Foreign companies in China’s e-commerce market

June 24, 2025 - Business, Intellectual Property - Tagged: , , , - no comments

IP and data protection rules

The sheer size of China’s e-commerce market can present extremely lucrative opportunities for foreign companies looking to sell their products online. But those looking to enter the market need to ensure they take the necessary steps to protect their intellectual property (IP) and successfully navigate complex data protection rules. In this article, Tang Panpan of CMS China outlines what foreign businesses should do to protect their brand in China.

China has a vast consumer base and a rapidly growing e-commerce market, presenting immense business opportunities for overseas companies. According to data from the China Business Intelligence Network, as of December 2024, the number of online shoppers in China was 974 million.[1]Data from the National Bureau of Statistics shows that total online retail sales in 2024 were Chinese yuan 15.52 trillion, with a growth rate of 7.2 per cent.[2] China has now been the world’s largest online retail market for 12 consecutive years.[3]

Given this enormous e-commerce market, it is no surprise that the country is highly attractive to overseas companies – including those that have yet to enter the Chinese market and those already operating in China but that have yet to establish a significant presence on e-commerce platforms. However, to build competitiveness and trust in a brand, companies must ensure they protect their IP and comply with the country’s data protection laws. Ignoring these issues can damage a brand’s reputation, reduce market share and expose a business to legal risks. To fully leverage the potential of China’s e-commerce market and promote consumption, companies must prioritise the following:

1.Key considerations for intellectual property protection

China’s e-commerce market is characterised by a diverse range of platforms, each catering to different consumer segments and offering unique opportunities for brands. Major platforms include Tmall, JD.com, Pinduoduo, Douyin, Xiaohongshu and WeChat. As a first step to entering the e-commerce space, companies should consider establishing an official presence on these platforms, particularly by setting up official flagship stores. This not only enhances brand visibility but also leverages the trust and traffic offered by these platforms.

a) Trademark strategy as a crucial foundation

When it comes to onboarding new brands, major e-commerce platforms have similar authentication requirements, with trademarks being a key component. Most platforms require a registered trademark certificate for flagship store applications, while some may accept a trademark application receipt. Initially, the trademark provided must match the name of the flagship store. Later, when products are listed in the store, the brand owner must ensure that the certificate or application receipt of the trademark that covers the products intended for listing has been properly recorded on the platform. Therefore, companies should prepare for the registration of their trademarks in China in advance.

Many overseas companies extend their international trademarks to China through the World Intellectual Property Organization (WIPO). However, this approach can be problematic. International trademarks may not cover goods that align with China’s unique trademark classification standards. China has its own version of standard goods and services based on WIPO’s Nice Classification, which is tailored to the domestic market. When extending the international trademark application to China, such extended applications may lead to registration delays or rejections, as the goods specified in the international application may not match the specific standard used for goods and services in China. Moreover, such trademarks may not seamlessly connect with the domestic consumer market. For example, the Chinese market often features more finely segmented products with more precise names for goods. For these reasons, it is generally advisable to register trademarks directly in China. By working with local professional trademark agencies, companies can receive guidance on selecting product names that better fit the Chinese market. This direct approach allows for greater control over the registration process in terms of both timing and outcomes.

Additionally, overseas companies should prioritise registering the Chinese version of their foreign trademarks. Chinese consumers are accustomed to identifying brands in Chinese, so registering a Chinese version of the brand name and using both Chinese and English names for flagship store names and social media accounts is an advisable long-term strategy.

b) Contractual considerations with local partners

For overseas brands utilising Chinese e-commerce platforms, a common business model involves operating through a domestic subsidiary or partnering with a professional e-commerce management company. One frequent issue that arises in this context is the need to replace underperforming partners. Without a clear mechanism for transitioning between partners, this process can become cumbersome and legally complex.

