Updated on 02/15/2024

I. Economic data

A. Macro-economic data

• General data [1]

Population 2022: 1 411 750 000 inhabitants [2]

Area: 9 596 961 km2

Density : 142 inhabitants/km2

GDP (nominal) 2022: $17,963 billion (2nd)[3]

GDP/capita 2022: $12,073.40[4]

GDP (PPP) 2022: $30,337 billion (2nd) [5]

GDP (PPP)/capita 2022: $21,482.6 [6]

Growth rate 2022: 3%

GNI/capita (PPP) 2021: $19,160

HDI 2021: 0,768

Literacy rate: 97,15%[8]

Life expectancy 2022: 78 years old

Policy

China has been a Socialist Republic ruled by the Communist Party since 1949. At the time of writing, Xi Jinping has been the President of the Republic , since 2013. In 2022, Xi Jinping promised to substantially increase the size of the middle class by 2035. The Chinese Communist Party has also affirmed its desire to reorient the economic model towards more qualitative growth[9].

In terms of foreign policy, China is a member of the United Nations Security Council and a nuclear power. Chinese peacekeepers are deployed in eight UN missions. China is the second largest financial contributor to UN peacekeeping operations.[10]

Tensions still exist between China and Taiwan. China claims Taiwan as part of its territory, while Taiwan does not wish to be part of China and claims independence.

Population

Since China's policy of reducing the number of births, the birth rate has fallen sharply, from 18.25% in 1978 to 6.77% in 2022[17].

China's population is unevenly distributed across the country, and is concentrated mainly in the east, where several provinces have more than 400 inhabitants per square kilometer.

Still in the minority just a few years ago, the urban population has now become the majority. Indeed, the urbanization rate reached 65% in 2022[18], with a total of 920,710,000 people living in cities[19].

China's ten most populous cities are Shanghai (24,870,895), Guangzhou (23,426,128), Chongqing (22,251,500), Beijing (21,893,095), Chengdu (14,677,122), Shantou (14,251,500), Tianjin (13,866,009), Xiamen-Quanzhou (13,764,758), Xi'an (12,905,600) and Shenzhen (12,356,820).[20]

Economic development

The world's second-largest power after the United States, but the world's leading power in terms of GDP per purchasing power parity (PPP), China is today one of the major emerging powers of the "BRIC" group (Brazil, Russia, India, China).

China joined the WTO in 2001.

China's strong growth from 1990 to 2020 was based on a large, low-cost workforce, substantial foreign investment and worldwide exports of manufacturing goods[11].

China's middle class represents more than 400 million people[12].

The World Bank has classified China as an upper-middle-income country.

After years of growth, 2023 brought concerns. China's zero Covid policy in 2021 left its mark on the Chinese economy. Household consumption fell, causing deflation, i.e., a general drop in prices[13]. China's growth rates are getting ever lower.

In addition, youth unemployment reached 21.3%, the highest level ever recorded[14].

According to a study by the Bureau of Statistics on January 31, 2024, factory activity weakened by 0.49% compared with the previous month. However, this decline was less marked than in December 2023[15].

Resources

Services account for the largest share of gross domestic product (GDP) (53.3%), followed by industry and mining (39.4%). Agriculture generates 7.3% of GDP.

China holds 171 minerals, of which 158 are verified reserves. Ten of these reserves are energy resources (oil, natural gas, coal, uranium), 54 are mineral resources (iron, manganese, copper, aluminum, lead, zinc), 91 are non-metal mineral resources (graphite, phosphorus, sulfur and sylvite) and 3 of these resources are liquid or gaseous[16].

Foreign investment

For the first time since 2016, Chinese exports fell by 4.6% in 2022[21].

In 2021, exports of goods from China generated $3,215 bn. Imports totaled $2,653 bn[22].

In 2022, foreign investment fell by 73% year-on-year to $42.5 bn.[23]

The main countries investing in China are Singapore, the Virgin Islands, South Korea, the Cayman Islands, Japan, Germany and the USA. Investments are made in manufacturing, real estate, leasing and IT services[24].

