In October 2023, Premier Li Qiang signed off on a new set of measures designed to create a safer online environment for China’s youth. The regulations, China’s most comprehensive child internet safety laws yet, will task educators and technology companies with tackling data privacy, cyberbullying, and, of course, the dreaded wangyin (internet addiction). Part of this will be through the implementation of built-in minor protection features in apps, websites and programs that help educate youngsters and restrict their usage. The new rules come into effect on 1 January 2024.

One can readily sympathise with China’s fears about the shifting internet landscape. Since 2019, when gaming addiction was still the government’s prime target, short videos on platforms like Douyin (the Chinese TikTok) and Kuaishou have become ubiquitous and, for many, are becoming the go-to form of entertainment. Around the world, parents, individuals and governments are rightfully concerned about the addictive nature of social media, as well as its potential for facilitating the exploitation of vulnerable people.

Below the surface of China’s ambitious plan, however, lurk different but interlocking fears about the suzhi, or “quality”, of the next generation. State media has likened gaming to opium, a drug whose voracious use in Qing-era China is tightly associated with the “century of humiliation” that began with the First Opium War. The argument goes that internet addiction, if let loose upon the population, could create an unmotivated and ineffective workforce that cannot contribute to the country’s development, from the perspective of the political leadership.

This framing could risk overlooking a much bigger threat: a long-term youth mental health crisis created by a hyper-competitive education system and compounded by economic woes. It is highly contested whether excessive gaming or internet usage constitute addictions comparable to drug or alcohol addiction. In fact, some theorise that the internet is less a cause and more a symptom of Chinese young people’s problems, serving as “a sanctuary where troubled youth seek solace and emotional escape”, as anthropologist Jie Yang puts it. Even if the internet is the core contributing factor to young people’s poor mental health, can the new restrictions really prevent excessive and detrimental gaming and internet usage?

This winter marks four years since the first gaming restrictions were put in place and another two since they were further tightened. Last year, a state-associated gaming regulator declared that the policy had effectively solved the problem of gaming addiction. Putting self-reported data to one side, the jury is still out on whether these kinds of measures really work. One study led by researchers from the University of York and published by the journal Nature in August found “no credible evidence” for the reduction of “excessive playtime”, which is classed as spending more than four hours per day, six days per week playing video games, as a result of China’s gaming curfew.

The authors of this paper theorise that the “highly federated” nature of the games industry could have led to ineffective policy. Individual game providers are responsible for recording the real age of players and restricting their gameplay accordingly. Enforcement is then inconsistent across providers. “Top-down regulation may be able to secure compliance from large corporations who have the resources to effectively identify and police their player bases and have become prime targets of political intervention in China. It is less clear how compliance is easy to affect and police for thousands of small companies,” the research paper states.

The same issue is likely to come up when these measures are applied to all apps and platforms, but on a much bigger scale. Meanwhile major stakeholders in charge of China’s super-apps, like Tencent, Sina and ByteDance, are likely to comply as best they can to avoid retaliations. But loopholes will become rife in the hands of smaller app developers.

As has been the case with the gaming restrictions so far, under-18s will inevitably find workarounds. Logging into an adult’s social media account or lying about their age when they sign up are easy ways minors can evade controls on what content they can see and how long they can browse for. But, if the self-reported data from China’s gaming industry holds any water, these kinds of measures may be enough to nudge habits in a slightly healthier direction. The ongoing mental health crisis, however, will eventually need to be tackled head-on.

The post Will China’s new internet restrictions really protect minors? appeared first on Focus - China Britain Business Council.

A crisis in food confidence began in China in 2008, when melamine was found in locally produced baby formula, sickening over 300,000 infants, and causing the death of three. Since then, many other food safety scandals have been recorded in the country.

More recently, a “double standards” scandal erupted when it was found that the soy sauce sold by food company Haitian outside of China had fewer additives and preservatives than its domestic counterpart.

In response to these scandals, in July 2022, the National Health Commission (NHC) announced the issuance of 36 new National Food Safety Standards and three revised National Food Safety Standards. This is the first batch of national food safety standards issued by the NHC since September 2021.

Food advertising has also been impacted by these new regulatory measures, with authorities coming down particularly harshly on campaigns and ads endorsing products that claim therapeutic effects. Heavy fines have been issued against food companies that claimed false information on their labels or called their products “organic” without obtaining the proper authorisation from the Certification and Accreditation Administration (CAA). Therefore companies marketing food products in China should avoid any misleading or false content in their campaigns.

According to Chinese Advertising and Consumer Laws, an advertisement is deemed false if it deceives or misleads consumers with incorrect or confusing content, such as if the product does not exist, the information is inconsistent with reality, if scientific or statistical information is false or cannot be verified, or any other circumstances in which the consumers are deceived or misled by false content.

The penalty for campaigns deemed false could be valued at three-to-five times the advertising fees, or, if the advertising fees cannot be calculated or are significantly low, a fine of RMB 200,000 (£23,787) to RMB 1 million (£119,000). If illegal activities have been committed more than three times within two years or there are other serious circumstances, the advertiser may incur a fine of five-to-ten times the advertising fees, or a fine of RMB 1-2 million, and the business licenses may be revoked.

National symbols are taken seriously in China and cannot be used in advertising of food products. The law states that an advertisement may not use any form of the national flag, the national anthem or the national emblem, or the army flag, anthem, or emblem; or use the names or images of state organs or their functionaries. For example, a coffee brand was fined for using the phrase “Same as the Prime Minister’s Coffee” and hanging the photo of a state leader at its stores.

The use of minors under the age of ten as advertisement endorsers is also prohibited in China. In 2018, a2 Milk engaged Chinese actress Hu Ke and her son, who was younger than ten at that time, as endorsers for their milk powder on their official website and social media accounts. As a result, the company was fined RMB 100,000 (around £11,900) by the Shanghai Administration for Market Regulation (AMR).

Another important rule to follow is not to claim disease prevention or therapeutic effects of food products. In May 2022, actress Jing Tian claimed, as an endorser of a fruit and vegetable pressed candy, that the candy could prevent the absorption of sugar, oil and fat in the body. As a result, she was fined RMB 7.22 million (almost £860,000) and banned from being an endorser for three years. The manufacturer of the candy was also penalised, and its products were removed from major e-commerce platforms.

Regular food advertisements are not permitted to claim therapeutic effects or use medical language or language that easily causes confusion between the products promoted and pharmaceuticals or medical devices.

Manufacturers of baby formula and other milk products are not allowed to claim full or partial substitution for breast milk. In 2022, Yashili published advertisements claiming that its products are “the most like breast milk” and purchased search engine optimisation services to list its product at the top of search results. Yashili was fined RMB 200,000 (£23,800) by the Huangpu Branch of the Guangzhou AMR.

Healthcare food or food formulated for special medical purposes must have official approval before appearing in published advertisements. In 2020, Abbott published a short video for its product PediaSure, which is formulated for special medical purposes, before obtaining approval, and was fined RMB 1.94 million.

Advertisements for healthcare food, medicine, medical treatment, or medical devices are also not allowed to use endorsers to make endorsements or testimonials.

