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Can the formal contract signature be in traditional Chinese characters?
As long as the signature can show your identity, whether it is simplified or traditional, it is a sign of your identity. So whether you use simplified or traditional does not affect the identification of the signing subject.

Signing is to acknowledge the terms of the contract and express the rights and obligations of voluntarily accepting and abiding by the contract.

The signature requirement is voluntary, with full capacity for civil conduct, without fraud or coercion, without major misunderstanding and fair performance.

Signatures that meet the above requirements have legal effect.