"Law of the People's Republic of China Against Unfair Competition (Deliberation Draft)" for Public Solicitation of Comments

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【Source】http://www.chinalaw.gov.cn/article/cazjgg/201602/20160200480277.shtml

【Date of Issue】2016-02-25

 

Contents

Notice of Public Solicitation of Comments

People's Republic of China Unfair Competition Law (Revision Draft for Review)

Chapter I: General Provisions

Chapter II: Acts of Unfair Competition

Chapter III: Supervision and Inspection

Chapter IV: Legal Responsibility

Chapter V: Supplementary Provisions

Explanation on of the drafting of the "Law of the People's Republic of China Against Unfair Competition (Revision Draft for Review)"

I. The necessity of revising the "Law Against Unfair Competition"

II. The revision process for the " People's Republic of China Law Against Unfair Competition"

III. Explanation of important issues regarding the "Draft Amendments for Deliberation"

(1) Revised the concept of "Business Operator" in the General Provisions section, clarifying the scope of oversight and enforcement authority.

(2) Revised and improved relevant articles in the section on 'Acts of Unfair Competition" adding two kinds of conduct and deleting four articles.

(3) Strengthened the tactics for supervision and inspection and increased liability in the sections on supervision and inspections and legal responsibility.

Notice of Public Solicitation of Comments

Since the implementation of the Unfair Competition Law of the People's Republic of China (hereinafter "Unfair Competition Law") in 1993, after more than 20 years of development, the extent of marketization of our nation's economy has greatly increased; and the total economy, the market size, the level and the situation of market competition have all undergone extremely extensive and profound changes. In order to realize the objectives of the Party Central Committee and the State Council concerning giving full play to the decisive role of the market in allocating resources; establishing fair, open, and transparent market rules; and building a unified and open market system with orderly competition, to better maintain the market order of fair competition, and to better safeguard consumers' lawful rights and interests, the State Administration for Industry and Commerce, after synthesizing various opinions, has revised the current Law Against Unfair Competition, and has formulated the Unfair Competition Law of the People's Republic of China (Revision Draft to be sent for Deliberation) (hereinafter "Deliberation Draft") to report to the State Council. The full text of the deliberation draft is hereby released to solicit opinions from all aspects of society, so as to fully understand the comments and recommendations of all aspects of society and to improve the quality of the legislation. Relevant units and individuals from all sectors having comments on amendments may present them through the following means prior to March 25, 2016:

I. Login in to the Chinese Government's legal information network (http://www.chinalaw.gov.cn), and submit comments of the draft for deliberation through the 'Comment Solicitation System for Laws, Regulation, and Rules:" on the left side of the home page.

II. Mail a letter to: Beijing City P.O. Box 2067 (postal code: 100035), and please specify on the envelope "Comments on Unfair Competition Law".

(3) Send opinions via email to fbzdjz@chinalaw.gov.cn.

Legislative Affairs Office of the State Council

2/25/2016

People's Republic of China Unfair Competition Law (Revision Draft for Review)

Chapter I: General Provisions

Article 1: This Law is formulated in order to safeguard the healthy development of the socialist market economy, to encourage and protect fair competition, to stop acts of unfair competition, and to protect the lawful rights and interests of business operators and consumers.

Article 2: Business operators shall follow the principles of voluntariness, equality, fairness, honesty and credibility in economic activities, and observe the generally recognized business ethics.

"Unfair competition" as used in this Law refers to a business operator's conduct violating the provisions of this Law, harming the lawful rights and interests of other business operators or consumers and disturbing market order.

"Business operators" as used in this Law refers to natural persons, legal persons or other organizations engaged in the production or trade of goods, or the provision of services. ("goods" hereinafter includes services).

Article 3: People's governments at all levels shall adopt measures to stop acts of unfair competition, so as to create a favorable environment and conditions for fair competition.

Administrative departments for industry and commerce of people's governments at the county level or above shall conduct supervision over and inspection of acts of unfair competition; where laws or administrative regulations provide otherwise, the relevant departments may also conduct supervision and inspections in accordance with those provisions.

Article 4: The State encourages, supports and protects all organizations and individuals in the conduct of social supervision over acts of unfair competition.