More and more multinational corporations in the food industry from the United States and Europe are increasing their stake in China, as they believe in the massive market potential of the country. However, these companies should make sure that they are well-informed of the possible risks regarding false or misleading advertising and the relevant legislation regulating the sector.

Entering China is a key decision for businesses of all sizes. Call +44 (0)20 7802 2000 or email enquiries@cbbc.org now to find out how CBBC can provide you with the platform to unlock your potential.

The post In China, get your food ads right … or pay the price appeared first on Focus - China Britain Business Council.

The People’s Bank of China (PBOC) recently released its Fintech Development Plan for 2022-2025, which seeks to further develop China’s fintech sector and drive the digital transformation of finance in the country over the next four years. The new plan emphasises ‘building momentum’ on the basis of  ‘accumulation’ to boost the sector’s progress by 2025. The new fintech development plan is based on China’s 14th Five Year Plan, a roadmap for China’s social and economic development in the period between 2021 and 2025.

The term fintech includes a variety of technology-enabled financial activities, such as mobile payments, digital banking and online insurance. Moreover, fintech also includes the development and use of cryptocurrency, although this aspect of fintech is banned in China.

This article reviews the development of fintech in China, outlines the country’s strategies and main tasks for the fintech sector in 2022-2025, and takes a closer look at the key points of the new fintech development plan.

The history of fintech in China

In China, the development of fintech can be divided into three stages:

• Finance computerising stage (1993—2004): The PBOC and other financial institutions began to digitise their back offices and services. Typical applications include ATM, POS, bank’s core transaction system, credit system, clearing system, etc.
• Internet finance stage (2004—2016): Financial institutions or Internet companies started to build online platforms, gather users, and use mobile internet technology to transform traditional financial services. The asset end, transaction end, payment end, and capital end of finance are connected by technology into the same network. During this stage, some fintech elements such as online securities account opening, online banking systems, P2P lending, and mobile payments were expanded rapidly.
• Fintech stage (2016—present): Unlike the Internet finance stage, fintech is broader in scope. In addition to Internet technology, more emerging technologies, such as big data, cloud computing, artificial intelligence and blockchain are merged into the field of financial business to change or create new financial products or services, lower transaction costs, and improve operational efficiency. Representative applications include big data credit investigation, intelligent investment, and supply chain finance.

Today, fintech is a major part of public life in China. According to the Ernst & Young Fintech Adoption Index, the adoption rate of consumer fintech in China reached 87% in 2019, meaning that 87% of China’s digitally active population use at least one fintech service in their daily life. For anyone who has spent time in China and experienced the ubiquity of WeChat/Alipay, this will come as no surprise. The adoption rate is expected to grow as fintech becomes more accessible to rural populations.

What are the goals of the Fintech Development Plan?

China wants to have a ‘digitalised, intelligent, green and fair’ fintech sector that can give strong support to the implementation of strategies such as innovation-driven development, digital economy, rural revitalisation and carbon peak and carbon neutrality.

As with all Chinese government plans, it is worth reading beyond the jargon to find out what the plan actually means.

Enhancing regulatory supervision

After a long period of being hands-off in their regulatory approach, the Chinese government is now paying close attention to the balance between fintech innovation and regulation. It still wants the fintech market to grow but in a regulated way instead of unchecked expansion.

In 2020, China started to scrutinise the internet finance industry, suspending Ant Group’s US$37 billion IPO. In 2021, China launched a broader anti-monopoly campaign against tech giants and intensified supervision of data collection as well as privacy protection in the fintech domain. The country’s leading fintech players, including Ant Group, Tencent and Didi, were all hit by fines and increased regulatory scrutiny.

Privacy and data protection

Privacy and data protection – which dominated China’s regulatory landscape in 2021 – is also highlighted in the Fintech Development Plan for 2022-2025. The plan indicates that China will make a series of supporting regulations and policies to implement relevant provisions of the Cybersecurity Law, the Data Security Law (DSL) and the Personal Information Protection Law (PIPL) in the fintech area.

Low carbon and green fintech

In September 2020, President Xi Jinping pledged that China would hit its carbon emission peak before 2030 and become carbon neutral before 2060. To achieve this goal, no industry can just stand by, including the fintech sector.

In addition to the integration of fintech and green financing, the plan proposes to build green data centres and systems based on advanced technologies, putting forward clear goals for the power usage effectiveness (PUE) values of data centres. PUE is the ratio of the total amount of power used by a data centre to the amount of power delivered to computing equipment. It describes how efficiently a data centre uses energy — an ideal PUE is 1.0. The plan aims for PUEs of 1.3-1.5; the PUE values of most data centres in China are currently above 2.2.

Fair and inclusive

One of the main challenges faced by China’s fintech sector is unbalanced growth among different regions and groups. The Fintech Development Plan for 2022-2025 tries to address this issue by making the fintech sector fairer and more inclusive.

In the field of rural finance, with the help of technologies such as the Internet of Things, satellite remote sensing and electronic enclosures, the plan aims to achieve automatic data collection and improve traceability for agriculture, while also increasing the penetration rate of fintech in rural areas.

For special groups, including older adults, those with disabilities and minority groups, the plan proposes the application of accessible financial products and services, such as large-character versions, voice versions and minority language translations.

Despite the ongoing crackdown on tech giants and greater regulatory scrutiny of the fintech sector, the Fintech Development Plan 2025 indicates that fintech is a prioritised area for development in China. Through the second iteration of the Fintech Development Plan, China wants to build momentum to achieve significant improvement in the sector’s core competitiveness by 2025. To translate this into plain language, the fintech domain is still encouraged in China and supported by the government, but China wants the sector to develop in a regulated, more balanced, and high-quality way.

A version of this article was first published by China Briefing, which is produced by Dezan Shira & Associates. The firm assists foreign investors throughout Asia from offices across the world. 

The post What’s in China’s Fintech Development Plan for 2022-2025 appeared first on Focus - China Britain Business Council.

The scale and penetration rate of e-commerce in China is already astonishing, and this plan aims to push it to new heights. According to the plan, the volume of e-commerce transactions in China reached RMB 37.2 trillion (£4.2 billion) in 2020 and is expected to reach RMB 46 trillion (£5.2 billion) by 2025. E-commerce related employment is expected to reach 70 million by 2025, as e-commerce is further integrated with primary, secondary and tertiary industries across the country.

The key aspects of the plan focus on enlarging and regulating cross-border e-commerce, encouraging sustainability and eco-friendly growth, new consumption scenarios (such as so-called ‘phygital’ retail) and enabling the expansion of e-commerce in more remote areas to support rural revitalisation. Some specific policy plans are described below:

• Deepen the coordinated development of e-commerce and delivery networks.
• Support the opening of free trade zones and ports, a national digital economy innovative development trial zone, cross-border e-commerce comprehensive zones and other pilot projects.
• Increase the sustainability and ‘green operation’ of e-commerce enterprises, including increasing the application and promotion of energy-efficiency technology and equipment, upgrading data centres and warehouse hardware and advancing the reduction of carbon emissions.
• Stimulate the development and regulation of second-hand e-commerce (including platforms such as Idle Fish and Zhuan Zhuan) to promote the recycling and re-use of resources.
• Set up more comprehensive standards for eco-friendly packaging and accelerate the implementation of an eco-friendly packaging product certification system.
• Support the application and implementation of 5G, augmented reality, virtual reality, 3D printing and other new technologies into consumption scenarios to speed up the digital transformation of enterprises and improve both offline and online shopping experiences.
• Actively develop smart community, smart shopping areas, smart gym construction; encourage innovation of business models and upgrade of the food delivery, parcel storage cabinet deployment.
• Support Chinese brands in “going global” (品牌出海) and expand overseas payment settlements in RMB currency.

