I heard that it is only regulated under China laws, so can people use trademarked names with that extension?
China most certainly does have tradmark laws. They are administered by the Patent and Trademark office ()www.chinatrademarkoffice.com/. What China doesn't do is spend a lot of effort going after it's own citizens that violate trademark rights and copyrights held by people in countries outside of China (though they have been getting a little better). Furthermore, the rules set forth by CNNIC (the gTLD managing organization) are very close to those rules set forth by WIPO for UDRP. There are rules regarding mark status. On top of that, even if the first two were not true, a US resident with a business in the US would not get any legal protection by registering the domain in China. In fact, that would likely be seen as evidence of bad faith registration (trying to get aroud the US law). There are ways for companies to get the benefits of other country's laws, but simply having the domain registered in that country is not one of them. It is way more complicated than that. China Domain Dispute Policy: http://www.cnnic.cn/html/Dir/2006/03/15/3655.htm
bluegrass, that's interesting information. But trademark names also have different amount of protection depending on the name (fancifal vs generic), so I think that fancifal names, such as Nike, get protected. Also if a person has an online store and sells a brand, wouldn't that mean the brand is worldwide and not just physically located in the original country?