China - Direct MarketingChina - Direct Marketing

Direct selling is defined by Chinese regulators as a type of business model involving the recruitment of direct marketing sales agents or promoters and the selling of products to end-consumers outside fixed business locations or outlets.
 

As part of China’s WTO commitment, the Chinese government agreed to allow market access for wholesale or retail trade services away from a fixed location.  However, the regulations are quite restrictive, especially regarding multi-level marketing (MLM) organizations, which are characterized as illegal pyramids under the regulations.  Sales promoters earn commission only according to their sales performance and the proportion of payment to sales promoters should not exceed 30% of the income generated from sales.  Furthermore, commission paid to a salesman is not allowed to be calculated based on the MLM structure, and direct selling firms must have fixed-location service centers in each jurisdiction (generally a city) where sales occur to provide after-sales service and consultation. To obtain a direct sales license, firms must have three years of relevant foreign experience, a 20-100 million RMB ($2.9-14.5 million) bond deposit, and an 80 million RMB ($11.6 million) registered capital threshold, among other requirements.  The Chinese government has remained slow to approve direct-sales license applications for new entrants over the past few years.  The industry remains closely watched and tightly regulated at both the central and local levels.