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June 29, 2017

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Test for China's new consumer protection law lies ahead

On Saturday, a series of updates to Beijing's law on protection of consumer rights took effect. The new revisions are hailed by the communist party mouthpiece as dramatically boosting the legal recourse available to buyers over grievances.

Areas covered include refunds, information security and guarantees of immunity for "intentionally buying fake products." All those involved in the supply chain, from the manufacturer to the vendor and advertisers, can be charged and punished under the revisions, according to experts cited in The People Daily.

Punitive fines can be levied up to three times the amount of damages suffered under the new revisions, with a minimum fine of 500 yuan. China's food safety law allows for fines up to 10 times the damage, but the consumer law is broader in its scope.

The Economist mentioned some parts of the law that are noteworthy for their strong stance on the side of consumers. In the case of online shopping, the magazine points out that within seven days of purchase it is possible for buyers to return products without needing to state a reason. Exceptions to that privilege are customized products, live or perishable products, digital soundtracks/video that have been downloaded or where the seal has been broken as well as delivered periodicals.

Placing an obligation on the providers to recall and repair defective products is also highlighted by Article 24 of the law.

The updates are an encouraging and, so far as we know, well-intentioned package of reforms to coincide with the Chinese leadership's goal of transitioning away from an export-oriented economy to one that is driven by consumer demand. It would be a logical step in any attempt to foster confidence in the market and thereby give China's consumers a framework of protections for their activities.

Among the provisions is the nullification of so-called "overlord clauses" that vendors like to declare beforehand; these include notices like "items on sale are not refundable," which would violate the new statutes.

What remains to be seen is the degree of latitude the state will grant to those who want to utilize the new legal guarantees. If they challenge state-owned companies, will China respect the collective rights of consumers to rally against targets in a possible challenge to state authority? Sure, there is the consumer protection association, and the government will supposedly act on behalf of people whose rights were infringed. But Chinese courts have yet to demonstrate their independence from government, and the test will have to come in cases where the government has a large amount at stake.

It is also interesting to see the application of protections to "professional fake product busters" who carry out as their trade the examination of food and medicine for watered-down content or other illegal means of production, the People's Daily reported. The intentional purchase of defective products is permitted, according to the state media service.

Even if the new law proves to be able to boost consumers' rights, the Chinese government still has a long way to go in building the mainland's consumer market into a mature industry. Beijing has to curb the nation's rampant pirating industry and food security issues before Chinese businesses can earn consumers' trust. No amount of consumer rights improvements will help if people do not feel safe about what they eat and buy in the first place.

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