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China’s Internet Regulator Discusses New Data-Security Rules With Foreign Firms

The Chinese Internet regulator is discussing options for applying new data security rules with foreign companies, including Walmart.

China’s Internet Regulator Discusses New Data-Security Rules With Foreign Firms

Currently, Beijing is seeking to neutralize or at least minimize the concerns of multinational corporations about the impact of new data security standards on their activities. In this context, the Chinese authorities are making efforts to convince foreign companies that their business in the space of the world’s second-largest economy will not face any difficulties and will not suffer losses as a result of new control measures.

Representatives of the Chinese Cyberspace Administration held meetings with dozens of heads of international firms. The media, citing insiders, reported that during this communication, officials are trying to reduce the level of concern of companies, which is clearly visible as November approaches, when the new data processing regime will come into force. Officials answer questions from representatives of foreign companies and give recommendations on the algorithms for carrying out activities in the context of the introduction of a new system for working with arrays of information.

At the same time, the media, citing anonymous sources, reported that the Chinese regulator recognized the problematic nature of obtaining permits for the transfer of confidential data abroad. Insiders claim that the possibility of creating a mechanism for the rapid approval of routine transfers and a so-called curatorial whitelist for information materials of certain categories and individual companies is currently being discussed.

The new regulatory framework governing the data processing process has become a cause of concern among foreign firms operating in this country. These changes have already led to certain consequences, which from the point of view of China’s interests are unequivocally negative. For example, Dentons, a company specializing in the provision of legal services, announced in August that it had ceased operations in this country. Morgan Stanley transferred more than 200 technology developers from mainland China against the background of regulatory innovations. In this case, about a third of the representatives of the local group of specialists changed their place of work dislocation.

The new system of rules that forms the regulatory regime gives the administration of Chinese President Xi Jinping the power to fine companies that have leaked information classified as confidential, or improperly handle it. Also, the authorities, within the framework of legal norms that will come into force in the fall, have the right to close firms that have committed the aforementioned shortcomings in their activities.

Carolyn Bigg, head of data protection and cybersecurity at DLA Piper in Asia, says that every company operating in China, regardless of specialization, should clarify how to ensure that the business complies with the new regulatory framework since fines can be huge in case of violations. She also said that the consequences for non-compliance with the regulatory regime may entail the blocking of activities or a ban on the transfer of personal data abroad.

The new legislative norms governing the processing of arrays of information are designed to enable China to take control of valuable data that affect the state of affairs in the economy and are an important factor in the development of future technologies. These measures have been met with negative criticism due to the fact that they violate the free flow of data, which is necessary for multinational corporations to work around the world, form a long-term strategy, and conduct research.

Recently, Beijing yet has been following a more loyal tactic of interacting with foreign and private companies, since their presence in an economic system under threat of deflation is critically important. The Chinese authorities are aware that harsh measures against the foreign and private sectors of the economy will have negative consequences.

The State Council, the Cabinet of Ministers of China, last weekend announced its intention to optimize the data transmission process as part of the implementation of the corresponding 24-point plan. The authorities claim that this decision will solve long-standing problems that are a kind of barrier to the activities of foreign companies in the country. The Chinese leadership also plans to create a so-called green channel for firms from other countries whose business does not go beyond the legal space defined by legislation. The authorities will help Beijing, Shanghai, Tianjin, and the Greater Bay Area, including Hong Kong, to develop a list of common data, the export of which is allowed.

The media, citing sources, report that representatives of Walmart, one of the world’s largest retailers, took part in a meeting with officials in Beijing.

Currently, there are clear signs in China that officials are ready to soften the business regulation regime, which in its current configuration was formed in 2021 and 2022. These kinds of concessions are not the result of a rethinking of the state’s position on the organization of the process of the existence of the economic sphere. In this case, it is more appropriate to define mitigation as a forced step aimed at finding a way out of the depths of the crisis recession provoked by the coronavirus pandemic.

As we have reported earlier, China’s Central Bank Calls On Financial Sector to Help Fund Technology Research.

Serhii Mikhailov

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Serhii’s track record of study and work spans six years at the Faculty of Philology and eight years in the media, during which he has developed a deep understanding of various aspects of the industry and honed his writing skills; his areas of expertise include fintech, payments, cryptocurrency, and financial services, and he is constantly keeping a close eye on the latest developments and innovations in these fields, as he believes that they will have a significant impact on the future direction of the economy as a whole.