China's first e-commerce legislation comes into effect today, with the introduction of an electronic signature law.

The law allows parties to decide whether to use traditional or electronic signatures in contracts or other legally binding documents, and affords digital signatures the same legal standing as traditional signatures.

But agencies providing digital authentication services must first receive government approval.

Alamusi, chief executive officer of Chinaeclaw.com, a professional website about e-commerce legislation, said he believed the law has come at an opportune time to promote e-commerce in China.

"Prior to the introduction of the law there had been lack of legislation in terms of solving effectiveness and reliability of online trading and electronic messages, a serious obstacle to the development of e-commerce," he said.

Andy Qi, a spokesman for 1pai.com, an online joint venture between US giant Yahoo! and major Chinese Internet portal Sina Corp, said the law expanded the scope of online trading and would encourage more people to do business electronically.

He said his firm signed a co-operation deal with the China E-commerce Association last week using electronic signatures, which might be the first such agreement signed after the law was approved.

Jin Jianhang, vice-president of China's biggest business-to-business website Alibaba.com, said he also believed the law will help increase the reliability of online trading, which may be the biggest headache to e-commerce websites.

However, they said they believed the development of e-commerce is a systematic process and needs long-term efforts from both government and industry.

Alamusi pointed out that the law has just 36 articles and does not cover other major legal issues like electronic contracts, protection of e-commerce consumers, and the legal liability of e-commerce service providers.

Another problem is that there are over 70 electronic signature authentication agencies in the country. Although the law requires them to get approval from the Ministry of Information Industry, there is no regulation related to this.

He added that even if the public key infrastructure (PKI) encryption used in electronic signatures is believed to be very secure and extremely difficult to crack, its security is relative and the industry must work out some more secure avenues.

Wang Xiaoyun, a professor from Shandong University, cracked the MD5 encryption method, one of the two major KPI encryption methods, in August.

She also found some loopholes in the other encryption method SHA-1 in February.

Alibaba's Jin said it is unrealistic to expect a sharp increase in usage of electronic signatures, because enterprises and government agencies will continue take a wait-and-see attitude for the regulations to be put in place and their concerns to be eased.

Qi also called on the Chinese Government to pay more attention to customer-to-customer e-commerce, which is troubled by the creditability of online trading.

(China Daily April 1, 2005)