Legal And Regulatory Environment

Regulatory actions and enforcement activities 

In 2025, regulatory oversight in China's consumer sector underwent a series of developments, with authorities placing renewed emphasis on the safety and quality of consumer goods and services. Enforcement actions were particularly focused on certain key segments such as food, e-commerce, pharmaceuticals, public utilities, elderly care, childcare and tourism, while the broader regulatory landscape continued to be shaped by geopolitical developments and evolving trade and tariff controls.

A major policy milestone was the joint issuance of the Three-Year Action Plan for Optimising the Consumption Environment (2025–2027) in February 2025 by the State Administration for Market Regulation, National Development and Reform Commission, Ministry of Industry and Information Technology, Ministry of Commerce and Ministry of Culture and Tourism. The Action Plan sets out core priorities, including (i) upholding safety standards through the "four strictest requirements" for food, with enhanced supervision of staple categories such as grains, oils, meat, eggs, and dairy; (ii) rectifying market non-compliant practices in the livelihood‑related areas via the "Iron Fist Campaign", targeting illegal activities such as excessive food additives and counterfeit products; and (iii) regulating competition order by addressing monopolistic conduct and price fraud in sectors including pharmaceuticals, public utilities, and automotive.

Enforcement practices increasingly reflected a "enforcement + service" approach. On the one hand, multiple "Iron Fist Campaigns" were rolled out nationwide, resulting in over 53,200 product quality violation cases investigated and fined. On the other hand, in light of economic uncertainty, flexible enforcement measures such as "no penalty for first-time offenders" and administrative guidance became more prevalent.

Geopolitical tensions and regulatory complexity

Geopolitical factors and trade controls continued to intersect with regulatory enforcement. In February 2025, a major US-based apparel multinational was added to China's Unreliable Entity List for discriminatory practices against Xinjiang cotton. In May 2025, a Shanghai subsidiary of a European luxury brand was fined for data breach (see Data, AI and Technology below for more details). Separately, the Nanjing Maritime Court heard the first case under the PRC Anti-Foreign Sanctions Law, where a Chinese marine engineering company successfully sued a European equipment firm for refusing to pay contract balances after the Chinese entity was added to the US SDN list, establishing a precedent for enterprises, including foreign subsidiaries in China, to seek redress in Chinese courts for losses caused by foreign sanctions.

Looking ahead to 2026, further targeted enforcement is expected to continue in priority sectors, including those closely related to people's livelihood. Multinational enterprises should closely monitor geopolitical developments, strengthen supply chain due diligence, and adopt proactive risk mitigation strategies such as dual-track sourcing and contractual clauses addressing political force majeure. Sustained focus on data security, full-chain product traceability, and consumer rights protection will remain critical to navigating the increasingly stringent and complex regulatory environment. 

Competition

China's revised Anti-Unfair Competition Law, effective from 15 October 2025, introduces key updates, including:

• Prohibiting large enterprises from abusing advantageous positions, such as imposing unreasonable payment terms or delaying payments to SMEs.
• Banning platform operators from forcing merchants to sell below cost and requiring fair competition clauses in service agreements.
• Recognizing data scraping and unauthorized use of others' data as unfair competition.
  Explicitly prohibiting fake orders, fake reviews, and malicious returns.

Judicial enforcement is also evolving. In September 2025, the PRC Supreme People's Court issued its first decision confirming abuse of administrative power to restrict competition, in a case involving the shared e-bike sector. This decision reinforces the prohibition on administrative agencies granting exclusive rights without legal basis and signals greater scrutiny of local government practices that may distort market entry or favour incumbents in the consumer goods sector.

The Revised Provisions on Prohibition of Monopoly Agreements (effective from 1 February 2026) establish clearer safe‑harbour thresholds for vertical agreements. Consumer goods companies should reassess distribution agreements and vertical arrangements, especially non-price restraints such as territorial or customer restrictions, to ensure compliance.

Consultation drafts including the Internet Platform Antitrust Compliance Guidelines (Draft, November 2025), which are expected to formalize obligations for platform operators, including algorithm transparency and fair dealing, and new rules clarifying the calculation of illegal gains in administrative penalty cases, increasing predictability of penalties.

Another notable development in 2025 was the State Administration for Market Regulation (SAMR)'s nationwide campaign to curb "involution" (内卷) in the market. This initiative targeted irrational competitive practices, such as destructive price wars, redundant marketing, and resource-wasting strategies that increase costs without improving consumer welfare. The campaign reflects a broader regulatory trend to restore fair and orderly competition and prevent enterprises from engaging in behaviours that distort market efficiency.

Looking ahead, antitrust enforcement is expected to become more proactive and preventive, with ongoing supervision extending beyond traditional cartel and dominance cases. There will be increased focus on vertical non-price restrictions, such as territorial limits on distributors, which were previously tolerated in practice. Companies should prepare for more active monitoring and early intervention by the PRC antitrust authorities. 

Recent enforcement actions, including consecutive SAMR-led inspections targeting large online platform operators, also signal a renewed regulatory focus on platform economy. Platform businesses should expect heightened scrutiny.