The post China’s plan for e-commerce in 5 years’ time appeared first on Focus - China Britain Business Council.

How did the Chinese government come to implement these new cosmetic regulations?

In the last 30 years, we have not had any new laws within the cosmetics industry in China, so you can imagine how much of a demand there was for these new regulations. The Chinese government has been working on them for around the last three to four years, developing a novel regulatory framework that is both amazing and really complicated in the sense that there are more safety requirements for the products than in any other market.

Therefore, in June 2020, the State Council announced a new cosmetics regulation called the Cosmetic Supervision and Administration Regulation (CSAR), which came into effect on 1 January 2021. As a follow up to this general regulation, on 4 March 2021, the National Medical Products Administration (NMPA) in China released the Administrative Measures on Cosmetic Registration and Notification, which came into force on 1 May 2021. These new measures officially specify that animal testing will no longer be mandatory for imported cosmetics.

What are the regulations that have replaced animal testing requirements?

When selling imported cosmetics that are not tested on animals in China, the products need to have a Good Manufacturing Practice (GMP) certificate or Quality Management System (QMS) certificate, proving that the cosmetics’ manufacturer has passed Good Manufacturing Practice in their home country. The biggest challenge from this is that the certificate needs to be signed off by the government, rather than by a third party, which is what normally happens in Western countries. Once regular cosmetics brands can show proof of a GMP certificate from their home country that is signed off by the government, then they can generally avoid animal testing when importing into China.

Regular cosmetics refers to regular skincare and haircare, as opposed to special cosmetics, which could include hair dye, hair perms, anti-freckle and whitening products, sunscreen, and anti-hair loss products. Products for children are also regulated as special cosmetics, for which mandatory animal testing requirements are still in place.

Although this new GMP requirement has caused a lot of headaches, especially among US brands where they don’t have this kind of mechanism in place, it has been a huge game-changer for cruelty-free cosmetics brands as they can now enter the Chinese market.

How do the new cosmetics regulations differ from the previous ones?

One of the main differences is that animal testing was previously mandatory for all imported cosmetics, and now it is no longer required. However, the new regulations also pose some new challenges when it comes to the safeguarding mechanisms that have been put in place. A lot of documentation and information is required from brands regarding both the product and the raw materials used. The reason behind this is because the Chinese government wants to avoid so-called ‘kitchen sink’ cosmetic products, which are products that contain harmful substances such as heavy metals.

Although a lot of documentation is still required, the entire process and uploading of the information can be carried out online, which makes registering much easier.

Although a lot of documentation is still required, the entire process and uploading of the information can be carried out online, which makes registering much easier. As an example, in the past, companies like Knudsen & CRC. would need somewhere between 500-1000 pages of printed paper to complete a single product registration.

What types of documentation are needed for product registration under the new regulations?

The documentation includes qualification documents of the applicant and production entity, basic information about the product, technical and safety reports such as certificates of analysis, testing reports (including on raw materials), or other documents that indicate the products are safe for use.

In addition, new requirements have also been put in place in which brands making efficacy claims about their products must show proof of these claims through documentation. As an example, if a brand says a product provides anti-ageing effects, then this must be proven through scientific literature, human tests, consumer surveys or lab tests.

As you can imagine, this means that the documentation required for product registration under the new laws is massive but will also help to fight against misleading or false product claims among brands.

Are there any other requirements that brands should know about under the new cosmetics regulations?

One of the new requirements of the law is that both the applicant and the entrusted production entity shall appoint a quality and safety person with more than five years of working experience in the cosmetics industry. This person will be responsible for product safety and quality control, quality management supervision, and adverse reaction monitoring and reporting. If something happens in regards to product safety, then this person is responsible and will be liable, directly facing any punishments imposed by the authorities.

For imported cosmetics registrations, the foreign applicant is also required to appoint a responsible agent (legal entity) in China. This China-based legal entity must fulfil several requirements that include having an office, having a cosmetic business scope, and having at least four or five employees. The legal entity will be responsible for cooperating with the supervision and inspection work of the NMPA, marketing communication and advertising compliance, sales and distribution, assisting with product recalls, adverse reaction regular reporting, warehouse control and the handling of customer complaints.

Can you provide a brief breakdown of the steps that cruelty-free brands should take when entering the China market?

The first step is always to ensure that their trademark has been registered. This is something that we constantly repeat, and yet many brands still don’t do it and then encounter difficulties later because they haven’t protected their trademarks.

The next step is to decide on the owner of the product registration or the responsible person. I would strongly recommend that all brands use the product owner as the owner of the product registration, or at least avoid using the distributor. The reason for this is that the owner of the product registration will have full access to all the information or trade secrets regarding the product formula, production process, and raw material suppliers. We had a very bad case in 2020 where one of our clients provided the product registration to their distributor, who then took everything and copied the product entirely with the information they obtained access to.

I strongly recommend all brands use the product owner as the owner of the product registration, because the owner of the product registration will have full access to all the information or trade secrets regarding the product formula, production process, and raw material suppliers …

The third step is to screen the raw materials. Sometimes brands will use ingredients and raw materials such as probiotics or specific oils that may not be approved in China. In these cases, brands can either decide to re-formulate, to not register in China, or to apply for a new raw material registration, which involves animal testing. As a cruelty-free brand, this may not be an option.

Finally, after determining whether the raw materials are approved in China, the brand will normally decide on the products that they want to register, which is when the actual product registration process begins. Normally,  the products will be registered within four to six months, after which the brand can start selling in China. Under the new law, regular product filings are applicable for life, whereas previously the products needed to be re-filed after four years. Special cosmetic registrations are currently still only valid for five years.

Subtle Energies is a cruelty-free brand that is now being sold at The Peninsula hotels in China

How do you see the new regulations changing the timeline for registration?

With the new online system, I think it will make the time to market much shorter. This is a huge advantage for many cosmetics brands, especially colour cosmetics (i.e., makeup), which are almost like a fashion product where the fashionable colours change rapidly. As a result, the shortened time to market will be hugely beneficial.

Are there any parts of the new cosmetics regulations that you anticipate brands will find difficult or confusing?

I think it depends on where the brand is from. If brands are used to European regulations, they will likely not find it too confusing because the regulations are similar, apart from the need for more documentation. For brands from the US, for example, the documentation requirements may be much more difficult to fulfil because they won’t already have it in hand. The brands will need to go back and test everything for the first time, especially when it comes to the raw materials. The responsible person part of the new regulations may also be a point of confusion because of the number of requirements, even among European brands.

Are there any categories where you are seeing a particular trend with the types of brands that will be entering the China market after these new cosmetics regulations have come into effect?

