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August 17, 2023

China on charm offensive with Western businesses over new data laws

Beijing says it plans to speed up and improve the flow of data for multinational companies operating in the country.

By Ryan Morrison

Chinese officials have been reaching out to foreign multinationals in an attempt to calm concerns over the country’s new data security rules. Companies including Walmart and PayPal reportedly met with the Cyberspace Administration of China (CAC) to discuss the regulation, which is being introduced later this year and includes tighter reporting restrictions and limits on the flow of data outside the country.

China hopes to utilise data generated in the country for AI and other future technology applications (Photo: DisobeyArt/Shutterstock)
China hopes to utilise data generated in the country for AI and other future technology applications. (Photo by DisobeyArt/Shutterstock)

The conversations surrounded the approvals process for transferring sensitive information and how to speed things up and the creation of a white-list for low-risk data categories and companies according Bloomberg, which cites two sources familiar with the talks.

There has been concern from some multinational companies with a presence in China that the new regulations would make data transfer over complex. The CAC published the “Measures for the Standard Contract for Cross-border Transfer of Personal Information” and the “Standard Contractual Clauses for Cross-border Transfer of Personal Information” earlier this year, and they are due to come into force in November.

They effectively give the Chinese government the power to shut down or fine a company that leaks or mishandles sensitive information. The aim is to allow the government to exert control over the data companies gather on Chinese citizens.

These regulations  impact any company with Chinese operations and it has led some to change the way they do business in the country. Law firm Dentons split off its Chinese operations and Morgan Stanley moved 200 technology developers out of mainland China.

How China’s new data laws will impact businesses

Speaking to Bloomberg, Carolyn Bigg, head of DLA Piper’s data privacy and data security team said if found in breach of the regulations a company could have its system blocked in China, leaving it unable to transfer Chinese personal data outside of the country.

Making overtures to concerned multinationals is part of a wider initiative by the government to help revive the economy. This includes a 24-point plan to streamline data transfers that include a “green channel” for foreign companies that meet pre-defined requirements  and a list of general data types that can be freely exported without prior approval.

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This will be welcomed as there have been issues with delays in gaining approval for the transfer of large amounts of personal information, and companies like Walmart have expressed concern over having to share data with regulators during the approval process. Arguing that this forces them to divulge internal security procedures.

It isn’t clear exactly what was said at the meeting, but according to the Bloomberg report it included assurances that the entire process would be faster and more efficient in future.

China’s courting of international businesses comes as it continues to deal with the fall-out of US export controls which are preventing key technologies such as semiconductors reaching Beijing. In response, the Chinese government introduced restrictions of its own, limiting access to key materials produced in China and used in electronics manufacturing.

Read more: UK considering security risks of Chinese technology investments

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