State workers shall not participate in, support, or cover up acts of unfair competition.

Chapter II: Acts of Unfair Competition

Article 5: Business operators must not exploit commercial markers to carry out the following acts of market confusion:

(1) Using others' well-known commercial markers without authorization, or using commercial markers similar to others' well-known commercial markers, thereby causing market confusion;

(2) Prominently using one's own commercial markers that are identical or similar to others' well-known commercial markers, misleading the public and causing market confusion;

(3) Using others' registered trademarks or unregistered well-known trademarks as the brand name [字号] in an enterprise's title, misleading the public and causing market confusion;

(4) Using the brand name, or an abbreviation thereof, of a well-known enterprise or of an enterprise group as the text label in a trademark or the main body of a domain name, misleading the public and causing market confusion.

"Business markers" as used in this Law refer to symbols that distinguish goods producers or operations; including but not limited to the name, packaging, decoration, and shape of a well-known goods; trademarks, the name or the abbreviation of an enterprise or an enterprise group, brands, the main body of a domain name, a website name, webpages, full names, pen names, stage names, the name of a channel's programming, and symbols.

"Market confusion" as used in this Law refers to causing the relevant public to misidentify goods producers or operations or the specific relationships of goods producers or operations.

Article 6: Business operators must not exploit a relatively dominant position to carry out the following acts of unfair competition:

(1) Limiting the trading partners of trading counterparts without just cause;

(2) Limiting trading counterparts to purchase of goods they [the business operators] designated, without just cause;

(3) Limiting the trade terms of its trading counterparts and other business operators, without just cause;

(4) Collecting abusive fees or unreasonably requiring trading counterparts to provide other economic benefits;

(5) Attaching other unreasonable trade conditions.

"Relatively dominant position" as used in this Law refers to the situation where, during the course of specific transactions, one trading party occupies a dominant position in areas such as finance, technology, market access, sales channels, or raw material purchasing; and where its trading counterpart is reliant upon that business operator and it would be difficult to turn to other business operators.

Article 7: Business operators must not carry out the following acts of commercial bribery:

(1) Seeking economic benefits for one's own unit, department, or for oneself in public service or by relying on public service.

(2) Business operators paying each other economic benefits without truthfully recording them in contracts and accounting documents;

(3) Paying or promising to pay economic benefits to third parties with influence on transactions, harming the lawful rights and interests of other business operators or consumers.

"Commercial bribery" refers to acts by which business operators pay or promises to pay economic benefits to trade counterparts or third parties who might influence the transaction, enticing them to seek trading opportunities or competitive advantage for the business operators. Paying or promising to pay economic benefits is commercial bribery, accepting or promising to accept economic benefits is accepting commercial bribes.

Where employees exploit commercial bribery to win trading opportunities or competitive advantage for business operators, such acts shall be deemed the acts of the business operators. Where there is evidence showing that employees accept bribes contrary to the business operators' interests, this is not deemed to be the act of the business operators.

Article 8: Business operators must not carry out the following acts of misleading commercial publicity:

(1) Conducting false or biased publicity;

(2) Using viewpoints or phenomena that unsettled in science as settled facts in publicity;

(3) Carrying out publicity using discriminatory language or other misleading methods.

Article 9: A business operator must not carry out the following acts infringing on trade secrets:

(1) Obtaining rights holders' trade secrets by theft, enticement, intimidation, fraud, or other improper tactics;

(2) Disclosing, using, or allowing others to use a rights holders' commercial secrets acquired by tactics provided for in the previous item;

(3) Disclosing, using, or allowing others to use commercial secrets in their possession, in violation of agreements or the rights holders' demands for preserving commercial secrets.

Where a third party clearly knows or should know of unlawful acts listed in the preceding paragraph, but obtains, discloses, uses or allows others to use a rights holders trade secrets, it is viewed as infringements of trade secrets.

"Commercial secrets" as used in this Law refers to technological information and business information that is not publicly known, has commercial value, and is subject to corresponding secrecy measures taken by the rights holder.

Article 10: Business operators must not carry out the following acts of promotions with prizes:

(1) Failing to clearly indicate information on promotions with prizes, such as the type of award, the contest requirements, the payout amount or prizes, influencing consumers' redemption of prizes.

