Balance cybersecurity with the need for free flow of data
The ability of foreign companies to operate in China without undue interference from state agencies remains fundamental to free trade
Internet censorship is a core pillar of Chinese state security. Beijing tightened it last week with the implementation of a new cybersecurity law targeted at businesses. It remains to be seen whether it balances the needs of state security with the importance of innovation and investor confidence , or amounts to a trade barrier in the eyes of foreign business. Since the National People’s Congress Standing Committee passed the law last year, foreign companies have been scrambling to keep up with changes that broaden its coverage of businesses, goods and services and the application of rules limiting the transfer of data overseas. The law enables unprecedented access to company technology to bolster control of collection and movement of data.
Vigorous lobbying by foreign industry groups for a delay to more controversial provisions has finally borne fruit. The Cybersecurity Administration has announced a grace period until the end of next year for businesses to comply with cross-border data transfer regulations. In addition to restrictions on moving data out of the country, the new law includes a more comprehensive security review process for key software and hardware, and compulsion to assist authorities in security investigations.
Experts are divided over whether it best serves the national interest. Luo Fuhe, a senior member of the country’s top political advisory body and once in charge of scientific development in Guangdong, argued recently that heightened internet censorship posed a threat to social and economic growth, and undermined overseas investor and business confidence in the country’s future. But Li Yuxiao, a professor who studies internet regulation at the Beijing University of Posts and Telecommunications, says cybersecurity is crucial to national security, and sees secure information systems as integral to protecting the economy and promoting domestic operating systems.
The ability of foreign companies to operate in China without undue interference from state agencies remains fundamental to free trade including the China-led “Belt and Road Initiative”, 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.