There are no specific categories. Every single brand, from low-end and cheaper colour cosmetics to high-end premium skincare will take advantage of these new regulations. China is growing faster than any other market when it comes to cosmetics and will soon to be the biggest market in the world. Most brands don’t have a choice but to look to China, especially with the new lack of need for animal testing. They need to enter the market to be able to compete in the future, which has caused the demand for registration in China to explode.

Do you have a case study that you could provide us with when it comes to importing a cruelty-free brand into China?

As a part of a pilot programme we started in 2018 and that continues to run today, we worked with a number of regular cosmetics brands to launch into China without animal testing. One of these brands is Australian premium skincare brand Subtle Energies, which is currently being sold at The Peninsula Hotel. The brand is Leaping Bunny certified, which is a cruelty-free certification. To import into China through the programme, Subtle Energies needed to comply with cosmetic regulations, such as using only approved raw materials, while also shifting a portion of the manufacturing process into an approved facility within China.

The post A guide to the new animal testing and cosmetics laws in China appeared first on Focus - China Britain Business Council.

On 14 May 2021, China issued a revision to the Regulations on the Implementation of the Law of the People’s Republic of China on the Promotion of Privately-run Schools. The modifications come into effect on 1 September 2021. While seeking to improve and regulate the growth of the private education sector in China, the modifications also stipulate that private educational institutions must strictly support the public welfare nature of education.

What is the current landscape of international private education in China?

International schools in China can be roughly divided into three types: 1) pure international schools that only accept foreign passport holders (some of which have been renamed in their license as ‘expat family children schools’); 2) private bilingual schools operating an international programme; and 3) public schools that operate an international division.

According to The Development Report of International Schools in China, as of 2020, there were 535 private bilingual schools in China, a number that has demonstrated steady growth for the past 5 years. Conversely, the number of private expat-only schools declined to 113 from a peak of 126 in 2017.

British-style education retains a strong reputation in China. The number of British-style schools has been growing significantly in recent years, with over 60 campuses in China. In 2020 alone, cities like Haikou, Dongguan, Xiamen, Changsha, Shijiazhuang, and Changchun celebrated the launch of their first British-style schools.

Any strategy for an education group looking at Asia is incomplete unless we have presence in China — Gwen Byrom, Director of Education Strategy, NLCS International

What does the new Private Education Promotion Law say?

The revisions to the law mainly target private schools carrying out compulsory education (the nine years starting from age six) for Chinese nationals. In principle, schools that only admit the children of foreign nationals are not affected by these revisions.

One of the key strategies behind the revisions is preventing public schools from turning into private schools, as seen in Articles 7 and 8 (read the full text of the law in Chinese here), as well as making access to schools more equitable by prohibiting entrance exams and cross-district enrolment.

The law also touches on school leadership. Article 25 states that members of decision-making bodies such as the board of directors should be Chinese nationals. However, this does not mean that schools cannot have foreign principals or management staff, for example.

According to Article 29, private schools offering compulsory education should not use foreign teaching materials, and that any foreign teaching materials used in other schools should comply with relevant laws and regulations.

It was noted during a recent DIT-CBBC webinar on the outlook of UK-China collaborations in school education that no foreign materials does not necessarily mean that curriculum materials from the UK or other countries cannot be used as supplementary materials to widen student learning. This is particularly true for subjects such as English, ICT, PE and art, although schools should still carefully review all materials to ensure that they do not include sensitive content.

Why have these changes come about?

The changes to the law come as China attempts to standardise education and make access to education more equal, as suggested by the definition of education as “public welfare.”

China has taken aim at educational costs as part of measures aimed at reversing the country’s declining birthrate. Despite a relaxation of the one-child policy in 2016 (recently revised to a “three-child policy”), some young urban Chinese are deciding not to have children due to the high costs of childcare and early childhood education. Some statistics even show that urban Chinese families spend up to a quarter of their family income on education.

As a result, other recent measures include tightening regulations around off-campus private tutoring services, which have been able to charge parents concerned about the child’s academic achievement increasingly high fees. On 15 June, the Ministry of Education established the Off-Campus Education and Training Department to oversee the curricula, operations, qualifications, and capital sources of tutoring organisations.

The next step for school ventures in China

The new regulations governing private education are complex, but the outlook remains optimistic for British education companies looking to enter the Chinese market.

Michelle Liang, COO of Wellington College China noted during the aforementioned webinar that the regulations underscore the importance of working with a trustworthy local partner who can help you to understand the local regulatory environment, especially for new school brands.

During the same webinar, Maxine Lu, general principal of Xiehe Education Group, suggested that schools think about how to develop a more holistic approach to education that runs from K-12 (Key Stages 1-5 in British National Curriculum terms) and beyond, and an approach that helps children develop into well-rounded individuals, rather than just preparing them to take international examinations such as iGCSEs.

She also stressed the importance of offering professional development for teachers and leveraging the advantages of a combination of expats, local Chinese and overseas return Chinese teachers. This focus on teacher training could also be an opportunity for companies in the professional development field.

The post What do changes to China’s private education law mean for British schools? appeared first on Focus - China Britain Business Council.

Members and affiliates of CBBC will be all too aware of some of the challenges faced by organisations that do business with China arising from decisions made in Westminster. The ramifications of political decisions can sometimes be problematic.

One piece of recent policy that bucks the trend, however, should be welcomed as, in contrast to the perceived zeitgeist, it creates an opportunity to build stronger links with the country.

The new immigration legislation is designed to attract the ‘brightest and best’ workers from around the world and creates a points-based system, similar to that of Australia’s. It has been introduced following Brexit and the end of the free movement of people and workers between the UK and the EU. It is designed to make Britain a more attractive business environment globally. The new regime can be confusing however, and there are several considerations businesses that trade or employ internationally need to be aware of.

The most relevant aspects to consider are the types of visas now available for Chinese migrants and investors, and the statutory requirements that organisations employing overseas workers must fulfil.

In relation to the latter, any business which plans on employing personnel from China, and any other country, must be approved by the Home Office. In government terms, they must be licensed to sponsor visa holders, i.e. foreign workers. To gain Home Office approval, businesses first need to register with the Home Office, which then checks eligibility. To be granted sponsor status, businesses must meet certain criteria. The process can be done online here.

To be eligible, applicants cannot have unspent criminal convictions for immigration offences or certain other crimes, such as fraud or money laundering, or have had a sponsor licence revoked in the last 12 months. Applicants also need appropriate systems in place to monitor sponsored employees. Applications are reviewed by UK Visas and Immigration (UKVI) and supporting documents are also required. Many businesses find it easier to use the services of immigration and visa consultants who can help save time and maximise the chances of a successful application.

Having a job offer for a skilled position from an approved employer will earn 40 points. Being able to speak English gets 10 points. The magic number to reach before a visa is issued is 70.

The most recent figures issued by the government show that only a small percentage of UK businesses are on the approved sponsor list. There are just over 32,000.

As an approved sponsor, members can hire employees through the skilled worker visa route. These visas allow qualifying applicants to come to the UK to work. To qualify for a skilled worker visa, applicants must meet certain criteria, each of which is scored. For example, having a job offer for a skilled position from an approved employer will earn 40 points. Being able to speak English gets 10 points. A salary offer of at least £25,600 gets 20 points. The magic number to reach before a visa is issued is 70.