[1] Unless otherwise stated, the general data comes from the Atlas, socio-économique des pays du monde, Larousse, édition 2024
[2] Source : Stats.gov

[3] Source : Groupe de la Banque Mondiale
[4] Source : Stats.gov
[5] Source : Groupe de la Banque Mondiale
[6] Source : Groupe de la Banque Mondiale

[7] Source : Groupe de la Banque Mondiale
[8] Source : Statista
[9] Source : Ministère de l'Economie, des Finances et de l'Industrie
[10] Source : Ministère de l'Europe et des Affaires Etrangères

[11] Source : Ministère de l'Economie, des Finances et de l'Industrie
[12] Source : GEO

[13] Source : GEO

[14] Source : Le Monde
[15] Source : La Tribune
[16] Source : Ambassade de la République Populaire de Chine en République Française

[17] Source : Le Monde
[18] Atlas, socio-économique des pays du monde, Larousse, édition 2024
[19] Source : Stats.gov

[20] Source : Population Data
[21] Source : La Tribune
[22] Atlas socio-économique des pays du monde, Larousse, édition 2024
[23] Source : L'Opinion

B. Economic data specific to franchising

Historical background

Franchising first appeared in China in 1987, and has become increasingly popular in recent years, due in particular to the rising standard of living of the Chinese population and the growing appeal of branded products.

Institution[25]

The China Chain Store and Franchise Association[26] (CCFA), founded in 1997, officially represents the retail and franchise sector in China. The CCFA officially has over 1,200 member companies from a variety of sectors (retail, foodservice, services, etc.).

The CCFA participates in policy formulation and coordination.

Contract content

The minimum duration of a franchise contract in China is three years, according to the Regulations on the Administration of Commercial Franchises.

The average investment for a franchise outlet is $100,000[35].

Trade shows

The CCFA hosts three annual trade fairs, to enable foreign investors to meet potential partners in China.

The China Franchise Expo (created in 1999) will be held from May 31 to June 2, 2024 at the China National Convention Center in Beijing. Another China Franchise Expo will be held in Shanghai from August 2 to 4, 2024.[27]

Finally, the 37th edition of the Shanghai International Franchise Exhibition will take place from March 27 to 30, 2024 at the Shanghai New International Expo Centre (SNIEC)[28].

Economic impact

By 2015, total sales of China's 100 largest franchises had reached a record 434.5 bn yuan (around $62.9bn). However, this figure fell in 2017, to 330 bn yuan (approx. $47.8 bn)[36].

Since 2017, the revenue generated by franchises has largely increased, reaching $800bn in 2021[37] .

International

China accounts for 13% of franchises outside the United States[38].

According to the CCFA's 2022 list of China's top 300 franchises, the leading franchise network was American (Meijer)[39]. Other American brands such as KFC, McDonald's and Wyndham are present throughout China[40].

Statistics

South Africa has around 800 franchise systems, spanning 14 sectors [23]. In 2018, there were 45,011 outlets in South Africa. 84% of franchisees rate their relationship with the franchisor as very good or good [24].

South Africa is now home to 68,000 franchisees [25]. 40% of them are based in the Gauteng province [26].

The biggest sector in the franchise business is fast food. South Africa has around 85,000 restaurants and over 850 franchises. The international food market is estimated to be worth $4.9 billion by 2026 [27].

In 2022, South Africa had 1,907 businesses and companies in a state of bankruptcy [28].

Statistics

South Africa has around 800 franchise systems, spanning 14 sectors [23]. In 2018, there were 45,011 outlets in South Africa. 84% of franchisees rate their relationship with the franchisor as very good or good [24].

South Africa is now home to 68,000 franchisees [25]. 40% of them are based in the Gauteng province [26].

The biggest sector in the franchise business is fast food. South Africa has around 85,000 restaurants and over 850 franchises. The international food market is estimated to be worth $4.9 billion by 2026 [27].

In 2022, South Africa had 1,907 businesses and companies in a state of bankruptcy [28].

[24] Source : B'Trade
[25] The information below comes from the http://www.ccfa.org.cn/portal/cn/xiangxic.jsp?type=11
[26] N° 811, bâtiment de l'économie et du commerce extérieur, n° 22 rue Fuwai, district de Xicheng, Pékin, Tél : 010-68784950
[27] Source : China Franchise Expo
[28] Source : SFE
[29] Source : Global Franchise

[30] Source : CCFA
[31] Idem

[32] Source : China Briefing
[33] idem
[34] Source : myNews
[35] Source : Global Franchise
[36] Source : China Briefing

[37] Source : Global Franchise
[38] Source : Franchise Statistics
[39] Source : CCFA
[40] Source : Global Franchise

II. Legal information

A. Legal information directly related to the franchising

Applicable legislation

China has legislated on franchising. It is governed by the Regulations on the Administration of Commercial Franchises[41], the Regulations on Administrative Measures for the Registration of Commercial Franchises[42] and the Regulations on Administrative Measures for Pre-contractual Information for Commercial Franchises, which came into force on May 1, 2007[43] and were amended on February 23, 2012[44].