(2) Carrying out promotions with prizes by using fraudulent methods such as lying that there is a prize or intentionally having internal personnel win the prize;

(3) setting unreasonable conditions for prize redemption;

(4) having a top-prize valued at more than 20,000 RMB in a drawing-style prize promotion.

'Prize promotions' as used in this Law includes drawing-style and premium-style promotions. Under the same conditions, determine the reward, is the bonus-award-winning promotional; occasional method determines whether the type of incentive or reward, is a Lottery-award-winning promotions.

Article 11: Business operators must not concoct or disseminate false information or malicious appraisal information, and must not disseminate incomplete information information that cannot be confirmed, harming others' commercial reputation, the reputation of others' goods.

Article 12: Bidders must not act in collusion with each other so as to force the bidding prices up or down.

Bidders and tenderers must not collude with each other so as to push out their competitors from fair competition.

Article 13: Business operators must not use network technology or application services to carry out the following acts influencing user choices and interfering with other business operators' normal operations:

(1) Using technological means to impede users' normal use of another business operator's network application services without the user's consent;

(2) without permission or authorization, inserting links in network application services provided by other business operators, causing forced target jumping;

(3) misleading, deceiving, or compelling users to modify, close, uninstall or irregularly use network application services lawfully provided by others;

(4) without permission or authorization, interfering with or disrupting the normal operation of other network application services lawfully provided by others.

Article 14: Business operators must not carry out other acts of unfair competition harming the lawful rights and interests of others or disturbing market order.

"Other acts of unfair competition" as provided for in the preceding paragraph are to be determined by the Administrative Department for industry and Commerce under the State Council.

Chapter III: Supervision and Inspection

Article 15: When supervision and inspection departments investigate acts of unfair competition, they have the right to exercise the following powers of office:

(1) Enter business premises or other venues related to the conduct under investigation to conduct inspections;

(2) Question business operators under investigation, interested parties, or other entities or individuals, and request supporting materials, data, technical support or other materials relating to the acts of unfair competition;

(3) Make inquiries about, or reproduce, agreements, account books, invoices, documents, records, business correspondence, audio-visual materials or other materials relating to the acts of unfair competition;

(4) Order business operators under investigation to suspend suspected unlawful acts, to explain the source and quantity of property related to the conduct under investigation, and to not transfer, conceal or destroy that property;

(5) Carry out the sealing or seizing of property suspected to be involved with acts of unfair competition;

(6) Make inquiries into the bank accounts of business operators suspected of acts of unfair competition as well as accounting vouchers, books, statements and so forth relating to deposits;

(7) Where there is evidence of the transfer or concealment of unlawful funds, an application may be made to the judicial organs to have them frozen.

Article 16: When supervision and inspection departments are investigating acts of unfair competition, business operators under inspection, interested parties or other relevant units or individuals shall truthfully provide relevant materials or circumstances, shall cooperate with supervision and inspection departments performing duties according to law, and must not refuse or obstruct supervision and inspection.

Chapter IV: Legal Responsibility

Article 17: Where business operators harm others' lawful rights and interests in violation of this law, they shall cease the infringement; where they cause damages to others, they shall bear liability for compensating the damages.

Where business operators or consumers are harmed by acts of unfair competition, they may file lawsuits in the people's courts in accordance with law.

Article 18: Where there is conducted listed in Article 5 of this Law causing a dispute, the dispute is to be settled by the parties through negotiation; where [the parties] are unwilling to negotiate or negotiation fails, the parties may file lawsuits in the people's courts and may also request that the supervision and inspection departments handle it.

Where business operators violate the provisions of Article 5 of this Law, the supervision and inspection department shall order it to cease unlawful acts, confiscate unlawful goods, and where the revenue from illegal business is above 50,000 RMB, impose a fine less than five times the amount of illegal business revenue; where the circumstance is serious, may revoke its business license; where there is no illegal business revenue or the the illegal business revenue is less than 50,000 RMB, impose a fine of less than 250,000 RMB; where revenue from the illegal business cannot be calculated, impose a fine between 100,000 and 1,000,000 RMB depending on the circumstances.