Another popular visa route that those with links to China should be aware of is the Tier 1 Investor Visa. This provides a route into the UK for high-net-worth individuals who wish to invest in Britain. To qualify, applicants must have least £2 million of their own money held in a regulated financial institution and available for immediate dispersal in the UK. They must also have a UK bank account at a regulated bank, be at least 18 years old and able to prove that the investment funds belong to them, their spouse or legal partner.

The other types of visa that CBBC members should be aware of are Global Talent Visas and Sole Representative Visas.

The Global Talent Visa is an immigration route for individuals with a proven track record as ‘recognised leaders’, or show promise as being ‘emerging leaders’, in the fields of science, the humanities, engineering, the arts or technology.

The Sole Representative Visa is available for representatives of overseas businesses if they are either the sole representative planning to set up either a UK branch or wholly owned subsidiary, or an employee of an overseas newspaper, news agency or broadcasting organisation posted on a long-term assignment to the UK.

Despite recent headlines about friction between the UK government and Chinese technology firms, the signs are still positive if recent statistics are anything to go by. Indeed, Chinese IT workers and tech investors have been approved for UK visas at a higher percentage than any other nation, according to new data.

Figures released by Tech Nation reveal that last year, while the number of Chinese nationals applying to work or invest in the UK IT and technology sector has dropped, those that did apply enjoyed a higher visa approval rating than nationals from any other country. Of the 77 who applied under the Global Talent Visa route, 86% were approved. The low number of applicants is more likely to be due to restrictions caused by the pandemic, rather than any political concerns.

Chinese IT workers and tech investors have been approved for UK visas at a higher percentage than any other nation, according to new data

The figures show there are favourable conditions no matter what nationality applicants are, and that Britain is still very much open for business and remains a lucrative place for IT and tech firms to expand into. Chinese IT specialists are particularly attractive to UK employers.

The advantage of these immigration changes for those with commercial interests in China is that all firms should theoretically now be operating on a level playing field. Previously, organisations with interests in the EU, and those that employed EU workers, had an advantage. Now everyone is equal, and that should ultimately be good for business for CBBC members.

For more information visit AY&J Solicitors or email: contact@ayjsolicitors.com

The post How the UK’s new immigration rules help your Chinese employees appeared first on Focus - China Britain Business Council.

China recently issued the draft Personal Information Protection Law (the “PI Law”), which, if adopted, will be the first comprehensive high-level legislation on personal information protections in China. It details the rules for collection, storage, processing, and disposal of personal information, clarifies a number of controversial issues such as security assessment for data exportation, and sets out comprehensive requirements in relation to establishing internal policies for data management. The PI Law therefore forms a solid base for further legislation on personal information protection matters.

The PI Law influences all business sectors. In particular, it will likely significantly affect the data practice of international financial institutions which already have business operations in China or are expanding their business operations into China.

Extraterritorial jurisdiction

Different from the Cyber Security Law, effective in 2017 which regulates constructions, operations, maintenance, and utilisations of networks in PRC territory, the PI Law has explicit exterritorial effect. International financial institutions which do not have a presence in China would still be subject to the PI Law in terms of collections and utilisation of personal information of people residing in China.

According to Article 3 of the PI Law, the PI Law regulates the collection, storage, utilisation, processing, transmission, provision or disclosure (collectively “handling”) outside of China of personal information about people residing in the territory of China if either of the following conditions are met: (i) the purpose of the handling is to provide goods and services to people in the territory of China; (ii) the purpose of the handling is to analyse or evaluate behaviours of people within the territory of China; and (iii) any other situation provided for by laws and regulations. China has a huge financial service market, which attracts those international financial institutions to invest in.

International financial institutions which do not have a presence in China would still be subject to the PI Law in terms of collections and utilisation of personal information of people residing in China

Meanwhile, the financial services sector has not been fully opened to foreign investment. As a result, many foreign financial institutions select to stay offshore whilst studying the China market or servicing Chinese customers by sending staff to travel to China or otherwise remotely. During the course of such remote business operations, foreign financial institutions inevitably collect and analyse personal information generated in China, which include customer identities, financial information, family structures, contact information, etc.

If the PI Law is finally adopted, the handling of personal information by these foreign financial institutions will be subject to the PI Law. Consequently, foreign financial institutions will be required to follow the data protection requirements under the PI Law.  A violation to the data protection requirements under the PI Law may result in the foreign financial institution being included in a blacklist and in a ban on cross-border transfers of personal information to it.

It may be a big challenge, especially for those financial institutions which have already developed and implemented robust data protection policies in practice, to follow the PI Law when handling the personal information.  The PI Law increases the administrative cost by imposing a “local presence” requirement on those foreign financial institutions that collect or use personal information concerning people residing in China.

The requirement is that, according to Article 52 of the PI Law, a foreign financial institution must establish a dedicated department or appoint a representative in China to take charge of data protection matters.  The data protection department and the data protection person must be filed with the government. The PI Law does not set out the criteria for such department or person. However, with respect to data protection persons working for foreign securities and fund business, the China Securities and Regulatory Commission (CSRC) may require that they maintain professional securities qualifications. This will increase administrative burdens on foreign financial institutions.

Engaged processing

Generally speaking, the PI Law permits the outsourced processing of personal information. Consequently, financial institutions can outsource to third party service providers both IT or business functions concerning personal information.

The PI Law distinguishes ‘outsource of personal information processing’ from ‘transfer of personal information due to business disposal or otherwise’; and imposes less burden on outsourcing arrangement.  According to Article 22 of the PI Law, a personal information controller is allowed to engage a third party service provider to process personal information in its possession provided that (i) the personal information controller enters into an agreement with the service provider to define the purpose of and method for the processing, the nature and categories of personal information to be processed, as well as the required security measures to protect personal information; (ii) the personal information controller supervises the personal information processing activities; (iii) the service provider only processes personal information within the scope of consents which relevant data subjects grant; and (iv) the service provider returns to the personal information controller or otherwise destroys personal information upon the completion of the processing.

A personal information controller is not required to seek data subjects’ separate consents to the outsourced processing; nor is it required to disclose the identity of the service provider. Consequently, a personal information controller can decide whether to enter into an outsourcing arrangement involving process of personal information after its collection of personal information.

At the early stage when international financial institutions enter into the Chinese market, they tend to outsource their administrative functions, IT functions, and certain ancillary business functions (eg, with respect to mutual fund business, the TA and FA functions) to manage costs and retain flexibility.  Such outsourcing arrangements will more or less involve processing of personal information. The PI Law does not impose any requirement to seek individuals’ separate consents or to disclose service providers’ identities, and thus facilitates outsourcing arrangements.

Nevertheless, in order to control the data breach risks arising from outsourcing arrangements, it would be important to enter into service agreements with service providers pursuant to legal requirements under the PI Law and to include all necessary clauses, such as the scope and restriction of the outsourced services, auditing right, confidentiality, destruction of information, prohibition on further subcontracting, etc. A well drafted service agreement will help mitigate data breaching risks arising from outsourcing arrangements and be a good defence when authorities perform regular inspections on outsourcing activities involving personal information.

