Beijing’s new internet laws hint at trade barriers
The ability of foreign companies to operate in China without interference from state agencies remains fundamental to free trade, and the government needs to strike a balance between security and a welcoming environment
When does cybersecurity cross a fine line to become seen as a trade barrier? A case in point where that question arises is in China, where the National People’s Congress Standing Committee has just passed a controversial cybersecurity law to tighten control over the internet at the business level. Nearly a year has passed since President Xi Jinping used a world internet conference to advocate internet sovereignty and defend Beijing’s hard line on internet freedom and state security. Expressions of concern from corporations appear to have made little difference.
This follows the passage of a counterterrorism law that requires technology companies to share encryption keys and back-door access with state security agents. The impact on the free flow of data would affect all players in the market and not just foreign firms. It is understandable China feels the need for such a law if it sees threats in cybersecurity. But the implications for innovation are negative.
Provisions in the new law that raise concerns include the storage in China of personal and business data by the operators of “critical infrastructure” such as information services, transport and finance; provision of “technical support” to security agencies; and the threat of business suspension or closure for unapproved storage or provision of internet data overseas, and the vague criminalisation of use of the internet to damage national unity. US Chamber of Commerce in China chairman James Zimmerman sees the new law as a blow to innovation.
The ability of foreign companies to operate in China without undue interference from state agencies remains fundamental to free trade and healthy growth. It is therefore a question of how the new law is implemented, and the need to strike a balance between security and a welcoming environment for foreign investment, including the free flow of data. Beijing has some work to do in explaining the practical application of the law and showing business it does not amount to a trade barrier.