At the beginning of a partnership, both the brand authorisation documents submitted to the platforms and the commercial contracts with partners often fail to outline an efficient process for ending the agreement; for example, when the brand owner adopts a sample authorisation letter provided by the platforms, which typically does not include a clause on termination. However, a commercial contract may generally stipulate that the mutual consent of both parties can terminate an agreement. Still, it fails to establish a mechanism for the brand owner to unilaterally terminate an agreement. This oversight can create significant obstacles when it comes time to replace a partner. To avoid such complications, it is essential to establish clear contractual provisions that facilitate a smooth transition between old and new partners.

c) Proactive IP protection to combat infringement

To effectively address the challenges of China’s e-commerce landscape, brands must remain vigilant in protecting their IP from infringement by other sellers operating on Chinese e-commerce platforms. The vastness and dynamism of the country’s e-commerce market mean that counterfeit products and unauthorised use of trademarks can pose significant risks to brand integrity and market share.

To mitigate these risks, it is crucial for brands to engage with the IP protection mechanisms offered by major e-commerce platforms as early as possible. Most platforms provide tools and procedures for reporting and addressing infringement issues. Brands should also consider hiring dedicated teams or partnering with specialised agencies to monitor and handle infringement cases. Regular monitoring of listings, swift action against counterfeiters and proactive engagement with platform authorities can help maintain a brand’s exclusivity and protect its market position.

d) Compliance in marketing activities

Effective marketing is crucial for success in China’s e-commerce market. Brands must not only promote their products through their own social media accounts, but also collaborate with influencers and engage in co-branding activities. However, when creating engaging content, brands often overlook the importance of copyright protection.

Disputes over the copyright of images, fonts, texts, etc., are increasingly common. For example, a company might publish a promotional article on its WeChat account, only to receive a notice of copyright infringement for using a commercial font without paying the required licence fees. Such situations not only lead to legal disputes but also have a significant impact on a brand’s reputation. To avoid these issues, brands must ensure that all creative content is either original or properly licensed. The marketing departments within companies should establish review protocols to scrutinise all materials before they are used in marketing activities. Additionally, when collaborating with external service providers, it is crucial to have comprehensive contractual agreements that clearly outline the ownership and usage rights of all creative assets. This approach not only protects a brand from potential legal disputes but also maintains the integrity and consistency of a brand’s messaging.

2. Key considerations for data protection

Over the past decade, China has gradually established a comprehensive legal framework for data protection, emphasising the importance of safeguarding personal information and ensuring data security. The Cybersecurity Law, the Data Security Law and the Personal Information Protection Law form the backbone of this regulatory environment. Given that e-commerce involves handling vast amounts of consumers’ personal information, e-commerce companies operating in China must comply with these laws to avoid legal risks. Moreover, effective data protection also plays a crucial role in fostering consumer confidence. When consumers feel that their personal information is secure and handled responsibly, they are more likely to engage in online transactions and continue to support e-commerce platforms. By demonstrating a commitment to safeguarding consumer data, companies can differentiate themselves in a competitive market and attract a broader customer base. This, in turn, promotes sustainable business growth and contributes to the overall health of the e-commerce ecosystem.

a) User consent as a precondition

China’s data protection laws generally require that the legal basis for processing personal information is premised on obtaining individual consent. E-commerce companies must obtain explicit consent from consumers when collecting their personal information. This consent must be informed, voluntary and specific, meaning that users must clearly understand the purpose of data collection, how their data will be used, and the scope of the data being collected. Companies should implement transparent data collection practices and provide users with easy-to-understand privacy policies. It is equally important to ensure that consent mechanisms are user-friendly and accessible, allowing consumers to make informed decisions about their data.

The implementation of this requirement varies between company-owned platforms and third-party platforms. For companies operating stores on third-party e-commerce platforms, the platform’s own privacy policy typically covers the basic scenarios of consumer information collection. However, if companies need to collect or process additional personal information, they must develop and implement their own privacy policies. As for company-owned platforms, such as official websites, apps or WeChat mini-programs, companies must independently formulate and implement appropriate privacy policies for all consumer personal information collection scenarios and obtain user consent.

b) Cross-border data transfers

For overseas companies operating in China, the issue of cross-border data transfer (CBDT) is particularly important. China’s data laws place strict regulations on the transfer of personal information and important data outside the country. When personal information involves sensitive personal information (even one piece) or general personal information reaches a certain volume (more than 100,000 people in a year), companies must obtain necessary approvals from or complete relevant registrations with the relevant cybersecurity authorities before transferring data out of China. This process often involves working closely with Chinese regulatory authorities to ensure compliance. It is advisable to localise data storage in China whenever possible to avoid potential legal and operational complications.