Section 3 of the Commercial Franchise Administration Regulations defines a franchise as an agreement whereby the franchisor grants the franchisee the right to use its commercial operating resources (trademarks, patents, technologies), and the franchisee carries on business according to a uniform mode of operation and pays the franchisor a franchise fee.

In China, as in the United States, there are two types of franchises: commercial franchises and distribution agreements[45].

To be eligible to offer a franchise, the franchisor must have owned and operated at least two outlets for a minimum of one year. These outlets may be located outside China, provided they are operated under the same franchise brand as the Chinese brand[46].

Like most franchise laws, Chinese law contains provisions on pre-contractual information. The law also contains provisions on the parties’ obligations.

The Civil Code[47] also applies to franchise agreements.

Trademarks

The law governing trademark protection in China is the Trademark Law of August 23, 1982[51]. In order to be registered, the trademark must be distinctive, must not conflict with a previously registered trademark and must not contain the elements listed in Section 10 of the said law. Furthermore, it must not be identical to a trademark registered abroad for identical or similar goods, or to a well-known trademark registered in China for different goods.

In addition to trademarks and logos registered in languages other than Chinese, franchisors must create and register a trademark using Chinese characters[52].

Once registered, the trademark is protected for 10 years, renewable, from the date of approval of registration (Sections 39 and 40 of the Trademark Law of the Republic of China).

Chinese trademarks are registered with the State Intellectual Property Administration. In order to register a trademark, the applicant must be represented by an authorized intellectual property company, if he or she is a foreigner with no establishment in China.

China is a member of the Madrid System, so Chinese trademarks can be registered internationally. The Madrid System enables companies to obtain trademark protection in up to 130 countries by filing a single international application, in a single language, with the World Intellectual Property Organization (WIPO). Under Article 6 of the Madrid Agreement, trademark registration is valid for 20 years.

China is a member of the Paris Convention, under which each contracting State grants the same industrial property protection to nationals of other contracting States as to its own nationals. Lastly, China has signed up to the Nice Agreement.

To go further

In China, trademark applications can be handled both nationally and through WIPO. The China National Intellectual Property Administration (CNIPA) conducts examinations, issuing amendment or refusal notices if necessary. Both multi-class and mono-class applications are accepted, though single-class applications are typically preferred due to fewer complications. Trademarks are subject to cancellation for non-use after three years from the registration date. To develop a franchise in this country, it is advisable to cover "Business assistance relating to franchising" that is accepted under class 35 by the trademark office. Please note however that retail services are not accepted. Recording a licensing agreement is not compulsory but offers legal advantages. Special considerations include that CNIPA only accepts records for registered trademarks, and licensed terms do not automatically extend with renewals.

Pre-contractual information

Under Sections 21 and 23 of the Regulation on the Administration of Commercial Franchises, pre-contractual information and the draft contract must be given to the prospective franchisee at least thirty days before the contract is signed. Pre-contractual information must be provided in writing. Section 5 of the Administrative Measures relating to Pre-contractual Information for commercial franchises may serve as a template of the form that the pre-contractual information document may take.

According to Section 5 of the Administrative Measures on Pre-contractual Information for commercial franchises, the information required includes details of the franchisor (name, activity, etc.), the franchisor's group of companies, the franchisor's intellectual property assets, the franchisee's financial obligations, supply obligations, the services provided by the franchisor (consistency of assistance and know-how), the franchisor's control over the franchisee, and the investments to be made by the franchisee, the Chinese branch of the franchise network (list of franchised stores in China and an assessment of their commercial performance), the franchisor's accounts and any legal proceedings in which it is involved (bankruptcy proceedings, major lawsuits pending relating to the franchise, criminal convictions involving the franchisor or its legal representatives), any bankruptcies the franchisor has experienced in the last two years, a copy of the proposed franchise agreement and any other important information.

Failure to comply with the duty to provide pre-contractual information will result in the nullity of the contract upon the franchisee's request. In addition, under the Commercial Franchise Administration Regulations, the Ministry of Commerce can fine the franchisor up to 100,000 yuan (approx. $15,000). However, the Ministry of Commerce rarely takes action[58].

Franchise agreements must be in writing. Under Sections 7 and 509 of the Civil Code, as well as Section 4 of the Commercial Franchise Administration Regulation, the parties must act fairly, honestly and in good faith.