Data exportation

The PI Law releases the concern that all data exports require security assessment organised by the government. As a result, foreign financial institutions would have a greater flexibility to integrate on their global platform the data generated from their business operations in China.

Restrictions on data exportation have long been a controversial topic in China. The Cyber Security Law sets out the principle that personal information and important data which critical information infrastructure (CII) operators collect or generate in China must be kept in China and that, if they are necessarily to be exported outside of China, a security assessment procedure according to relevant regulations would be required.  In order words, the Cyber Security Law only restricts the export of personal information and important data which CII operators generate or collect in China.

However, the Cyberspace Administration of China (CAC) – the country’s key regulator on cyber security matters, issued a draft Administrative Measure for Export of Personal Information and Important Data in 2017, which was later replaced by the draft Administrative Measure for Data Security and the draft Administrative Measure for Security Review of Export of Personal Information, both of which were released in 2019.  All these draft measures expanded the scope of personal information exports where security assessment is required.

Under these draft measures, all exports of personal information require security assessment, regardless of whether they are collected or generated by CII operators or of the materiality of the personal information.  These measures also require government approvals for the security assessment before exports can be implemented. Such a wide scope of application of the security assessment requirement triggers concerns that the security assessments will incur a significant administrative cost and that the delay in government approvals for the security assessments will delay the exporting process.

The PI Law relieves the concerns by narrowing down the scope of applications of the security assessment requirement. According to Articles 38 and 40 of the PI Law, an export of personal information by a CII operator or an export of personal information reaching a volume threshold to be stipulated by the CAC must undergo a security assessment procedure organised by the CAC.

With respect to all other circumstances relating to export of personal information, the exporter may select to undergo, or not to undergo, the security assessment procedure at its own discretion. If a security assessment is not selected, the exporter will be responsible for entering into an agreement with the offshore personal information receiver to ensure that the receiver meet the personal information protection standard imposed by the PI Law. In this regard, the data transfer agreement will be critically important to ensure the compliant because the exporter is responsible for the behaviours of the data receiver.

The PI Law helps clarify the requirements on data exports and relieve the concerns of multinational corporations, including, in particular, international financial institutions. International financial institutions usually desire to have extensive data integration, i.e., to process, analyse, and store information about customers and staff on a global platform which enables them to apply their operational strategies, investment models, and risk control tools consistently.  The reduction in the scope of application of the security assessment requirement offers international financial institutions greater flexibility to export and integrate data globally.

Note that the PI Law does not exclude the possibility that relevant industrial regulators may impose other conditions on data export.  For example, CSRC restricts the export of client identity data and transactional data. These restrictions will still apply despite the PI Law.

Compelled disclosure to foreign government agencies

The PI Law prohibits the disclosure to foreign government agencies of personal information collected in China. This prohibition may confront international financial institutions with the dilemma that, whilst they may be compelled to disclose personal information to foreign government agencies, they are prohibited from the disclosure by the China government.

According to Article 41 of the PI Law, unless otherwise provided for under international conventions or bilateral treaties to which China is a party, the disclosure of personal information to foreign government agencies for judicial assistance or administrative enforcement is required to be approved by the China government.

This requirement is consistent with that under the PRC Securities Law effective in March 2020, where disclosure to foreign law enforcement agencies of files and materials relating to securities business is prohibited unless such disclosure is made via a cooperative mechanism established between China and the foreign government in question (eg, the MOU between CSRC and US SEC) or otherwise approved by CSRC or other government agencies in China.  These requirements mean that the China government would have full control over the information to be disclosed to foreign government agencies.

However, the prohibition on disclosure contradicts some foreign authorities’ positions.  For example, the US congress passed the CLOUD Act in 2018, with which the US government has the power to compel companies to disclose personal information or other data in the possession of not only those companies but also their subsidiaries overseas, even if the local laws where these subsidiaries are located prohibit them from doing so. Consequently, when the US government orders a US financial institution to disclose certain personal information in the possession of its subsidiary in China and the China government disapproves such disclosure, the financial institution will (i) violate the US law, if it selects not to disclose such personal information as the US government orders; or (ii) violate the China law, if it selects to follow the order of the US government.

It may be too early to assess the practical impact of this prohibition on international financial institutions, or to suggest a resolution.  However, a well-developed information firewall between a foreign financial institution and its subsidiaries in China, as well as a well-designed managerial policy, may help segregate data generated in China from those under direct or indirect control of the foreign financial institution and thus reduce the practicability to compel the disclosure of data in the possession of such a Chinese subsidiary.

Contact the author Xun Yang from LLinks Law Offices on xun.yang@llinkslaw.com for more information on PI law

The post What does the new draft Personal Information Protection Law mean? appeared first on Focus - China Britain Business Council.

The United Kingdom formally left the European Union on January 31, 2020 and the year-long transition period that allowed continuity of rules and regulations ends on December 31, 2020. This includes the rules surrounding the conformity of marking and assessment of products.

Although the UK and EU are attempting to negotiate an agreement in relation to the regulatory regime after the transition period, plans are also being implemented for the introduction of a United Kingdom Conformity Assessment (UKCA) Mark in the event that a deal is not reached.

What is the UKCA Mark?

The UKCA mark is a new conformity mark for goods intended to be placed on the market in England, Wales and Scotland. This compliance mark will replace the existing European CE mark. (Goods being sold on the Northern Ireland market fall under a slightly different jurisdiction. See the table below). UK regulations have been amended to broadly replace references to the CE mark with reference to the UKCA mark and the role of ‘Notified Bodies’ will be replaced with ‘UK Approved Bodies.’

The table below illustrates the accepted markings in each relevant market.

Who is the UKCA Mark for?

Whether you are a manufacturer, importer or distributor, it is important that you ensure that products brought into the UK have the new mark.

Businesses are encouraged to be ready for full implementation of the new UK regime as soon as possible after 1 January 2021. However, there will be a one year period where both the UKCA or CE mark will be accepted for products shipped before 1 January 2021. The UKCA mark will entirely replace the CE mark at the end of 2021.

When do you need to use the UKCA mark?

Companies will need to use the new UKCA mark if all of the following apply:

• The product is for the market in Great Britain
• The product is covered by legislation which requires the UKCA marking
• The product requires mandatory third-party conformity assessment
• The product’s conformity assessment has been carried out by a UK conformity assessment body and you haven’t transferred your conformity assessment files from your UK body to an EU recognised body before 1 January 2021.

This does not apply to existing stock, for example, if the product was fully manufactured and ready to place on the market before 1 January 2021. In these cases your goods can still be sold in Great Britain with a CE marking, even if covered by a certificate of conformity issued by a UK body.

How should you use the UKCA mark?

In most cases, the UKCA mark must be applied to the product itself or to the packaging. In some cases, it may be placed on the manuals or on other supporting literature. This will vary depending on the specific regulations that apply to the product.

The following general rules apply:

• UKCA markings must only be placed on a product by the manufacturer or an authorised representative (where allowed for in the relevant legislation)
• When attaching the UKCA mark, the company takes full responsibility for the product’s conformity with the requirements of the relevant legislation
• The company must only use the UKCA mark to show product conformity with the relevant UK legislation
• The company must not place any marking or sign that may misconstrue the meaning or form of the UKCA marking to third parties
• The company must not attach other marks on the product, which affect the visibility, legibility or meaning of the UKCA Mark
• The UKCA Mark cannot be placed on products unless there is a specific requirement to do so in the legislation.