However, in practice, while e-commerce platforms may store user information locally, many European companies still need to transfer this data overseas through their own tools. This is especially true for companies using global management software like SAP, which often has servers located outside China. Whether data is directly input into such software, resulting in storage overseas, or overseas entities access data stored in China through this software, it constitutes CBDT of personal information under China’s data laws. Companies must either completely block such data flows or implement effective anonymisation measures. Otherwise, they must undertake the necessary preparatory work to comply with CBDT-related legal requirements. The specific requirements vary depending on whether the data involves sensitive personal information and the number of individuals concerned. These include informing consumers about cross-border transfers in privacy policies and obtaining separate consent, signing standard contracts between domestic and overseas entities, conducting personal information protection impact assessments for data transfers, and registering with or obtaining approval from cybersecurity authorities as required.

c) Contractual considerations with service providers

The operation of e-commerce involves numerous aspects and processes. In addition to the operation of stores on e-commerce platforms, companies must collaborate with a variety of service providers. These include logistics suppliers, warehousing providers, membership management services and application developers. Inevitably, the personal information that companies collect will be further shared with these service providers, constituting a form of entrusted processing of personal information.[4]

China has specific regulations regarding entrusted processing. It is essential for companies to review the data protection capabilities of these service providers. Before sharing any data, companies should clearly define the data protection obligations through contractual agreements. This ensures that all parties are aware of their responsibilities and helps safeguard the privacy and security of personal information.

3. Outlook and suggestions

China’s e-commerce market continues to hold immense potential for promoting consumption, but companies must navigate complex regulatory and operational landscapes to succeed. For overseas companies looking to enter or expand in China’s e-commerce market, the following is vital:

  • Strengthen IP protection: Prioritise trademark registration in China, conduct thorough IP reviews of all marketing materials and ensure compliance with local IP laws. This not only protects a brand but also builds consumer trust, which is essential for driving consumption.
  • Enhance data protection measures: Implement strong data protection practices, including obtaining user consent, localising data storage and ensuring compliance with CBDT regulations. Transparent and secure data handling can significantly boost consumer confidence.
  • Build strong partnerships: Choose reliable local partners and service providers, and establish clear contractual agreements to manage transitions smoothly and clarify data protection responsibilities. Effective partnerships can enhance operational efficiency and consumer satisfaction.
  • Monitor and adapt: Stay updated with the latest regulatory changes and market trends. Regularly monitor your brand’s presence on e-commerce platforms to promptly detect and address any IP and data protection issues.

By addressing these key considerations and adopting a proactive approach, overseas companies can better position themselves in China’s e-commerce market, build consumer trust and ultimately promote sustainable consumption.

Tang Panpan is a Senior Associate at CMS, China.

Ranked as a Top 10 Global Law Firm, CMS provides a full range of legal and tax services in over 40 countries, with more than 80 offices and 6,800 CMS lawyers worldwide. CMS China (Shanghai, Beijing and Hong Kong) offers business-focussed advice tailored to companies’ needs.

[1] In 2024, the number of online shopping users in China will reach 974 million, accounting for 87.9% of the total number of Internet users, China Commercial Industry Research Institute, 15th March 2025, viewed 29th May 2025, <https://www.askci.com/news/chanye/20250315/143000274202019921236654.shtml>

[2] Statistical Communiqué of the People’s Republic of China on National Economic and Social Development for 2024, 28th February 2025, viewed 29th May 2025, National Bureau of Statistics, <https://www.stats.gov.cn/sj/zxfb/202502/t20250228_1958817.html>

[3] China’s online retail industry has strong resilience and vitality and has become the world’s largest market for 12 consecutive years, Insight and Info, 20th February 2025, viewed 29th May 2025, <https://www.chinabaogao.com/market/202502/743306.html>

[4] Entrusted processing refers to a situation where one party entrusts another party to handle or process data on their behalf. The entrusted party acts according to the instructions of the entrusting party and is typically bound by contractual obligations to ensure the security and confidentiality of the data.

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