Franchisors must register with the Ministry of Commerce (MOFCOM) within 15 days of signing the contract[49]. Foreign franchisors must register with the Beijing Ministry of Commerce[50].

The contract must set out the general data relating to the parties, the franchisee's financial obligations, the services provided by the franchisor to the franchisee, the quality requirements and how compliance with them will be monitored, the advertising methods used by the franchisor, how the contract will be terminated, liability for breach of contract and the terms of termination.

The duration of a franchise agreement may not, in principle, be less than three years, unless the franchisee agrees otherwise. This minimum duration does not apply in the event of renewal of the franchise agreement (Section 13 of the Commercial Franchise Administration Regulations).

According to Section 12 of the Commercial Franchise Administration Regulations, the parties agree in the franchise agreement that the franchisee may unilaterally terminate the agreement within a certain period of time after the conclusion of the franchise agreement.

The law governing trademark protection in China is the Trademark Law of August 23, 1982[51]. In order to be registered, the trademark must be distinctive, must not conflict with a previously registered trademark and must not contain the elements listed in Section 10 of the said law. Furthermore, it must not be identical to a trademark registered abroad for identical or similar goods, or to a well-known trademark registered in China for different goods.

In addition to trademarks and logos registered in languages other than Chinese, franchisors must create and register a trademark using Chinese characters[52].

Once registered, the trademark is protected for 10 years, renewable, from the date of approval of registration (Sections 39 and 40 of the Trademark Law of the Republic of China).

Chinese trademarks are registered with the State Intellectual Property Administration. In order to register a trademark, the applicant must be represented by an authorized intellectual property company, if he or she is a foreigner with no establishment in China.

China is a member of the Madrid System, so Chinese trademarks can be registered internationally. The Madrid System enables companies to obtain trademark protection in up to 130 countries by filing a single international application, in a single language, with the World Intellectual Property Organization (WIPO). Under Article 6 of the Madrid Agreement, trademark registration is valid for 20 years.

China is a member of the Paris Convention, under which each contracting State grants the same industrial property protection to nationals of other contracting States as to its own nationals. Lastly, China has signed up to the Nice Agreement.

Contract perfomance

Jurisdiction and applicable law

China has ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

Special features

Trade secrets, including the franchisor's know-how, are protected in China under the Anti-Unfair Competition Law, which came into effect on December 1, 1993.

[41] Ordonnance n°485 du Conseil d’Etat de la République populaire de Chine
[42] Décret n° 5 de 2011 du Ministère du commerce
[43] Ordonnance n°16 de 2007 du Ministre du Commerce
[44] Ordonnance n°2 de 2012 du Ministre du Commerce
[45] Source : Franchise.org
[46] Source : iclg
[47] Source : gov.cn

[48] Source : iclg

[49] Article 8 du Franchise regulation
[50] Source : iclg

[51] Source : OMPI

[52] Source : Franchise.org

Competition law

Antitrust law is governed by the Anti-Monopoly Act of August 30, 2007, which came into force on August 1, 2008[54].

This law prohibits agreements, decisions and other concerted acts that eliminate or restrict competition.

Vertical agreements, prohibited by Section 14 of the aforementioned law, include the fixing of set resale prices and minimum resale prices. Binding sales clauses are also prohibited by Section 17 of the aforementioned law.

Possible exemptions are provided for, notably in the case of improvements in technology, efficiency or competitiveness, or in the public interest, provided that consumers benefit and competition is not wholly eliminated in the market concerned. Unlike European law in this area, Chinese law does not specify that the agreements in question must be indispensable to obtaining the advantage justifying them in order to benefit from the exemption.

However, the types of agreements and cases of exemption are not precisely defined. It is also advisable to be particularly wary with regard to competition rules when setting up a network, especially as penalties are currently being strengthened.

Cartel control is the responsibility of the State Administration for Regulation.

Personal data

The Personal Data Protection Act, which came into force on November 1, 2021[55] , introduces a principle of minimizing the personal data collected. This law does not apply to the State.

Section 4 of the Personal Data Protection Act defines personal information as information relating to an identified and identifiable natural person, recorded electronically or by other means. It does not include anonymized information.

To process personal information, the data controller must define explicit and reasonable purposes (Section 6 of the Personal Data Protection Act).

Like the European General Data Protection Regulation, the Personal Data Protection Act lays down six conditions for lawful processing (consent of the data subject; necessity of processing for the conclusion or performance of a contract to which the data subject is a party; legal obligation; public health emergency, or protection of the life, health and property security of natural persons in the event of an emergency; reporting, media monitoring and other activities carried out in the public interest and personal information disclosed by the data subject).

