It is NOT illegal for someone to work in China without a degree, as long as they have the Z-visa and residence permit. But one thing that should be made perfectly clear here is this: It IS illegal for teachers to work in China with just an L visa, regardless of whether they have the degree or not. Some schools and unis promise to convert the L visa to a Z-visa, but they really can't, in many provinces an L visa can't be changed into a Z-visa.

If a teacher has a degree or not is really irrelevant, it is the type of visa you have that is important. I have seen many job advertisements on the internet where a degree is required so teachers can use Superkids and New Interchange textbooks. What a joke? Basically, using these textbooks is a waste of time and energy, why is there a degree required to teach oral and written English? You only become good at teaching these things by experience, as we well know, many degree holders have very poor written English skills.