Shanghai’s data flow centre walks the talk, promises international standards, but China’s foreign firms need ‘faster, wider roll-out’
- Data flow service centre in Lingang free-trade zone in Shanghai will adopt internationally recognised standards and aim to help entities navigate requirements
- China’s data security structures are seen as a challenge for foreign businesses, who Beijing is eager to reassure and retain
In a step towards freer cross-border data flows and to address the concerns of foreign businesses, Shanghai inaugurated a major data flow service centre in the Lingang free-trade zone on Sunday, with pledges to adopt internationally recognised standards.
The centre will seek data cooperation agreements with Singapore and New Zealand, as well as countries involved in Brics economic cooperation bloc and Beijing’s signature Belt and Road Initiative, with applications including electronic invoices and proof of payments, blockchain and digital identity mutual recognition.
On top of aligning with international practices, additional data flow scenarios are being trialled in Lingang, including “easier access” to overseas websites for foreigners who have checked into a designated hotel, as well as streamlined data exchanges for healthcare companies without the need to share raw data or sensitive personal information, according to the Jiefang Daily newspaper.
“It will explore ways to elevate services to match standards set out in the Comprehensive and Progressive Agreement for Trans-Pacific Partnership (CPTPP) and the Digital Economy Partnership Agreement (DEPA),” Ding Rui, the centre’s director, told the newspaper, which is the official daily newspaper of the Shanghai committee of the Communist Party.
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The centre is the first of its kind set up by Shanghai’s cyberspace administration to help entities navigate requirements for compliance at “minimal costs and time,” Ding added.
However, the vetting power would be held by the cyberspace watchdog, and the centre could only advise businesses and submit applications on their behalf.
China’s onerous, opaque data security structures that limit or prohibit outbound data transfers are perennial challenges facing foreign businesses.
Beijing has been pushed to loosen the shackles to balance security with business demands in its latest charm offensive to reassure and retain foreign firms amid a slump in foreign investment and an exodus of existing firms.
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Having incorporated feedback from a public consultation, the Cyberspace Administration of China published the long-awaited rules on facilitating and standardising cross-border data flows in March, with some relaxations including exemptions for certain scenarios and the flexibility for areas like Lingang to publish negative lists to simplify procedures.
And the new centre in Lingang is set to be at the forefront of data classification and formulation of lists and protocols to handle important data.
China has applied to join the CPTPP and DEPA, but clauses concerning data transfer and the location of computing facilities have been flagged as the most problematic areas, said Zhao Jingwu, a law professor at Beihang University in Beijing, said in a report.
China’s ill-defined digital and data security laws mean uncertainty for years
A 2023 survey by the American Chamber of Commerce in Shanghai showed 70 per cent of the 325 respondents labelled data transfer and processing restrictions, and other cybersecurity requirements, as a hindrance to business and the top regulatory challenge.
“China’s ill-defined digital and data security laws mean uncertainty for years, with significant confusion around interpretation and enforcement remain. Companies have been frustrated by the resultant operational inefficiencies and compliance costs,” the report said.
Shanghai, though, hopes the centre in Lingang can take the lead in experimenting with data flows for industries, including biomedicine, intelligent connected vehicles and financial management, as well as shipping and trade.