The Personal Data Protection Act now requires companies in the digital sector to appoint a person responsible for data processing, and to carry out regular audits of their security systems.

The law on the protection of personal information also puts an end to algorithmic discrimination, enabling the price of products sold online to be adjusted according to data collected on the consumer.

Under this law, the transfer of personal data from China to other countries is conditional on having a level of data protection equivalent to that of China.

Special provisions for foreign investments

Over the past twenty years, and particularly since China joined the World Trade Organization in 2001, the country has gradually opened up to foreign investment.

The Foreign Investment Act[56] and the Special Administrative Measures for Foreign Investment Access, published annually by the Ministry of Commerce, govern foreign investment law.

Section 3 of the Foreign Investment Law states that China wishes to promote and encourage foreign investors to invest in China.

Section 2 of the Foreign Investment Act defines a foreign company as one controlled by foreign investors. Direct capital ownership is not taken into account in the definition of a foreign enterprise. Section 4 of the same law specifies that the Chinese State implements "national treatment before establishment", meaning that the treatment accorded to foreign investors and their investments during the investment access phase is equivalent to that of domestic investors.

Most franchise activities are open to foreign investment.

Each new commercial entity setting up in China must obtain a commercial license, including the franchise offer and the activities covered by the franchise. Within thirty days of obtaining the business license, the company must register with the local State tax authorities[57].

Intellectual property: www.chinatrademarkoffice.com;
China chain association store and franchise: http://www.ccfa.org.cn;
Legislation: http://en.npc.gov.cn.cdurl.cn/laws.html;
Official statistics institute: https://www.stats.gov.cn/;
World Bank: https://www.banquemondiale.org/fr/home.

Main websites

B. Peripheral legal data

[53] Promulgated by Order No. 10 of the People's Republic of China on September 2, 1993
[54] Promulgated by Decree No. 68 of the President of the People's Republic of China on August 30, 2007
[55] Source : NPC.gov
[56] Adopted on March 15, 2019, and entered into force on January 1, 2020.
[57] Source : FDI China

I. Economic data

A. Macro-economic data

- General data[1]

Population 2022: 1,411,750,000 inhabitants[2]

Area: 9,596,961km2

Density: 142 inhabitants/km2

GDP (nominal) 2022: $17,963 bn (2nd)[3]

GDP/capita 2022: $12,073.40[4]

GDP (PPP) 2022: $30,337 billion (2nd)[5]

GDP (PPP)/capita 2022: $21,482.6[6]

Growth rate 2022: 3%[7]

GNI/capita (PPP) 2021: $19,160

HDI 2021: 0.768

Literacy rate: 97.15%[8]

Life expectancy 2022: 78 years old

- Policy

China has been a Socialist Republic ruled by the Communist Party since 1949. At the time of writing, Xi Jinping has been the President of the Republic , since 2013. In 2022, Xi Jinping promised to substantially increase the size of the middle class by 2035. The Chinese Communist Party has also affirmed its desire to reorient the economic model towards more qualitative growth[9].

In terms of foreign policy, China is a member of the United Nations Security Council and a nuclear power. Chinese peacekeepers are deployed in eight UN missions. China is the second largest financial contributor to UN peacekeeping operations.[10]

Tensions still exist between China and Taiwan. China claims Taiwan as part of its territory, while Taiwan does not wish to be part of China and claims independence.

- Economic development

The world's second-largest power after the United States, but the world's leading power in terms of GDP per purchasing power parity (PPP), China is today one of the major emerging powers of the "BRIC" group (Brazil, Russia, India, China).

China joined the WTO in 2001.

China's strong growth from 1990 to 2020 was based on a large, low-cost workforce, substantial foreign investment and worldwide exports of manufacturing goods[11].

China's middle class represents more than 400 million people[12].

The World Bank has classified China as an upper-middle-income country.

After years of growth, 2023 brought concerns. China's zero Covid policy in 2021 left its mark on the Chinese economy. Household consumption fell, causing deflation, i.e., a general drop in prices[13]. China's growth rates are getting ever lower.

In addition, youth unemployment reached 21.3%, the highest level ever recorded[14].

According to a study by the Bureau of Statistics on January 31, 2024, factory activity weakened by 0.49% compared with the previous month. However, this decline was less marked than in December 2023[15].

