonment for offering bribes, and receiving bribes can, in some cases, result in the death penalty. The two key laws are the relevant sections of China’s Criminal Law and the Law of the PRC against Unfair Competition. In recent years the Supreme People’s Court and the Supreme People’s Procuratorate (China’s public prosecution service) have begun to issue detailed “interpretations” on key aspects of China’s legislation. These are designed to help the police and courts in the prosecution of different crimes.

The latest judicial interpretation for the Handling of Criminal Cases of Embezzlement and Bribery was issued on 18 April 2016, specifying detailed thresholds, as well as what it means in practice by “serious circumstance”, “extremely serious circumstances” and “significant loss of national interests” as outlined in the 9th Amendment to the Criminal Law passed in 2015. Under the 9th Amendment and this judicial interpretation, companies may be found guilty for providing money or property to former public officials, or close relatives of or any person close to the public officials or former public officials for illegitimate benefits. This act was not previously considered a criminal offence which now highlights the increased scrutiny companies and commercial relationships are now placed under.

While the authorities have taken a number of steps to strengthen the Chinese courts, the judiciary is not independent of the CCP. There have been instances of official use of state media channels – including the broadcasting of forced confessions - to pre-empt the judicial process. The courts can be influenced by ongoing political campaigns.

In view of the continuing anti-corruption drive and strict measures imposed by criminal law, companies doing business in China should review their compliance policies and business practices to avoid any potential violation.

8.3 Organised Crime

A number of British companies have received potentially lucrative business offers, or other unsolicited information from China, which have turned out to be scams. We therefore always recommend conducting basic due diligence before making any financial commitments (e.g. checking that your Chinese counterpart is a properly registered and licensed business). British companies should also ensure secure payment instruments are used, in particular when making deals via Internet platforms, and implement other standard checks for new business opportunities in China.

9. UK Export Finance

The government can provide finance or credit insurance specifically to support UK exports through UK Export Finance – the UK’s export credit agency. For up-to-date country specific information on the support available see UK Export Finance’s country cover policy and indicators.

10. Protecting the Digital Security of your Company

There is not a single comprehensive data protection law in China. China released its Cybersecurity Law in June 2017 to address cybersecurity and data privacy protection. This was complemented by a further two laws, namely the Data Security Law and the Personal Information Protection Law, which came into effect in September 2021 and November 2021 respectively. Together, they provide an overarching regulatory framework for data which is expected to be complemented supplemented by more detailed sector specific implementing rules, such as the guidelines published for the Automotive sector in October 2021. Provincial level data regulations are also in place in certain areas of China, businesses should be aware of these as they may include more stringent requirements.

The Personal Information Protection Law is the first comprehensive, national-level privacy law, covering the entire lifecycle of personal information processing by private entities and carrying substantial fines for noncompliance. In addition to personal data protection, businesses should also be aware of specific provisions in the above laws regarding cross-border data transfer and the treatment of “important data” and “core data”; as well as cybersecurity obligations such as those relating to “critical information infrastructure operators”, obligations apply if a company, or any of its clients, are deemed “critical information infrastructure operators”. Companies will need to be adaptable to a fluid regulatory environment and monitor sector-specific developments and regulations according to their own circumstances. In addition, China is establishing cross border data transfer pilot zones in areas such as Shanghai, Hainan and Guangdong, businesses should check their compliance if engaging with a pilot project.

Our key messages to UK companies concerned about the data regime in China are:

• get specialist legal advice. The legal landscape is unclear, but law firms closely follow developments and can advise companies on how to set up projects in China
• China’s laws do not ban cross border data transfers outright and do not require all sectors to localise data. This should be raised with Chinese partners and local/sector authorities at an early stage, and require them to provide a plan on how to store/transfer data
• if cross-border data regulations are used to pressure transfer for of source code or other sensitive IP, then request Embassy support
• while the October 2020 draft of the Personal Information Protection Law bears some resemblance to the EU’s General Data Protection Regulation, numerous fundamental differences and uncertainties exist. Companies should keep abreast of legal developments and adapt their privacy protection regimes accordingly

Company management and boards should treat cyber security as a priority issue – especially when considering business opportunities in China and other high-risk countries. Resources to help companies with cyber security include, HM Government’s Helping UK Tech Business Engage Safely and Ethically with China, 10 Steps to Cyber Security, ‘Cyber Security: what small businesses need to know’, and the Cyber Streetwise website. Businesses wishing to implement enhanced technical controls, and demonstrate that they take cyber security seriously, can apply to be assessed under the Cyber Essentials Scheme, leading to the Cyber Essentials or Cyber Essentials PLUS badge. Companies may also wish to consider joining the Cyber Information Sharing Partnership, which shares real-time cyber threat information on cyber threats.

China’s data security landscape is continually evolving, with new sector-specific guidance on data regulations gradually emerging and differing/additional regulations or requirements in different localities. The British Embassy Beijing’s China Commercial Regulatory Summary is a quarterly roundup of key regulatory developments in China and should be used for reference. However, it is important that companies continue to seek legal advice in their specific sectors”

11. Protective Security Advice

Business people should be cautious about what information they bring with them to China, and how they use information whilst they are in China - either using IT or speaking in public places, including hotel rooms and public offices. Further protective security advice can be found on FCDO travel advice.

The UK Government’s Centre for the Protection of National Infrastructure also offers advice on protective security.

12. Terrorism Threat

There is a general threat from terrorism in China. Further information on the threat from terrorism can be found in the travel advice for China.

13. Contact

Contact the UK’s Trade Policy team in China for further information.