China's Revised Financial Law Draft Targets Unfair Contracts and Online Investment Marketing

Stronger protections proposed for financial customers

China's revised Financial Law draft would prohibit unfair standard contract terms, require sellers to match financial products to customers' circumstances and restrict internet promotion of products offered through private placements. The proposals were submitted on November 2, 2026, to the 25th session of the Standing Committee of the 14th National People's Congress for a second reading.

The changes bring several everyday financial decisions into focus: the conditions a customer accepts when buying a product, the risks a salesperson explains and the investment advertisements people encounter online. Providers would have to set fair and reasonable transaction conditions, while those marketing financial products and services would face explicit duties to understand their customers.

The draft also reaches beyond individual transactions. It proposes bringing all financial activities within regulatory oversight, clarifying responsibility among regulators and strengthening arrangements for identifying and handling financial risks. Its intended role is to provide a common legal foundation across banking, insurance, securities and other financial activities.

The November submission follows an initial review in June 2026. The provisions remain proposals under legislative consideration. No adoption date, commencement date or schedule for another reading was given, and the account of the revisions did not specify penalties or procedures through which customers could seek compensation.

What would change in financial contracts?

Financial providers would be required to offer fair and reasonable terms. The revised draft specifically targets standard contract clauses that exclude or restrict customers' rights, reduce or remove a provider's own responsibilities, or place heavier responsibilities on consumers and investors in an unfair or unreasonable way.

Standard terms are conditions prepared in advance for repeated use. A customer usually encounters them as part of a ready written agreement, rather than negotiating each provision individually. The proposed rule addresses the balance of responsibilities within those terms, including what a business expects its customer to accept and what responsibility the business retains.

A clause that shifts responsibility toward the customer would therefore need to be considered alongside the proposed requirement for fairness. For an ordinary buyer, the practical issue is straightforward: the contract should explain the transaction without using its standard wording to unfairly weaken the buyer's position.

The revisions address both financial consumers and investors. Their wording covers the provision of financial products and services, placing the proposed protection at the point where a provider sets the conditions of its relationship with a customer.

Sellers would have to understand their customers

Businesses marketing financial products and services would have to strengthen customer suitability management. In plain language, suitability means checking whether a product fits the person being offered it, rather than treating every potential buyer as an appropriate customer.

The revised draft describes several connected duties. Marketers would have to learn about customers' circumstances as required by the rules, explain the contents of products and services truthfully, give adequate warnings about risks and offer products and services that match those circumstances.

A truthful description and a suitable recommendation address different parts of a sale. Explaining how a product works helps a customer understand what they are buying. Checking suitability asks whether that product belongs among the options offered to that customer in the first place.

The proposed requirements connect the seller's knowledge of the customer with the information given during marketing. Risk warnings would sit alongside a duty to make an appropriate match, giving the sales process a broader responsibility than simply presenting a product and obtaining agreement.

Internet marketing faces two sets of requirements

Providers and marketers using the internet would have to comply with the Financial Law, other relevant laws, administrative regulations and rules issued by the State Council's financial authorities for the particular product or service. They would also have to follow provisions specifically governing online provision or marketing.

The proposal brings together rules about the financial product and rules about the way it reaches customers. A product offered through an internet channel would remain subject to the requirements governing that product, while its online presentation and promotion would also fall under the relevant internet rules.

For customers, the connection matters because the screen through which a product is sold is only one part of the transaction. The revised wording would tie online activity to the wider financial regulatory framework, covering both the provision of a service and the marketing used to attract buyers.

Private placements could not seek a public audience

The revised draft adds a specific restriction for financial products and services offered through nonpublic issuance. It would prohibit advertising, public solicitation or disguised public solicitation through the internet and other channels.

A nonpublic offering, often called a private placement, is directed to a limited group of eligible investors rather than the public at large. The proposed restriction addresses the way such products are promoted: a product intended for a restricted audience could not be advertised or promoted through a public appeal.