Where business operators violate the provisions of item (3) of Article 5, Paragraph 1 of this Law, the supervision and inspection departments shall order the party to conduct and enterprise name modification registration within one month; where an application for modification is not submitted before the period is completed, the supervision and inspection department shall apply the provisions of the preceding paragraph in imposing penalties, and the supervision and inspection department for the locality where the business was registered shall delete this business's name from the enterprise credit information public notice system, and replace the name of that enterprise with its registration number or its unified social credit number, and list that enterprise in the irregular business directory; where the circumstances are serious, business licences may be directly revoked.

Article 19: Where business operators violate the provisions of Article 6 of this law, supervision and inspection departments at the level of prefecture-level city or higher shall order corrections and impose a fine between one and five times of its illegal business revenue ; where there is no illegal business revenue or the illegal business revenue cannot be calculated, a fine of between 100,000 and 3,000,000 RMB is imposed, depending on the circumstances.

Where business operators for designated goods have situations violating Article 6 of this Law, reference to the provisions of the preceding paragraph in giving sanctions.

Article 20: Where business operators violate the provisions of Article 7 of this law, the supervision and inspection department shall order it to cease the unlawful acts, and impose a fine of between 10% and 30% of its illegal business revenue, based on the circumstances; where a crime is constituted, pursue criminal responsibility in accordance with law.

Article 21: Where business operators violate the provisions of Article 8 of this law, the supervision and inspection department shall order them to cease the unlawful acts and shall impose a fine of between three and five times the illegal business revenue, depending on the circumstances; where there is no illegal business revenue or the illegal business revenue cannot be calculated, a fine between 100,000 and 1,000,000 RMB is imposed, depending on the circumstances; where the circumstances are serious, business licences may be revoked; and where a crime is constituted, criminal responsibility is pursued in accordance with law.

Article 22: Where business operators violate the provisions of Article 9 of this law, the supervision and inspection departments shall order them to cease the unlawful acts, and shall impose a fine between 100,000 and 3,000,000 RMB depending on the circumstances; where the act constitutes a crime, criminal responsibility is pursued in accordance with law.

Where the rights holders of trade secrets can prove that information used by others is substantially the same as their trade secrets and that those others had the capacity to obtain their trade secrets, those others shall bear the burden of proof to show that the information they used came from lawful sources.

Article 23: Where business operators violate the provisions of Article 10 of this law, the supervision and inspection departments shall order them to cease unlawful acts, shall confiscate illicit goods, and shall impose a fine of between 100,000 and 1,000,000 RMB, depending on the circumstances.

Article 24: Where business operators violate the provisions of Article 11 of this law, the supervision and inspection department shall order them to cease the unlawful acts, shall remove any influence, and shall impose a fine between 100,000 and 3,000,000 RMB depending on the circumstances; where a crime is constituted, criminal liability is pursued in accordance with law.

Article 25: Where business operators violate the provisions of Article 12 of this law, the supervision and inspection department shall order them to cease the unlawful acts and shall impose a fine between 100,000 and 3,000,000 RMB depending on the circumstances; where a crime is constituted, criminal liability is pursued in accordance with law.

Article 26: Where business operators violate the provisions of Article 13 of this law, the supervision and inspection departments shall order them to cease the unlawful acts, and shall impose a fine between 100,000 and 3,000,000 RMB depending on the circumstances.

Article 27: Where business operators violate the provisions of Article 14 of this law and engage in acts of unfair competition, the supervision and inspection departments shall order them to cease the unlawful acts and shall impose a fine between 100,000 and 3,000,000 RMB depending on the circumstances; where a crime is constituted, criminal liability is pursued in accordance with law.

Article 28: Where one clearly knows, or should know, that there are acts of unfair competition in violation of the provisions of this law, but still provides conditions for facilitation such as production, sales, storage, transport, network services, technical support, advertising and promotion, or payment and settlements, fines of between 100,000 and 1 million RMB are imposed based on the circumstances. Those actively cooperating with the supervision and inspection departments, truthfully explaining the circumstances, and providing evidence, may be given a lenient or commuted penalty.

Article 29: Where provisions of this law are violated to transfer, conceal, destroy or sell goods that have been sealed, seized, or ordered to have sales suspended, the , supervision and Inspection Department may confiscate the goods involved in the case, and impose a fine of between one and three times the value of goods involved in the case; where the value cannot be calculated, a fine of between 100,000 yuan and 1 million RMB is imposed; and where a crime is constituted, criminal liability is pursued in accordance with law.