Brexit: What you will need to consider or be prepared

1. The new conformity assessment requirements:

• The UK Government has confirmed that UKCA marking comes into force from 1 January 2021. However, to allow businesses time to adjust to the new requirements, the existing CE marking is allowed to be used until 1 January 2022 in most cases.
• After 1 January 2022, the UK will stop recognising the CE mark or conformity assessment activities that have been performed by EU27 Notified Bodies.
• The new UK legislation requires product conformity assessment activities to be performed by an entity or Assessment Body located in the UK.
• Likewise, the EU will not recognise conformity assessment activities performed by Notified Bodies in the UK for products placed on the market on and after 1 January 1 2021. And The EU will not recognise the ‘UKCA’ mark.
• EU Directives require some activities to be performed by entities located within the EU/EEA.

2. The timeline:

Note: This graphic does not include timescales for marine equipment, medical devices or IVDs.

Manufacturers will need to carefully consider the implications of Brexit on the conformity of their products and take appropriate action to ensure that all declarations are made correctly and on time. Although there is a transition period, it is essential that companies complete the new requirements as soon as possible. Manufacturers will also need to ensure that various partners within the supply chain are located in the correct territory.

3. Making contact with the ‘Conformity Assessment Bodies’ 

On January 1, 2021, UK-based Notified Bodies will automatically become ‘Appointed Bodies’ under the UKCA legislation. Any UK Notified Body-issued certificates that have not been transferred to an EU27 Notified Body, will automatically become valid as a means for illustrating conformity under the UK Regulations to which they apply: Reaching out to Conformity Assessment Bodies is always recommended if there are questions.

This article was written by BSI. BSI is appointed by the UK Government as the national standards body, holds the Royal Charter, and represents UK interests at the International Organisation for Standardisation (ISO), the International Electrotechnical Commission (IEC) and the European Standards Organisations (CEN, CENELEC and ETSI).

BSI’s role as the UK National Standards Body is to help improve the quality and safety of products, services and systems by enabling the creation of standards and encouraging their use. We represent UK economic and social interests across all European and international standards organisations and in the development of business information solutions for British organisations of all sizes and sectors.

BSI is also a Certification Body and Notified Body. For UKCA Services, BSI is an approved body (0086) for the UKCA Mark and can work with you on the required conformity assessment procedures that will allow you to affix the UKCA marking under the following areas:

• Construction Products
• Personal Protective Equipment
• Gas Appliances
• Pressure Equipment
• Lifts
• Marine
• Transportable Pressure Equipment
• Measurement Instruments

Learn more about BSI Services and the new UKCA Mark. At the time of writing, guidelines and timelines regarding UKCA marking for Medical Devices and IVD’s differ to those for the products listed above.

The post Ensure your business is Brexit prepared with the new UKCA mark appeared first on Focus - China Britain Business Council.

On a stroll through Beijing’s buzzing Tai Koo Li mall, you don’t have to look for long to spot familiar cartoon characters on the T-shirts in window displays, or well-known paintings printed on to the latest covetable tote bag. Of course these cartoon characters and artworks are IP assets, but the retail merchants don’t own that IP. Rather, they have been licensed by the rights holders to manufacture and sell the products for an agreed period of time within a certain territory in a bid to boost sales figures.

Essentially, IP licensing is a way for companies to increase the visibility of their brand and generate more revenue. To some extent, the licensor and licensee share the risks when they engage in IP licensing: on the one hand, the licensor does not need to risk producing and shifting merchandise that might not sell, and is simply paid royalties; on the other, the licensee does not need to worry about developing the reputation of the licensed IP and can simply use it to gain their own advantages in the market.

According to the Global Brand Licensing Market Report 2020 undertaken by the International Licensing Industry Merchandiser’s Association (LIMA), the retail sales of licensed merchandise increased 4.5% worldwide in 2019, to $2,928 billion. By type of merchandise, clothing (15.1%), toy (12.2%) and fashion accessories (11.9%) stayed ahead of the market in 2019.

In respect to the licensing statistics of China, the China Toy & Juvenile Products Association (CTJPA) underwent a survey that indicated retail sales of licensed merchandise increased 15.6% nationwide in 2019, to reach RMB 992 billion (approx. £113.5  billion) of sales revenue and RMB 38.2 billion (approx. £4.3 billion) of royalty revenue.

In this article, three world-leading licensors, Hasbro, Mattel and eOne Family Brands share their experience of licensing IP in China and, more importantly, explain how to effectively protect IP rights and deal with various challenges to help propel your business and commercial operations in China forward.

Hasbro

According to Licensing Global, Hasbro ranks seventh among the top 150 global licensors, with £5.3 billion of retail sales in 2019. The portfolio of Hasbro’s iconic brands includes Transformers, My Little Pony and Monopoly, and the company is a leading licensor in the entertainment industries: Hasbro’s licensing operations in China cover merchandise licensing, publication licensing, co-marketing promotion and more.

Jessica Qian, head of Hasbro’s licensing business for China, says that Hasbro attaches great importance to its cooperation with its licensee partners, citing the case of licensing its IP to Baleno, a well-known apparel brand in the China market.

When Hasbro selects a suitable licensee, the licensee’s sales volume and coverage of sales areas are considered the most important factors. As a result of this criteria being applied, Baleno was one of the best contenders for winning the licence: the company is capable of achieving strong sales figures and its retail stores are located all over China, including in third and fourth tier cities.

When Hasbro selects a suitable licensee, the licensee’s sales volume and coverage of sales areas are considered the most important factors.

As a result, Baleno obtained the non-exclusive licence from Hasbro to manufacture, promote and sell clothes bearing the cartoon characters owned by Hasbro. That is, Hasbro itself may also use the same IP as well as grant such an IP licence to other licensees in China within the licence period, though Hasbro would usually not authorise a number of licensees in the same sector for the sake of avoiding competition.

Under the details of the licence, Baleno can select certain images of the brand’s cartoon characters from the design books provided by Hasbro, and then has the right to manufacture the clothing bearing those selected images. Baleno is also permitted to use the relevant trademarks in promotion and advertising campaigns.

It is therefore essential that Hasbro, as the licensor, has registered the trademarks underlined by the China National Intellectual Property Administration (CNIPA) and has recorded the copyright of the principal images of the cartoon characters with the Copyright Protection Centre of China (CPCC) before licensing its IP to Baleno.

The first licensing cooperation between Hasbro and Baleno was established back in 2013. Baleno was initially licensed by Hasbro to sell boys’ clothing and accessories bearing images of Transformers. During the licence period, Baleno displayed Transformers-themed props in its local stores, attracting young Transformers fans and boosting sales. The success of this initial partnership led to a further licensing cooperation between Hasbro and Baleno on another brand – My Little Pony – the subsequent year.

To everyone’s surprise, revenues from Baleno’s My Little Pony items outperformed those of Transformers, despite the candy-coloured horses being much less popular in China at the time. Not only were the appealing images selected from the design book provided by Hasbro the key to the success of this particular licensing deal, but also Baleno’s efforts in making the shopping environment more attractive to customers.