- Resources

Services account for the largest share of gross domestic product (GDP) (53.3%), followed by industry and mining (39.4%). Agriculture generates 7.3% of GDP.

China holds 171 minerals, of which 158 are verified reserves. Ten of these reserves are energy resources (oil, natural gas, coal, uranium), 54 are mineral resources (iron, manganese, copper, aluminum, lead, zinc), 91 are non-metal mineral resources (graphite, phosphorus, sulfur and sylvite) and 3 of these resources are liquid or gaseous[16].

- Population

Since China's policy of reducing the number of births, the birth rate has fallen sharply, from 18.25% in 1978 to 6.77% in 2022[17].

China's population is unevenly distributed across the country, and is concentrated mainly in the east, where several provinces have more than 400 inhabitants per square kilometer.

Still in the minority just a few years ago, the urban population has now become the majority. Indeed, the urbanization rate reached 65% in 2022[18], with a total of 920,710,000 people living in cities[19].

China's ten most populous cities are Shanghai (24,870,895), Guangzhou (23,426,128), Chongqing (22,251,500), Beijing (21,893,095), Chengdu (14,677,122), Shantou (14,251,500), Tianjin (13,866,009), Xiamen-Quanzhou (13,764,758), Xi'an (12,905,600) and Shenzhen (12,356,820).[20]

- Foreign investment

For the first time since 2016, Chinese exports fell by 4.6% in 2022[21].

In 2021, exports of goods from China generated $3,215 bn. Imports totaled $2,653 bn[22].

In 2022, foreign investment fell by 73% year-on-year to $42.5 bn.[23]

The main countries investing in China are Singapore, the Virgin Islands, South Korea, the Cayman Islands, Japan, Germany and the USA. Investments are made in manufacturing, real estate, leasing and IT services[24].

B. Economic data specific to franchising

- Historical background

Franchising first appeared in China in 1987, and has become increasingly popular in recent years, due in particular to the rising standard of living of the Chinese population and the growing appeal of branded products.

- Institution[25]

The China Chain Store and Franchise Association[26] (CCFA), founded in 1997, officially represents the retail and franchise sector in China. The CCFA officially has over 1,200 member companies from a variety of sectors (retail, foodservice, services, etc.).

The CCFA participates in policy formulation and coordination.

- Trade shows

The CCFA hosts three annual trade fairs, to enable foreign investors to meet potential partners in China.

The China Franchise Expo (created in 1999) will be held from May 31 to June 2, 2024 at the China National Convention Center in Beijing. Another China Franchise Expo will be held in Shanghai from August 2 to 4, 2024.[27]

Finally, the 37th edition of the Shanghai International Franchise Exhibition will take place from March 27 to 30, 2024 at the Shanghai New International Expo Centre (SNIEC)[28].

- Statistics

There are 6,500 registered franchisors in China[29]. In 2022, the top 300 franchised brands had 570,000 outlets[30].

The fast food, convenience store, and tea beverage sectors have been growing rapidly in China[31]. The food and beverage sector accounts for 34% of franchises, retail for 33%, business services for 13% and home services for 9%[32].

62% of registered companies have fewer than 10 stores[33].

In 2021, 4.37 million small businesses closed, three times more than the number of new businesses that were opened in the same year. The rate of removal from the public registers of small and medium-sized enterprises therefore exceeded the number of registrations, something that had not happened for two decades[34].

- Contract content

The minimum duration of a franchise contract in China is three years, according to the Regulations on the Administration of Commercial Franchises.

The average investment for a franchise outlet is $100,000[35].

- Economic impact

By 2015, total sales of China's 100 largest franchises had reached a record 434.5 bn yuan (around $62.9bn). However, this figure fell in 2017, to 330 bn yuan (approx. $47.8 bn)[36].

Since 2017, the revenue generated by franchises has largely increased, reaching $800bn in 2021[37].

- International

China accounts for 13% of franchises outside the United States[38].

According to the CCFA's 2022 list of China's top 300 franchises, the leading franchise network was American (Meijer)[39]. Other American brands such as KFC, McDonald's and Wyndham are present throughout China[40].

II. Legal information

A. Legal information directly related to franchising

- Applicable legislation

China has legislated on franchising. It is governed by the Regulations on the Administration of Commercial Franchises[41], the Regulations on Administrative Measures for the Registration of Commercial Franchises[42] and the Regulations on Administrative Measures for Pre-contractual Information for Commercial Franchises, which came into force on May 1, 2007[43] and were amended on February 23, 2012[44].