The reference to disguised public solicitation extends the wording beyond advertisements openly presented as public sales pitches. The proposed boundary concerns the substance of the promotion, including attempts to attract a public audience indirectly.

This provision complements the suitability requirements. Suitability concerns whether a product matches a particular customer; the private placement restriction concerns whom the seller may approach through public promotion. Together with the contract provisions, they address three distinct stages: attracting buyers, recommending products and setting transaction terms.

A common foundation for financial legislation

The Financial Law is being developed as a basic, comprehensive law that would guide and coordinate China's financial legal framework. Its proposed position is described as the central element in a structure known as 1+N+X.

In that structure, 1 represents the Financial Law. N refers to laws governing individual sectors, including banking, insurance and securities. X covers other financial laws and regulations. The sector laws and other rules would align with the basic provisions established by the central law, through both new legislation and revisions to existing legislation.

The approach uses broad legal principles to cover matters shared across financial activities, while leaving more detailed rules to the laws governing particular fields. That helps explain why the same draft addresses customer protection, regulatory responsibilities, market development and financial risk.

The draft also calls for centralized, unified leadership by the Communist Party's Central Committee over financial work and a focus on serving the people. The second reading version adds content supporting a market oriented approach grounded in law and advancing the construction of international financial centers.

Regulators would share clearer responsibilities

The broader draft proposes placing all financial activities under supervision, with management organized by category and level. Such an approach allows oversight to distinguish between different activities while keeping them within the regulatory framework. It also calls for action against illegal financial activities.

Regulatory responsibility is another focus. The draft seeks a clearer division of duties, stronger support for regulators carrying out those duties and greater accountability for their performance. It also promotes cooperation between departments and between central and local authorities.

Those provisions address the organization behind supervision. Rules for financial businesses depend on authorities knowing which activities they oversee, how their responsibilities connect and when they need to work together. The draft places consumer and investor protection within that wider structure of regulatory duties.

The second reading version also adds provisions concerning asset management businesses and oversight of financial activities across borders. Asset management generally involves managing money or investments for clients, while activities across borders involve more than one jurisdiction.

Risk response would begin earlier

The draft proposes improving mechanisms to prevent, reduce and resolve financial risks, while assigning responsibility to the parties involved in handling them. It calls for early identification, early warning, early disclosure of problems and early action.

The proposed approach seeks to address insufficient legal authority and resources for dealing with financial distress. Authority determines what those handling a troubled situation are legally permitted to do; resources determine what means they have to carry out that response.

Risk resolution would follow market oriented principles and legal procedures. The draft also seeks stronger connections between financial risk handling, judicial proceedings and criminal enforcement, linking regulatory action with the work of courts and authorities tackling crimes.

Consumer protection and risk management therefore sit within the same proposed framework. The sales provisions address how individual customers are treated, while the supervision and resolution provisions address how authorities monitor financial activities and respond when problems emerge.

How the draft reached its second reading

The legislative sequence described so far has two main stages. The November revisions build on the first examination of the proposed framework earlier in 2026.

• June 2026: The 23rd session of the Standing Committee of the 14th National People's Congress conducted the first reading of the Financial Law draft.
• November 2, 2026: The draft was submitted to the Standing Committee's 25th session for a second reading, with expanded customer protections and targeted internet marketing provisions.

The main development at the second reading is the greater detail around financial transactions and promotion. Fair contract conditions, truthful explanations, adequate risk warnings and restrictions on public marketing of private offerings would become explicit parts of the proposed common legal framework.

Key Points

• China's Financial Law draft reached its second reading on November 2, 2026, following an initial review in June.
• Providers would have to set fair terms and avoid standard clauses that unfairly restrict customer rights or shift responsibility.
• Marketers would have to understand customers, explain products truthfully, warn about risks and offer suitable products.
• Online financial activity would have to follow both product rules and rules governing internet provision and marketing.
• Nonpublic offerings could not use internet advertising, public solicitation or disguised public solicitation.
• The broader draft addresses regulatory coverage, coordination, accountability and earlier action on financial risks.
• The proposals remain under legislative consideration.