Chinese authorities have decided to ease some rules on companies sending data abroad. This change seems like a reaction to complaints that several rules, like data export limits and security steps, have been too much for foreign investors. It’s led some to leave China altogether.
On March 24th (local time), Chinese media outlets like the South China Morning Post (SCMP) reported that the China Internet Information Office unveiled the ‘Regulation on Promoting and Normalizing Data Flow Overseas’ on the 22nd. Under this regulation, companies don’t have to undergo a safety evaluation for data exports if the collected data doesn’t include personal or critical information. It went into effect right after its announcement.
Consequently, overseas shopping, shipping, payments, and visa processing no longer need government scrutiny. Likewise, data linked to tasks like opening bank accounts, booking flights and hotels, and conducting service tests are exempt from evaluation. Even sending employees’ personal data overseas for reasons like collective agreements or labor laws no longer necessitates review by authorities.
Nonetheless, data concerning critical information infrastructure remains subject to security assessment. Additionally, suppose non-sensitive personal data for over a million individuals or sensitive information for over 10,000 people is exported overseas within a year. In that case, it must undergo a security evaluation by Chinese authorities.
The SCMP highlighted the new regulation as “a crucial step in China’s efforts to attract foreign investment, particularly as the recovery from the COVID-19 pandemic lags.” The previous ‘Data Overseas Transmission Security Evaluation Measures’ from 2022 faced backlash for mandating that overseas companies report most of their business data to Chinese authorities, sparking significant apprehension.
China’s Foreign Direct Investment (FDI) decreased 8.0% to 1.1339 trillion yuan (USD 178.04 billion) last year. Adding to the problem, foreign direct investment (FDI) for January and February of this year plummeted by 19.9% compared to the previous year. Premier Li Keqiang highlighted at the National People’s Congress (NPC) earlier this month that regulations surrounding data export were acting as “investment barriers,” further driving away foreign investors.
Critics argue that the new rule lacks clarity as it doesn’t define what qualifies as “important data” requiring reporting. The SCMP highlighted concerns among foreign companies due to the vague language in last year’s stricter Anti-Espionage Law and this year’s revised State Secret Protection Law, despite the relaxation of data export regulations.
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