Staying legal in China’s expanding markets

You should get to know the red tape, but it doesn't need to stand in your way

China is a territory rich in potential for UK tech companies with a hunger for technology and innovation. Yet organisations wanting to capitalise on these opportunities must sometimes overcome high legal and regulatory barriers. While China is increasingly open to foreign tech imports and investment, there remain several legal barriers that businesses need to be aware of.

It is firstly important to make sure you can legally operate in China. China has negative lists that determine which sectors are open to foreign imports and investment. The government also posts its own Unreliable Entity List, which restricts or prohibits any companies named from operating. Though there may be little chance of your company appearing on it, you can’t afford to rely on any suppliers that do.

Beyond this, there are licences required to operate a website or a web-based service, along with customs and licencing restrictions that govern the import or manufacture of IT equipment or electronic goods. Obtaining these licences may involve independent testing, technical documentation and product inspection from Chinese authorities.

Tech businesses tend to have a digital component, meaning that they’re likely to be affected by China’s cybersecurity and data regulations. China’s Cybersecurity Law governs how data can be collected, stored and transferred across borders. In some circumstances, companies may need to seek government approval for the cross-border transfer of personal data or important data, and, as a general rule of thumb, data should be located on Chinese servers. It’s also worth being aware of China’s National Intelligence Law, which requires companies to provide support and assistance to intelligence bodies on request. These laws may affect how you decide to structure your China business, how data is controlled and how you manage your core IP, so it's wise to get advice on potential issues early on. There are also intellectual property risks when operating in China, although companies can offset these risks through early planning and effective due diligence.

Of course, UK companies still have to abide by UK regulations, including those that cover bribery and the export of strategic military and dual-use technologies. What’s more, China has its own legal practices around contracts, workers’ rights and disputes, not to mention its own distinct court system to enforce them. China’s Corporate Social Credit System (CSCS), which applies to all companies working in China, is another consideration. Companies need to meet all their CSCS goals – and ensure that any suppliers or partners are meeting them as well.

This might sound like a lot of red tape to get through, but you can cut through it with preparation and research. Legal advisers and market entry consultancies can help firms navigate the regulatory barriers, while working with local consultants or industry specialists can also help. The Digital and Tech China website ( gov.uk/digitalandtechchina) is crammed with information, guidance and useful resources, while you can also talk to the China-Britain Business Council ( cbbc.org), the Department for International Trade and techUK ( techuk.org).

Tech businesses tend to have a digital component, meaning that they’re likely to be affected by China’s cybersecurity and data regulations