China Revises E-Commerce Law with Landmark Proportional Fine

China has taken a significant step toward overhauling its E-Commerce Law, releasing a draft amendment that introduces proportional fines of up to 5 percent of annual turnover for the most severe platform violations — a landmark shift from the current fixed-penalty system. The draft, jointly published on July 4 by the State Administration for Market Regulation (SAMR) and the Ministry of Commerce, marks the first systematic revision of the law since it took effect on January 1, 2019.

Why the Law Needs Updating

Nearly eight years after its enactment, China’s E-Commerce Law faces the challenge of regulating a platform economy that has transformed dramatically. When the law was first passed in 2018, the dominant model was traditional “shelf-style” e-commerce dominated by platforms like Taobao and JD.com. Since then, live-streaming e-commerce, mini-program marketplaces, second-hand platforms, and cross-border e-commerce have exploded in scale and complexity.

As Xinhua News reported, China has been the world’s largest online retail market for 13 consecutive years. The revision affects millions of e-commerce operators, numerous flexible-employment workers, and over 900 million online consumers.

“China’s E-Commerce Law has been in effect for nearly eight years. During this period, the forms of the digital economy and platform economy have undergone significant changes,” said Lv Laiming, Director of the Commercial Law Research Center at Beijing Technology and Business University, as reported by Dazhong Wang. “New business forms continue to emerge. Some prominent violations and illegal activities in practice need to be strengthened in governance, requiring improvement in law and institutions.”

Five Key Areas of Reform

The draft amendment covers five main areas: expanding the scope of legal adjustment, strengthening platform responsibility systems, establishing coordinated regulatory mechanisms, regulating prominent e-commerce violations, and deepening international cooperation in e-commerce.

Proportional Fines: A Paradigm Shift

The most consequential change is the introduction of proportional fines. Under the current law, the maximum fine for most violations is 2 million yuan — a negligible amount for platforms like Alibaba, JD.com, or Meituan, whose annual revenues run into the hundreds of billions or trillions of yuan. The draft empowers regulators to impose fines of up to 5 percent of a platform’s previous year’s business turnover for violations deemed “particularly serious” with “especially恶劣 social consequences.”

“The introduction of ‘proportional fines’ is an important highlight of this revision,” said Hong Yong, Associate Researcher at the Chinese Academy of International Trade and Economic Cooperation under MOFCOM, in comments to Xinhua. “It helps address the issue of fixed-amount fines having insufficient deterrent effect on large platforms. The draft links penalties to enterprise turnover, the nature of violations, and social impact, better reflecting the principle of ‘punishment commensurate with the offense.’”

Xue Jun, Director of Peking University’s E-Commerce Law Research Center, explained to CCTV that “platform-type enterprises, which are often huge in scale” now face proportional fines “serving to promote rectification” for serious illegal acts.

Graduated Penalties and Balanced Enforcement

Rather than simply increasing penalties, the draft introduces a graduated enforcement system. New measures include “suspension of new user registration,” “suspension of related business,” and “suspension or cessation of network access services” — allowing targeted enforcement without forcing a full business shutdown.

Lv Laiming noted that previously, “suspending all operations affects the continuous operation of enterprises. Now additional measures are added — besides suspension of operations, there can also be suspension of user registration or suspension of related business. This makes the degree of fault and violation match the penalty measures.”

The upper limit of some fixed fines has also been raised from 2 million yuan to 5 million yuan. But experts emphasize the draft does not一味加重 (unilaterally increase) penalties. It also introduces flexible enforcement mechanisms such as interviews (约谈) and rectification suggestions, allowing businesses the opportunity to recognize and address problems in their operations.

Worker Rights and Platform Governance

For the first time, the draft explicitly includes provisions for protecting the rights and interests of workers in the platform economy — a significant development for delivery drivers, ride-hail drivers, and other gig economy workers who have long existed in a legal gray area between employees and independent contractors. Workers are also included in the collaborative governance system, reflecting a shift from single-regulator oversight to multi-stakeholder governance.

Hong Yong noted that “as the social attributes of the platform economy continue to strengthen, the current law needs further improvement in areas such as platform responsibility, worker rights, and regulatory coordination.”

International Cooperation and Countermeasures

The draft promotes alignment of e-commerce rules, regulations, and standards with international norms, supports orderly overseas expansion by Chinese platforms, and adds countermeasures to protect enterprises’ legitimate rights abroad — a provision that reflects growing geopolitical tensions and regulatory friction with markets like the European Union and the United States.

Analysis: A New Phase in Platform Economy Governance

The revision represents a maturing of China’s approach to platform regulation. Following the anti-monopoly crackdown of 2021–2022 and the enactment of data security and personal information protection laws, the E-Commerce Law update signals a shift from crisis-driven enforcement to systematic, rules-based governance.

Hong Yong described the broader policy context: the revision aims to help the platform economy transition from “traffic competition” to “innovation competition” and from “scale expansion” to “high-quality development.”

What’s Next

The public comment period is now open. SAMR and the Ministry of Commerce will refine the draft based on feedback before submitting it to the Standing Committee of the National People’s Congress for approval. While no exact timeline has been set, the draft is expected to move through the legislative process in the coming months.

Key questions remain: How will proportional fines be calculated in practice — based on global or China-only revenue? Will the new worker rights provisions lead to formal employment classification for gig workers? And how will the countermeasures against foreign jurisdictions be implemented?

What is clear is that the revision marks a milestone in China’s platform economy governance, one that will reshape the regulatory landscape for the world’s largest online retail market for years to come.