Section 3 of the Commercial Franchise Administration Regulations defines a franchise as an agreement whereby the franchisor grants the franchisee the right to use its commercial operating resources (trademarks, patents, technologies), and the franchisee carries on business according to a uniform mode of operation and pays the franchisor a franchise fee.

In China, as in the United States, there are two types of franchises: commercial franchises and distribution agreements[45].

To be eligible to offer a franchise, the franchisor must have owned and operated at least two outlets for a minimum of one year. These outlets may be located outside China, provided they are operated under the same franchise brand as the Chinese brand[46].

Like most franchise laws, Chinese law contains provisions on pre-contractual information. The law also contains provisions on the parties’ obligations.

The Civil Code[47] also applies to franchise agreements.

- Pre-contractual information

Under Sections 21 and 23 of the Regulation on the Administration of Commercial Franchises, pre-contractual information and the draft contract must be given to the prospective franchisee at least thirty days before the contract is signed. Pre-contractual information must be provided in writing. Section 5 of the Administrative Measures relating to Pre-contractual Information for commercial franchises may serve as a template of the form that the pre-contractual information document may take.

According to Section 5 of the Administrative Measures on Pre-contractual Information for commercial franchises, the information required includes details of the franchisor (name, activity, etc.), the franchisor's group of companies, the franchisor's intellectual property assets, the franchisee's financial obligations, supply obligations, the services provided by the franchisor (consistency of assistance and know-how), the franchisor's control over the franchisee, and the investments to be made by the franchisee, the Chinese branch of the franchise network (list of franchised stores in China and an assessment of their commercial performance), the franchisor's accounts and any legal proceedings in which it is involved (bankruptcy proceedings, major lawsuits pending relating to the franchise, criminal convictions involving the franchisor or its legal representatives), any bankruptcies the franchisor has experienced in the last two years, a copy of the proposed franchise agreement and any other important information.

Failure to comply with the duty to provide pre-contractual information will result in the nullity of the contract upon the franchisee's request. In addition, under the Commercial Franchise Administration Regulations, the Ministry of Commerce can fine the franchisor up to 100,000 yuan (approx. $15,000). However, the Ministry of Commerce rarely takes action[48].

- Contract performance

Franchise agreements must be in writing. Under Sections 7 and 509 of the Civil Code, as well as Section 4 of the Commercial Franchise Administration Regulation, the parties must act fairly, honestly and in good faith.

Franchisors must register with the Ministry of Commerce (MOFCOM) within 15 days of signing the contract[49]. Foreign franchisors must register with the Beijing Ministry of Commerce[50].

The contract must set out the general data relating to the parties, the franchisee's financial obligations, the services provided by the franchisor to the franchisee, the quality requirements and how compliance with them will be monitored, the advertising methods used by the franchisor, how the contract will be terminated, liability for breach of contract and the terms of termination.

The duration of a franchise agreement may not, in principle, be less than three years, unless the franchisee agrees otherwise. This minimum duration does not apply in the event of renewal of the franchise agreement (Section 13 of the Commercial Franchise Administration Regulations).

According to Section 12 of the Commercial Franchise Administration Regulations, the parties agree in the franchise agreement that the franchisee may unilaterally terminate the agreement within a certain period of time after the conclusion of the franchise agreement.

- Jurisdiction and applicable law

China has ratified the 1958 New York Convention on the Recognition and Enforcement of Foreign Arbitral Awards.

- Trademarks

The law governing trademark protection in China is the Trademark Law of August 23, 1982[51]. In order to be registered, the trademark must be distinctive, must not conflict with a previously registered trademark and must not contain the elements listed in Section 10 of the said law. Furthermore, it must not be identical to a trademark registered abroad for identical or similar goods, or to a well-known trademark registered in China for different goods.

In addition to trademarks and logos registered in languages other than Chinese, franchisors must create and register a trademark using Chinese characters[52].

Once registered, the trademark is protected for 10 years, renewable, from the date of approval of registration (Sections 39 and 40 of the Trademark Law of the Republic of China).

Chinese trademarks are registered with the State Intellectual Property Administration. In order to register a trademark, the applicant must be represented by an authorized intellectual property company, if he or she is a foreigner with no establishment in China.

China is a member of the Madrid System, so Chinese trademarks can be registered internationally. The Madrid System enables companies to obtain trademark protection in up to 130 countries by filing a single international application, in a single language, with the World Intellectual Property Organization (WIPO). Under Article 6 of the Madrid Agreement, trademark registration is valid for 20 years.

