It is reported that China has high levels of online piracy and lacks effective enforcement. Moreover, China continues to be the largest origin economy for counterfeit and pirated goods, accounting (together with Hong Kong) for more than 85% of global seizures of counterfeit goods from 2017 to 2019. In addition, it is reported that the rate of unlicensed software installation in the country was 66% in 2017 (above the 57% rate of the Asian Pacific countries), for an estimated commercial value of USD 6,842 million.

China is a party to the Patent Cooperation Treaty (PCT).

Art. 18 of the amended Chinese Patent Law establishes that non-resident foreigners or organizations without business establishments in China shall entrust the patent agency established by law to handle patent applications or other patent-related matters in China. Moreover, according to Art. 19, any entity or individual intending to file a patent application in a foreign country for an invention or utility model completed in China shall submit a request for confidential examination to the patent administration department under the State Council in advance. The patent administration department of the State Council shall handle international patent applications in accordance with the relevant international treaties to which the People's Republic of China is a party, this Law and the relevant provisions of the State Council.

It is reported that in China it is often difficult to provide evidence to support a specific claim for damage compensation in a patent enforcement action. The amount of damages was capped in a range going from a minimum of RMB10,000 (USD 1,450) to RMB 1,000,000 (about USD 145,000), which are not considered to be adequate. The first draft of the amendment to the Patent Law proposed an increase of the range to RMB 100,000-RMB 5,000,000 (USD 15,000 - USD 750,000) However, the second reading of the draft amendments under scrutiny, has changed this, setting only an upper ceiling of RMB 5,000,000 (USD 750,000) and eliminating the minimum amount.
The amendment also introduces certain changes regarding evidence of illicit profit of the defendant, The new draft amendment provides that, in order to determine the amount for compensation, where the right holder has endeavored to present evidence and the related account books or materials are mainly in control by the accused infringer, the People’s Court may order the defendant to provide those books and materials relating to the infringing conduct. If the defendant does not provide or provides false account books or materials, the People’s Court may refer to the right holder’s claims and evidence to rule on the amount of compensation. This will aid foreign right holders in patent enforcement actions.

All foreign companies starting a business in e-commerce activities (including through an e-commerce platform in China) must have a Chinese business license. In order to acquire a business license in China, foreigners must establish a Wholly Foreign Owned Entity (WFOE).

It is reported that China’s indigenous innovation practices are a web of policies, regulations and strategies that create incentives for Chinese enterprises to create advanced technologies. Only enterprises with Chinese legal person status can apply for product accreditation. Moreover, to be accredited, a product must have been manufactured by an entity with full ownership of intellectual property rights in China, either by creating the rights or by acquiring them. It is reported that these policies, which are contained in the The Medium- and Long-Term Plan for the Development of Science and Technology (2006–2020), aim to encourage domestic innovation and build and support “national champions" by providing financial incentives that favor domestic innovation.

The National Security Law foresees the rollout of a “secure and controllable” internet infrastructure. The official Xinhua news agency said the new law, signed by President Xi Jinping, would establish “mechanisms to censor items that have or may have an impact on national security, including foreign investment, particular materials and key technologies”. The law appears vague about how the new requirements will be implemented, and it has raised concerns related to legal uncertainty for businesses.
Under the National Security Law, the State can establish national security review and oversight management systems and mechanisms, conduct national security review of foreign commercial investment, special items and technologies, internet information technology produces and services, projects involving national security matters, as well as other major matters and activities, that impact or might impact national security.

The Ministry of Commerce Order No. 4 of 2020 on the List of Unreliable Entities sets up a list of unreliable enterprises. As per the Order, foreign entities classified as unreliable entities could face sanctions in the form of restrictions or prohibition on the foreign entity from engaging in China-related import or export activities, restrictions on prohibition on the foreign entity from investing in China etc. Foreign entities that could be included in the unreliable entity list include those involved in international commerce or related activities that engage in endangering national sovereignty, security or development interests in China, suspending normal transactions against any organization or individual in China, entities which violate market principles and cause damage to the rights and interests of the Chinese entity. Under this Order, a special unit in MOFCOM will be responsible for identifying foreign entities (which include foreign enterprises, organizations and individuals) that will be subject to restrictions.
Currently, no firms have been designated as an unreliable entity.

In additional to a general merger control regime, there is a notification and clearance regime for transactions involving sensitive/strategic sectors, which are reviewable by inter-ministerial bodies with the power to block proposed transactions on national security grounds. To date, there is no record of transactions on the telecom or ICT marked being blocked by Ministry of Commerce of the People's Republic of China (MOFCOM). However, the agency has imposed a number on behavioral remedies as a condition to clearing the acquisition of Nokia's smartphone business by Microsoft in 2014. According to MOFCOM, the transaction, already cleared without conditions in the US and EU, could have restricted the competition in the downstream smartphone market in China and endanger the ability of Chinese smartphone manufacturers to compete.
Furthermore, despite the MOFCOM review period can last up to a maximum of 180 days, it is reported that there have been cases where the review lasted significantly longer forcing the parties to withdraw their applications. It is unclear if the Circular is still in force, considering the promulgation of the Measures of Security Review of Foreign Investments in 2020. The National Development and Reform Commission has said that the Measures in 2020 summarize the work practices of foreign investment security review of the past 10 years.