Article 30: Where there is a refusal to provide relevant materials or circumstances to supervision and inspection departments lawfully conducting an investigation; where false materials or circumstances are provided; where evidence is concealed, destroyed or transferred; or where there is other conduct refusing and obstructing investigations; corrections are ordered by the supervision and inspection departments, and a fine of between 20,000 and 200,000 is imposed.

Article 31: Those dissatisfied with a supervision and inspection department's decision may apply for an administrative reconsideration or bring an administrative lawsuit in accordance with law.

Article 32: Where state workers supervising and inspecting acts of unfair conduct abuse their authority or derelict their duty for personal gain, they are sanctioned in accordance with law; where a crime is constituted, criminal responsibility is pursued in accordance with law.

Article 33: Where state workers supervising and inspecting acts of unfair competition abuse their position for personal gain by intentionally shielding and protecting from prosecution those business operators who are known to have violated provisions of this law so as to constitute a crime, criminal responsibility shall be pursued in accordance with law.

Chapter V: Supplementary Provisions

Article 34: "Greater than" and "Less than" as used in this law also include that number.

Article 35: This Law takes effect on _______.

Explanation on of the drafting of the "Law of the People's Republic of China Against Unfair Competition (Revision Draft for Review)"

I. The necessity of revising the "Law Against Unfair Competition"

Since the implementation of the Unfair Competition Law of the People's Republic of China (hereinafter "Unfair Competition Law") in 1993, after more than 20 years of development, the extent of marketization of our nation's economy has greatly increased; and the total economy, the market size, the level and the situation of market competition have all undergone extremely extensive and profound changes. The current Law against Unfair Competition Law is conspicuously unsuited to the needs of economic development, it has many problems such as content is narrow and out-dated, many legal blank spots, lacks certain provisions, has dispersed administrative law enforcement, unified law enforcement standards, an imperfect system of of legal responsibility, and too weak a degree of punishment. With the issuance of the "PRC Law Against Monopolies" and the revision of the "PRC Trademark Law" and the "PRC Advertising Law" ; there is an issue of corresponding legal provisions overlapping with and repeating each other. In recent years, the call and demand for revision of the Law Against Unfair Competition has been very strong from all sectors of the society, and both NPC delegates and CPPCC members have submitted bills and proposals to revise the Law Against Unfair Competition. In order to realize the Party Central Committee and the State Council's goals of giving full play to the decisive role of the market in allocating resources; establishing fair, open, and transparent market rules; and building a unified and open market system with orderly competition to better maintain the market order of fair competition, and to better safeguard consumers' lawful rights and interests, it is imperative to revise the Law Against Unfair Competition as soon as possible.

II. The revision process for the " People's Republic of China Law Against Unfair Competition"

In 2010, the State Administration for Industry and Commerce and the State Council Office of Legislative Affairs have jointly organize experts to conduct special researches on the amending the Law The revision of the Law Against Unfair Competition has been successively listed as a backup item in the Legislative Plan for the 12th NPC Standing Committee, a research item in the 2014 State Council Legislative Work Plan and a backup for the 2015 State Council Legislative Work Plan, with the State Administration for Industry and Commerce is in charge of drafting the revision. In 2014, the State Administration for Industry and Commerce organized university experts, practicing lawyers, and certain local bureaus for industry and commerce into eight research groups to conduct in-depth research on important questions regarding the revision of the Law Against Unfair Competition, and has held multiple seminars and symposiums on revision work. In 2015, The State Administration for Industry and Commerce has held numerous seminars and symposiums on the revision work to listen to the opinions of all sectors such as experts, scholars, local departments for industry and commerce and for market supervision, and has solicited the opinions of 38 Ministries and Commissions under the State Council including the National Development and Reform Commission and the Ministry of Commerce, in writing. On the basis of in-depth investigation and research and widely solicited opinions, combing the opinions of all sectors, [the Administration] has formulated the current Law Against Unfair Competition of the People's Republic of China (Revision Draft to be sent for Deliberation) (hereinafter "Deliberation Draft").