Baleno purchased several merchandise items such as toys, bags, hair accessories, stationery, etc. from Hasbro and its other licensees, in a bid to provide customers a more immersive experience and the chance to do one-stop shopping for My Little Pony products. The sales were so successful that Hasbro went on to license other brands such as Monopoly and Peppa Pig to Baleno. Since then the selection of merchandise has even expanded from children’s clothing to adults’.

Mattel

Mattel, another leading global children’s entertainment company specialising in toys and consumer products, share a similar experience of IP licensing in China. Mattel’s portfolio of brands includes Barbie, Thomas & Friends, Hot Wheels and Fisher-Price, among others. Its licensing operations in China range from character and merchandise licensing, to publication licensing, gift promotion and so on, covering a more broad range of sectors including clothing, food and beverage.

Mattel currently has a licensing relationship with Bright Diary, one of China’s largest dairy producers, on use of trademark and images of Thomas & Friends on the packaging of its yoghurts and cheese bars. According to Mattel, it’s Bright Diary’s wide sales channels covering numerous e-commerce platforms and marketplaces that have the most value, and from which Thomas & Friends have gained a great deal of exposure as a result.

More often than not, an international IP is less well-known in the third and fourth tier cities than in the first and second tier cities in China. Hence, as a preliminary matter, the licensor should first attempt to raise brand awareness in the local market. In Mattel’s case, the focus was on promotion of the content. For example, the cartoon series of Thomas & Friends was broadcasted on the China Central Television’s Children’s Channel. Nowadays, given most people in China’s widespread access to the internet, Mattel has expanded the licensing to online video platforms such as Iqiyi, Tencent Video and others, which are also popular among cartoon-watching children across China. Such accessibility to the cartoon series will in return cultivate the local market and increase  popularity of the licensed merchandise.

eOne Family Brands

Understanding how to effectively protect your IP in China is the true key to successful IP licensing. Peppa Pig, a British cartoon character, met Chinese audiences in 2015 and became an instant hit. Owning one of the most globally popular pre-school children’s brands, eOne Family Brands (the parent company of which was acquired by Hasbro in 2019) has encountered myriad issues relating to IP protection, including counterfeit goods, trademark squatting and product and content piracy, to name a few.

eOne countered the challenges in several ways. Firstly, they engaged enforcement vendors to constantly monitor all major e-commerce, social media and VOD platforms in China to identify and remove product or content piracy on a large scale. Secondly, they collaborated with several key stakeholders to facilitate these efforts, including the major platforms, licensees, commercial partners, relevant authorities and industry bodies. Such collaboration helped eOne identify and deal with potential threats more quickly, and stay at the forefront of any industry developments. Thirdly, they proactively identified and raided infringers who manufactured and stored large quantities of counterfeit goods, and had customs recordals in place to prevent the export of counterfeit goods from similar scale infringers.

eOne proactively identified and raided infringers who manufactured and stored large quantities of counterfeit goods, and had customs recordals in place to prevent the export of counterfeit goods from similar scale infringers.

Unlike most of the other rights holders, eOne carries out a high volume of litigation in safeguarding their IP. Litigation allows eOne to enforce against hundreds of infringers annually with the added bonus of damages awarded at the conclusion of the case, which covers all legal fees.

Among several successful litigations, one case that garnered international attention took place in 2018 against two Shantou-based companies manufacturing and selling counterfeit Peppa Pig toy sets on Taobao.com. The case was the first handled by Hangzhou Internet Court, the first internet court established in China, to award damages for a production copyright infringement. It turned out the internet court dealt with IP matters much more efficaciously compared to traditional courts.

The case also shows the value of copyright recordal and its importance as an enforcement tool. Even though copyright recordal is not mandatory in China, it is recommended that rights holders consider recording their most important works as it can help prove copyright ownership in infringement disputes and commercial negotiations.

Niall Trainor, Senior Director of Brand Protection at eOne Family Brands, shares his advice on what UK businesses should do with respect to safeguarding intellectual property in China:

“China is such a huge territory and complex IP environment. There is no ‘one size fits all’ approach to IP protection. However, there are a few basic tips that are essential if a company is serious about protecting its IP in China.

“First, it is essential you register your trademarks (in all subclasses) at least for the goods and services that you intend to use. Make sure you also register any transliterations, artwork and logos if they are essential to your brand. Increasingly you need trademarks in China not merely to protect your brand, but to commercially exploit it because platforms will request documentation that you are indeed the bona fide rights owner.

“Secondly, there is a limit to what you can achieve in running a brand protection program remotely from outside of China. Ideally you need someone on the ground in China, either by hiring an employee directly or appointing a local agent you trust, who can liaise with the relevant stakeholders.

“Thirdly, pick your battles. It is not possible to tackle every IP infringement you come across. Focus on those that materially affect your brand reputation or revenue.

“Finally, tying in with the previous point – this all costs money. China is not a cheap jurisdiction for IP protection, so it is important to accept that you will realistically need to spend tens of thousands of dollars as a minimum. That said, I always say to see it as an investment – it is always much cheaper, easier and less time-intensive preventing infringement, than it is having to deal with it after it has already happened.”

A pre- and post- checklist for licensing your IP in China

So, what should you do before licensing your IP in China? Hasbro cites localisation as its key strategy. As a foreign licensor, Hasbro is of the opinion that understanding customer demand is critical to the growth of its licensing business in China. For example, Hasbro has cooperated with local TV stations to develop a series of cartoons featuring Transformers and Nezha (a Chinese cartoon character derived from Chinese folk tales). Then, once the licensor finds the IP has taken customers’ fancy, it is the time to expand the sales channel and market because the consumption potential of the customers in the third-tier and lower cities can never be underestimated.

A licensor should evaluate the licensing opportunities and be well prepared to enter into the new market. The following points are what Hasbro says it normally takes into consideration before licensing IP in China.

• Understand your brand and know which market segment your IP can fit into;
• Locate the target customers whom you want to sell the merchandise to;
• Make a localised business plan based on the above-mentioned findings;
• Have the IP rights in place, including but not limited to trademark registration and copyright recordals;
• Choose licensing professionals who understand the local market, and share with them your business development strategy and short/long-term goals.

A licensor’s work does not end after signing the license agreement. Hasbro believes giving full support to the licensee in promoting and selling the merchandise is very important in order to build a long-term partnership and enhance the licensor’s reputation. Below is a list of the support work Hasbro normally carries out after licensing an IP to the licensee.

• Make a timely update to the design book in line with market demand, bearing in mind the uniqueness of the respective IP shall remain;
• Support licensees’ marketing campaigns, e.g. arranging brand-led marketing activities in accordance with a major campaign or in conjunction with holidays, e-commerce promotional days, etc., to help promote merchandise and increase sales;
• Support development of joint distribution channels, for example introducing suitable online or offline platforms to the licensee, or facilitate cooperation between licensees to hold brand-led marketing campaigns in the joint sales channels;
• Attach importance to IP protection by combating unauthorised use and counterfeit goods.

  

The post Hasbro, Mattel and eOne Family explain how to license and protect your IP in China appeared first on Focus - China Britain Business Council.