According to the Measure for Security Review of Foreign Investments, the types of transactions carried out by foreign investors directly or indirectly in China that may be subject to security review include the following: (i) investments by foreign investors by themselves or jointly with other investors, that are investing in any new project or establishing a business in China; (ii) foreign investors that are acquiring equity or assets of domestic business through mergers and acquisitions; and (iii) foreign investors making investments into China through other methods
Foreign investments in the important information technology and Internet products and services, major equipment, key technologies sectors must be declared to the office of the Operational Mechanism (the office is set up under the Measure for the review of foreign investments), to the extent that the investment has a bearing on national security and the that actual control of the investee enterprise is required. Actual control has been been said to exist when the total amount of foreign investment is larger than 50% or the foreign investor is able to affect the board, shareholder meetings or the essential personnel who decide the operation, human resources, finance or key technology of the company.
Pursuant to review, the Operational Mechanism can decide that the foreign investment will not affect national security, in which case the security review has been passed. If it is decided that the foreign investment will affect national security, the parties to the investment may be required to accept the attached conditions which will govern the investment. If the Operational Mechanism decides to prohibit the investment, the same shall not be carried out.

According to the revised Art. 4 of the "Decision of the State Council on Amending the Rules for the Implementation of the Law of the People's Republic of China on Foreign-funded Enterprises", sectors in which the establishment of foreign-capital enterprise is forbidden or restricted will be determined as per the state guidance for foreign investment orientation and guiding catalogue of industries for foreign development. According to the Art. 5, an application for the establishment of foreign-funded enterprises will not be approved under one of the following circumstances: (a) detrimental to the sovereignty of China or the public interest of society; (b) endangering China's national security; (c) violation of Chinese laws and regulations; (d) does not meet the requirements of China's national economic development; (e) may cause environmental pollution; (f) may cause environmental pollution.

According to Art. 14 of the Provisions on the Administration of Telecommunications Enterprises with Foreign Investment, the project proposal and feasibility study report of the joint venture must include a business forecast and development planning, as well as an analysis of the return on investment. The aforementioned requirement to submit a joint venture project proposal and feasibility study report is no longer applicable. Instead, according to Art. 11-13 of the Regulations on the Administration of Foreign-Invested Telecommunications Enterprises, for the establishment of foreign-invested telecommunications enterprises operating basic telecommunications services or value-added telecommunications services, investors must submit a project application report, among other details on foreign investors regarding the quality of foreign investors. The project application report includes details such as the names and basic information of the parties to the joint venture, the total investment of the business to be established, the registered capital, the proportion of the capital of each party, the type of business applied for and the duration of the joint venture. In addition, according to Art. 3 of the Implementing Rules of the Law of the People's Republic of China on Foreign Capital Enterprises, foreign capital enterprises to be established must benefit the development of China's national economy and be capable of achieving remarkable economic results.

According to Art. 2 of the Provisions on the Administration of Foreign Invested Telecommunications Enterprises (FITE Provisions), in order to operate as a foreign-invested telecommunications enterprise, the enterprise providing telecommunications services has to be established as joint venture between foreign and Chinese investors within the territory of China. The formation of such a joint venture must be pre-approved by the Ministry of Industry and Information Technology (MIIT) and approved by the Ministry of Commerce. Moreover, according to Art. 10 of the law, it is also required that foreign investors in value-added telecommunications services must have good performance and operational experience in operating value-added telecommunications services.

China's telecom laws require all foreign firms that provide data center or cloud computing services to enter into a joint venture with a Chinese firm and obtain an internet data center license. So far, the data center industry is not open to foreign investment in principle, but qualified Hong Kong and Macau capital is actually allowed to set up sino-foreign joint ventures to operate a data center business, with the proportion of equity interest of Hong Kong and Macao not exceeding 50%. Moreover, they need to obtain the approval of the Ministry of Industry and Information Technology's Communications Development Department for the "validation of foreign investment in operational telecommunications business" and the Ministry of Commerce's approval of the "Foreign Investment Enterprise Approval Certificate".

Under the Negative list, foreign investment in radio stations, television stations, radio and television transmission networks, radio and television satellites, satellite uplink stations, satellite receiving stations, microwave stations, internet audio-visual program services, cyber culture operations (except for music) and internet information dissemination services (except for contents opened up in China's WTO commitments) is prohibited. It is also prohibited to engage in the business of video broadcasting by order of radio and TV and the installation services of ground receiving facilities for satellite TV broadcasting.