The LEHMAN, Lee & Xu
China Law Newsletter keeps you up to date on recent developments in China Law and Legal Practice
China Gradually Opens E-Commerce to Foreign Investment
China in 2015 issued regulations to remove restrictions on WFOEs operating in the E-Commerce sector. Foreign companies are allowed to hold 100% equity in an E-Commerce company operating in China. The first such foreign invested E-Commerce company obtained an ICP license a year later.
However, not all E-Commerce is created equal in the eyes of Chinese authorities, and licenses for E-Commerce based services are not as easy to secure as those for sale of physical goods by the E-Commerce model.
Currently in Shanghai, only WFOEs established within a Free Trade Zone (FTZ) can apply for an ICP license and lawfully conduct E-Commerce business. A WFOE applying for an ICP license shall meet the following requirements: Registered capital of at least RMB 1 million; servers physically located within the FTZ; experience in the E-Commerce sector; and appropriate licenses for the products to be sold, if any.
The Chinese government has also set up 13 pilot zones for cross-border e-commerce, including Hangzhou, Tianjin, Shanghai, Chongqing, and several other major cities.
Although, restrictions on WFOEs involved in E-Commerce have been relaxed, it remains difficult for a WFOE to obtain an ICP license. Foreign investors, especially WFOEs, should have clear and open communication with the local government and China legal counsel.
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