Currently, China is discussing the possibility of changing the rules regarding data flows to other countries.
Beijing may decide to weaken the norms of this process. Experts say that this intention should be considered and interpreted as an initiative within the framework of China’s efforts to eliminate the concerns of foreign businesses about activities in this country against the background of strict state regulation measures. Also in this case, Beijing is seeking to take a step in the context of a strategy to revive the growth of the world’s second-largest economy, which is currently in a difficult situation and has no clear prospects for rapid prosperity.
The Cyberspace Administration of China has drafted several exceptions to its requirement to obtain permission to transfer data abroad. These rules apply to cross-border purchases, money transfers, hotel reservations, and airline tickets. At the same time, the regulator does not intend to abandon the requirement of mandatory security assessment for companies that collect the personal information of more than 1 million people and use this data in other countries.
China’s new data protection legislation has caused widespread concern about the ability of multinational corporations to continue operating in the Asian powerhouse. The media reports that the weakening of the norms may occur before the deadline for obtaining permits for international data transfers, which expires in November. These rules of the Chinese authorities apply to all data sets, including, among others, basic information about customers, the functioning of loyalty programs, and internal personnel management systems.
Atticus Zhao, a data compliance specialist at King & Wood Mallesons from Beijing, believes that the draft changes proposed by the Chinese Internet regulator would be particularly useful for companies that store information about less than a million people. According to him, for many firms, especially international ones, this is a significant relaxation and essential reduction in workload.
Data transfer restrictions were the reason for Morgan Stanley’s decision to transfer more than 200 technology developers from mainland China. Dentons also stated that these norms were one of the factors that provoked the termination of interaction with the Chinese partner Dacheng.
Over the past few months, Beijing has been making efforts to reduce the level of concern among multinational corporations that restrictive measures could turn China into a data island. Local authorities met with representatives of foreign companies in a closed-door mode in order to provide them with explanations of the political line and present a plan for the so-called green channel to facilitate transfers.
Many analysts and representatives of the business environment are of the opinion that the rules in force in China, starting with the laws on confidentiality and data security of 2021, provide a more significant burden on firms even compared to the legal regime of the European Union of the corresponding orientation. International companies, including hotel chains and financial institutions, have applied for permits to transfer information outside the mainland, but few of them have received approval at the moment.
Chinese regulators are requesting detailed data, including exact IP addresses and a report on the volume of arrays of information that the company stores in the country. In some cases, it took a whole year to provide answers. This is reported by the media with reference to people who were involved in the application process. Those who tried to get approval for the transfer of information from Chinese regulators spoke to journalists on condition of anonymity, saying that the issue is not public.
Tom Nunlist, deputy director of the Beijing-based consulting company Trivium, says that, in his opinion, this problem of a slow process is the result of regulators trying to do too much and too quickly. He also said that the data security regime in China will remain, but the Cyberspace Administration is taking the right step by abolishing untenable norms.
As we have reported earlier, China to Make Its Business Environment More Friendly for Foreign Companies.