III. Explanation of important issues regarding the "Draft Amendments for Deliberation"

The current Law "Against Unfair Competition" contains five chapters totaling 33 articles. The content amended by the Deliberation Draft involves 30 articles of the current Law, of which seven articles were deleted and nine added, totaling 35 articles.

(1) Revised the concept of "Business Operator" in the General Provisions section, clarifying the scope of oversight and enforcement authority.

1. Revised the definition of "business operators" in the Law Against Unfair Competition to mean "natural persons, legal persons or other organizations engaged in the production or trade of goods, or the provision of services," which expanded the scope of regulation, in line with the relevant provisions of the Anti-Monopoly Law.

2. Unified the system of law enforcement against unfair competition. Article 3 of the current Law Against Unfair Competition provides that, "where laws or administrative regulations provide that other departments shall supervise and inspect, follow those provisions." This provision has created problems such as that the standards for determiniations and punishment measures for suspected acts of unfair competition are not the same across different industries, and the public reaction has been strong, impacting the authority and fairness of law. The Deliberation Draft 's General Provisions clarify the general jurisdiction of the administrative departments for industry and commerce over acts of unfair competition, while providing that relevant departments can also conduct supervision and inspection pursuant to the provisions of laws and administrative regulations.

(2) Revised and improved relevant articles in the section on 'Acts of Unfair Competition" adding two kinds of conduct and deleting four articles.

1. Revisions and improvements in acts: First, is linking up with the "Trademark Law", deleted the current "Law Against Unfair Competitions's Article 5(1) on counterfeiting registered trademarks, and adding prohibitions on using others' registered trademarks or unregistered well-known trademarks as the brand name [字号] in an enterprise's title, misleading the public and causing market confusion. Second is using a concepts with examples to clarify the concept of commercial bribery and classic acts of commercial bribery, which is beneficial to distinguishing commercial bribery interest discounts between business operators, and to encourage and promote fair competition. Third is making distinctions from the "Advertising Law" by deleting provisions on advertising business operations; the current "Law Against Unfair Competition"'s introduction of embellished or false publicity actually shrank the acts of unfair competition. The Deliberation Draft specifies that misleading false publicity includes false publicity and also publicity that causes public misunderstanding; Fourth is deleting the current Law Against Unfair Competition's Article 5(4) regarding "forging or counterfeiting authentication marks, famous-and-excellent-product marks or other product quality marks on their goods, forging the origin of their products or making false and misleading indications as to the quality of their goods(,); provisions such as those on publicity leading to misunderstandings can be used to carry out investigation and review of this type of conduct. Fifth is supplementing and improving provisions on the burden of proof in commercial secrets cases. Sixth is changing the concept of reward sales to prize promotions, supplementing and improving the description of prize promotions that are unlawful competition. On the basis of the economic development situaiton, the maximum prize amount for drawing-style prize promotions was raised.

2. Added two types of acts: One is to regulate acts of unfair competition undertaken by business operators that do not possess market dominant positions but possess relatively dominant positions in trading; the other was to regulate acts that use software and other technological means to interfere with, restrict, and influence other business operators and users in the area of Internet. Furthermore, in consideration of the fundamental role of the Law Against Unfair Competition in protecting market competition, and in order to regulate new types of acts of unfair competition that may appear in the future, a residual clause was added to Article 14.

3. Deleted provisions on restrictions on competition for public utilities, tying arrangement, sales below cost,and administrative monopolies; to link up with the "Anti-Monopoly Law"

(3) Strengthened the tactics for supervision and inspection and increased liability in the sections on supervision and inspections and legal responsibility.

Addressing problems in the current "Law Against Unfair Competition" such as the insufficiency and weakness of supervision and inspection methods, and light liability and for offenses and weak determent value, the Deliberation Draft improves the scope of authority and duties of enforcement organs, endowing enforcement organs with administrative compulsory measures such as sealing and seize property; and at the same time increasing the duty of parties to cooperate in investigations and pursuing accountability of parties refusing to cooperate or undergo the investigation. Taking into account economic development circumstances and drawing lessons from new or revised legal provisions relating to liability, of the Deliberation Draft adheres to the principle of punishment matching the violation to and increase penalties for carrying out unlawful activity.

 

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