China is a member of the Paris Convention, under which each contracting State grants the same industrial property protection to nationals of other contracting States as to its own nationals. Lastly, China has signed up to the Nice Agreement.

- Special features

Business secrecy, and as such the franchisor's know-how, is protected in China by the Unfair Competition Law, which came into force on December 1, 1993[53].

B. Peripheral legal data

- Competition law

Antitrust law is governed by the Anti-Monopoly Act of August 30, 2007, which came into force on August 1, 2008[54].

This law prohibits agreements, decisions and other concerted acts that eliminate or restrict competition.

Vertical agreements, prohibited by Section 14 of the aforementioned law, include the fixing of set resale prices and minimum resale prices. Binding sales clauses are also prohibited by Section 17 of the aforementioned law.

Possible exemptions are provided for, notably in the case of improvements in technology, efficiency or competitiveness, or in the public interest, provided that consumers benefit and competition is not wholly eliminated in the market concerned. Unlike European law in this area, Chinese law does not specify that the agreements in question must be indispensable to obtaining the advantage justifying them in order to benefit from the exemption.

However, the types of agreements and cases of exemption are not precisely defined. It is also advisable to be particularly wary with regard to competition rules when setting up a network, especially as penalties are currently being strengthened.

Cartel control is the responsibility of the State Administration for Regulation.

- Personal data

The Personal Data Protection Act, which came into force on November 1, 2021[55] , introduces a principle of minimizing the personal data collected. This law does not apply to the State.

Section 4 of the Personal Data Protection Act defines personal information as information relating to an identified and identifiable natural person, recorded electronically or by other means. It does not include anonymized information.

To process personal information, the data controller must define explicit and reasonable purposes (Section 6 of the Personal Data Protection Act).

Like the European General Data Protection Regulation, the Personal Data Protection Act lays down six conditions for lawful processing (consent of the data subject; necessity of processing for the conclusion or performance of a contract to which the data subject is a party; legal obligation; public health emergency, or protection of the life, health and property security of natural persons in the event of an emergency; reporting, media monitoring and other activities carried out in the public interest and personal information disclosed by the data subject).

The Personal Data Protection Act now requires companies in the digital sector to appoint a person responsible for data processing, and to carry out regular audits of their security systems.

The law on the protection of personal information also puts an end to algorithmic discrimination, enabling the price of products sold online to be adjusted according to data collected on the consumer.

Under this law, the transfer of personal data from China to other countries is conditional on having a level of data protection equivalent to that of China.

- Special provisions for foreign investments

Over the past twenty years, and particularly since China joined the World Trade Organization in 2001, the country has gradually opened up to foreign investment.

The Foreign Investment Act[56] and the Special Administrative Measures for Foreign Investment Access, published annually by the Ministry of Commerce, govern foreign investment law.

Section 3 of the Foreign Investment Law states that China wishes to promote and encourage foreign investors to invest in China.

Section 2 of the Foreign Investment Act defines a foreign company as one controlled by foreign investors. Direct capital ownership is not taken into account in the definition of a foreign enterprise. Section 4 of the same law specifies that the Chinese State implements "national treatment before establishment", meaning that the treatment accorded to foreign investors and their investments during the investment access phase is equivalent to that of domestic investors.

Most franchise activities are open to foreign investment.

Each new commercial entity setting up in China must obtain a commercial license, including the franchise offer and the activities covered by the franchise. Within thirty days of obtaining the business license, the company must register with the local State tax authorities[57].

Main websites :

- Intellectual property: www.chinatrademarkoffice.com;

- China chain association store and franchise: http://www.ccfa.org.cn;

- Legislation: http://en.npc.gov.cn.cdurl.cn/laws.html;

- Official statistics institute: https://www.stats.gov.cn/;

- World Bank: https://www.banquemondiale.org/fr/home.

[1] Unless otherwise stated, the data below is taken from the Atlas, socio-économique des pays du monde, Larousse, 2024 edition.

[2] https://www.stats.gov.cn/sj/ndsj/2023/indexeh.htm

[3] https://donnees.banquemondiale.org/indicator/NY.GDP.MKTP.CD?locations=CN

[4] https://www.stats.gov.cn/sj/ndsj/2023/indexeh.htm

[5] https://donnees.banquemondiale.org/indicator/NY.GDP.MKTP.PP.CD?locations=CN

[6] https://donnees.banquemondiale.org/indicator/NY.GDP.PCAP.PP.CD?locations=CN