IP

In 2025, China further strengthened its intellectual property (IP) laws and regulations to create a fairer, more open business environment. These improvements especially benefit foreign companies seeking to enter or expand in China, offering stronger legal protections and greater confidence to operate.

The 2025 IP Nation Building Promotion Plan issued by the Office of the Inter‑Ministerial Joint Conference on Building a Strong Intellectual Property Nation in April 2025 introduces key initiatives to enhance China's IP system. It prioritizes speeding up the revision of the Trademark Law and regulations on trade secret protection. For consumer goods companies that depend on brand value, this means clearer and stronger safeguards for trademarks and confidential information. The plan also emphasizes developing IP rules for data protection, supporting the industry's digital transformation. This will help companies leverage data for targeted marketing and develop AI-driven products with tailored IP protections. To boost enforcement, the plan calls for better coordination between agencies and courts, and stronger cross-regional cooperation, making it easier and more cost-effective for companies to defend their IP rights.

In November 2025, China promulgated updated Patent Examination Guidelines, effective from 1 January 2026. It offers clearer standards and stronger protection for innovations in cutting-edge fields like AI and big data, especially those involving algorithms. This enables consumer goods companies to better align their patent strategies with digital and smart technology trends.

Chinese courts have also shown strong commitment to IP enforcement, which reflect China's ongoing dedication to building a safer, more equitable IP environment. For multinational consumer goods companies, this means greater security and support to invest, innovate, and grow their brands in one of the world's largest markets.

Data, AI and Technology 

In 2025, China introduced a series of new regulations and implementing measures on personal information protection, facial recognition technology, cybersecurity incident reporting, and cross-border data transfers. Highlights include:

• Processors handling personal data of over 10 million individuals must now conduct compliance audits every two years, with stricter requirements for large-scale processors and those handling minors' data.
• Facial recognition technology is subject to new rules requiring prominent notice and separate consent, prohibiting use in private spaces such as hotel rooms and bathrooms, and mandating data localization and security standards. Enforcement focuses on preventing misuse and unauthorized collection of biometric data.
• Cybersecurity incident reporting obligations have also tightened. All network operators must classify incidents into four tiers and report severe cases to provincial authorities within four hours, with further escalation for the most serious incidents. A detailed post-incident report is required within 30 days. Timely reporting offers safe-harbour, while delays or concealment may lead to penalties.
• For cross-border personal information transfers, new certification measures effective from 1 January 2026 set eligibility thresholds and require certification by qualified institutions.
• Enforcement trends highlight the seriousness of these obligations. For example, a Shanghai subsidiary of a European luxury brand reported a major data breach involving Chinese customers in May 2025, and by September, authorities have imposed penalties for unlawful cross-border transfers, failure to obtain consent, and insufficient security measures, underscoring the strict regulatory environment.

AI compliance is also in focus. The AI Safety Governance Framework 2.0, issued by the National Technical Committee on Cybersecurity Standards and the National Computer Network Emergency Response Technical Team/Coordination Centre of China in September 2025, updates risk classifications and preventive measures. Providers of AI-generated content must now ensure both explicit and embedded labels on text, images, audio, video, and virtual environments. Enforcement has been swift, with multiple mobile apps penalized in November 2025 for missing labels and metadata.

Looking ahead to 2026, with amendments to the Cybersecurity Law and new cross-border certification requirements coming into effect, companies are expected to face increasingly stringent compliance obligations and higher penalties for non-compliance. Proactive audits, transparent practices, and robust governance will be essential to mitigate regulatory and reputational risks. 

Employment

Regulators have tightened oversight on non-compete agreements with employees. The Compliance Guidelines for the Implementation of Non-Compete Agreements by Enterprises on 4 September 2025 issued by the Ministry of Human Resources and Social Security in September 2025 clarify that such agreements should mainly apply to senior management or technical staff with access to trade secrets, not employees with general industry knowledge. Geographical scope must align with the employer's operations, and compensation standards are set at a minimum of 30% of average salary for up to one year, and 50% for longer periods.

As platform-based work models expand, the PRC Supreme People's Court issued four guiding cases in 2025 to clarify how courts determine employment relationships between platform companies and workers. The assessment focuses on "dominant employment management," reflected in factors such as control over working hours and workload, management oversight, compliance with workplace rules, bargaining power over income, and the source of remuneration.

In September 2025, the Interpretation on the Application of Law in the Trial of Labour Dispute Cases (II) came into effect, setting out clear criteria for consecutive fixed-term contracts to prevent employers from avoiding permanent employment obligations. It also confirms employees' rights when continuing work after contract expiry and reinforces mandatory social insurance contributions, including invalidating any waivers. Employees may terminate contracts and claim compensation if contributions are not made. These changes aim to strengthen employee protections and ensure nationwide consistency in labour dispute rulings. Companies are advised to review and update employment practices for ongoing compliance.

Conclusion

As China's consumer sector enters 2026, regulatory expectations, policy direction and market dynamics will continue to evolve. Companies operating in the sector should closely monitor policy developments, assess compliance exposure, and adjust commercial and investment strategies accordingly. Early preparation, disciplined execution and robust governance frameworks will remain essential to managing risk and capturing opportunities in the year ahead.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.