China has long been known for its stringent regulations on data collection and export, creating challenges for both domestic and foreign businesses operating in the country. However, recent developments indicate a significant shift in the government’s stance towards data regulation. Authorities are now signaling a softer approach, aimed at easing regulatory burdens and improving the business environment, particularly for foreign companies.
The Cyberspace Administration of China (CAC) has released draft rules that suggest a more relaxed approach to data exports. According to the proposed update, government oversight will not be required for data exports unless it falls under the category of “important data.” This clarification provides much-needed clarity for businesses, as the previous vague wording on terms such as “important data” made compliance challenging.
The European Union Chamber of Commerce in China has hailed this development as a positive step, indicating that the Chinese government is listening to businesses’ concerns and taking steps to address them. The draft regulation not only relieves companies of some difficulties related to cross-border data transfer and personal information protection but also provides more clarity on how data handlers can verify whether their data qualifies as “important data.”
Lobbying for Better Operating Conditions
Foreign business organizations, including the EU Chamber, have actively lobbied the Chinese government for improved operating conditions. The cybersecurity regulator’s draft rules reflect an acknowledgement by the government that there are economic costs associated with strict data sovereignty ideals. They also recognize the importance of multinational corporations in data-intensive industries to China’s economic growth.
As multinationals navigate the uncertainties of the Chinese market, it has become clear that extreme ambiguity over the definition of “important data” can hinder their operations. Beijing’s efforts to provide clearer guidelines and exemptions are an essential step towards facilitating cross-border data flows and improving the overall investment climate.
China’s economic rebound from the Covid-19 pandemic has slowed down since April, adding pressure on the government to create a favorable environment for businesses. The enforcement of an updated anti-espionage law earlier this year, coupled with raids on foreign consultancies, further increased uncertainties for multinationals operating in China.
China’s regulatory approach to data security was initially influenced by the European Union’s stringent data protection policies and the lagging efforts of the United States in this area. However, as economic conditions changed, Beijing realized the need to strike a balance between data sovereignty and facilitation of cross-border data flows.
State Council’s Plan for Supporting Foreign Business
To support foreign business operations, the State Council announced a 24-point plan, which included measures to reduce random inspections for low-risk companies and promote data flows for certain foreign businesses. While some stakeholders viewed the plan as mostly consisting of existing policies, it highlighted the government’s commitment to improve the investment climate.
During a visit to China, U.S. Commerce Secretary Gina Raimondo emphasized the importance of taking actions to enhance predictability for U.S. businesses. The State Council’s 24-point plan was seen as an opportunity for tangible progress in this regard, providing a platform for dialogue between China and foreign companies.
Challenges Faced by Businesses
The U.S.-China Business Council’s annual survey highlighted data, personal information, and cybersecurity rules as the second biggest challenge faced by its members this year. The first challenge cited was related to international and domestic politics. While the proposed changes to data export controls lower regulatory risks, the ambiguity surrounding “important data” remains a concern. Beijing retains the authority to determine what constitutes “important data,” subjecting businesses to potential uncertainties.
Despite the remaining challenges, the proposed changes to data export controls and the broader regulatory environment indicate a willingness on the part of the Chinese government to foster a more transparent and predictable approach to technology regulation. These changes align with the State Council’s commitment to free data flows and could potentially lead to further improvements in the business environment.
Apart from data regulations, other areas such as artificial intelligence have also witnessed easing of restrictions. The introduction of more relaxed rules for the management of AI services demonstrates the government’s willingness to adapt its regulatory framework to accommodate technological advancements.
China’s evolving data regulations reflect a shift towards a more business-friendly environment, particularly for foreign companies. The proposed updates to data export controls, along with other measures to support foreign business operations, indicate a recognition of the economic costs associated with strict data sovereignty ideals. While uncertainties persist, these changes are steps in the right direction and hold the potential to improve the investment climate in China.
Leave a Reply