The Current State of Electronic Signatures in China: A Comprehensive Guide for Foreign Businesses

Electronic signatures have become a cornerstone of modern business transactions worldwide, and China is no exception. Since the enactment of the Electronic Signature Law (ESL) in 2004, China has recognized the legal validity of electronic signatures, with revisions in 2015 and 2019 further strengthening this legal framework. For foreign businesses operating in China, understanding the intricacies of this law is essential to ensure compliance and leverage the benefits of digital transactions. This blog post provides a detailed overview of the current state of electronic signatures in China, offering valuable insights for international investors and business owners.

Legal Framework

The primary legislation governing electronic signatures in China is the Electronic Signature Law (ESL). This law applies to mainland China, excluding Hong Kong, Macau, and Taiwan. The ESL establishes the legal validity of electronic signatures and sets forth the conditions under which they are considered reliable and enforceable.

Types of Electronic Signatures

The ESL recognizes different types of electronic signatures, each with varying degrees of security and legal standing:

Reliable Electronic Signatures

These signatures have the same legal effect as handwritten signatures or seals. To be considered reliable, an electronic signature must meet the following criteria:

• The signature creation data must be linked exclusively to the signatory.
• The signature creation data must be under the sole control of the signatory at the time of signing.
• Any alterations to the electronic signature after signing must be detectable.
• Any changes to the signed information after signing must be detectable.

Electronic Certificate-based Signatures

Also known as digital signatures, these are certified by third-party digital certificate service providers. They offer a higher level of security and are often used for more sensitive transactions.

Simple Electronic Signatures

While not explicitly defined in the ESL, these are generally considered less secure than reliable or certificate-based signatures but may still be valid in certain contexts.

Legal Validity and Enforceability

Electronic signatures are generally considered legally valid and enforceable in China, provided they meet the requirements set forth in the ESL. Key points regarding their validity include:

• Equal Legal Status: Reliable electronic signatures have the same legal force as handwritten signatures or seals.
• Consent: Parties must agree to the use of electronic signatures for them to be valid.
• Court Recognition: Chinese courts have upheld the validity of electronic signatures in various cases. For example, in case (2015) Shen Fu Fa Min Er Chu Zi No. 1164, a court in Shenzhen found a contract executed on an e-contract service platform to be legal and valid.
• Employment Contracts: Since March 2020, employers and employees in China have been allowed to sign employment contracts electronically.

Limitations and Exceptions

While electronic signatures are widely accepted, there are some limitations to their use:

• Excluded Documents: Certain documents cannot be signed electronically, including documents related to personal relationships (marriage, adoption, succession), documents for termination of public utility services, and other circumstances as specified by laws and regulations.
• Registration Requirements: Some finance documents that require registration with authorities (e.g., equity pledges or real property mortgages) may still need wet ink signatures and/or company chops for registration purposes.

Technical Requirements and Best Practices

To ensure the validity and enforceability of electronic signatures in China, businesses should adhere to the following best practices:

• Use of Certified Platforms: It’s recommended to use electronic contract signing platforms that meet the standards set by the Ministry of Human Resources and Social Security (MHRSS).
• Reliable Timestamps: Affixing trusted timestamps to electronically signed documents can enhance their legal effect.
• Identity Authentication: Robust identity verification methods should be employed to ensure the authenticity of the signatories.
• Data Retention: Platforms must retain evidence of the entire signing process, including identity authentication, signing intention, and the electronic signature itself.
• Compliance with Encryption Standards: China has developed its own encryption algorithms and PKI standards, such as the SM2 encryption algorithm. Digital signatures using certificates with the SM2 algorithm are considered legally valid.

International Context

While China’s electronic signature laws are generally in line with international standards, there are some unique aspects to consider:

• Certification Authorities: Third-party providers offering digital certification services must be pre-approved by Chinese regulatory authorities.
• Cross-border Transactions: Foreign visitors may need to obtain compatible CA certificates for their electronic signatures to have legal validity in China.

Get in touch with our Team

Electronic signatures are widely recognized and enforceable in China, provided they meet the requirements set forth in the Electronic Signature Law. As the use of electronic signatures continues to grow, it’s crucial for businesses and individuals to stay informed about the latest developments in this area of law and to ensure compliance with Chinese regulations when using electronic signatures for important documents and transactions.

At China Legal Solutions, our team of experienced professionals is here to help you navigate the complexities of the Chinese legal landscape, ensuring your business operations remain smooth and compliant. Whether you need assistance with electronic signatures, intellectual property, or any other legal matter, we are here to support your success in China.