China’s Unprecedented Cyber Law Signals Its Intent to Protect a Precious Commodity: Data

An aggressive new cybersecurity and data protection law in China that goes into effect today will have global ripple effects, and could serve as a model for other governments. But the Chinese government has also left many parts of the law vague—likely an intentional move meant to allow the country to stake out its own sense of “cyber sovereignty” while waiting to see how the U.S., Europe, and others decide to regulate the flow of data across international borders.

The new law is a resounding announcement from China that it intends to be a global player in controlling perhaps the most precious commodity of the digital economy: data. When the country announced the law late last year, it immediately inspired backlash from trade associations and chambers of commerce across the world, who said it would hurt the ability of foreign companies to compete in China.

That may be correct, but it’s hard to know how the law will actually change things because the most controversial aspects of it are so vague.

Among them is a requirement that certain companies submit their products to the government for cybersecurity checks, which may even involve reviewing source code. How often it would be required, and how the government will determine which products must be reviewed is unknown. This could come into play as part of China’s broader regulatory push to expand law enforcement’s power to access data during criminal investigations.

Another vague directive calls for companies to store certain data within the country’s borders, in the interest of safeguarding sensitive information from espionage or other foreign meddling. The government has delayed the implementation of this change until the end of 2018, however.

The reason for the delay seems to be that China wants its laws governing the cross-border flow of data to be “consistent with accepted international practices,” according to the authors of a recent research brief from the Eurasia Group, a political risk consultancy. Those practices include the European Union’s General Data Protection Regulation, set to take effect next year, and the Privacy Shield, a framework that allows for the commercial exchange of data between the United States and European Union in a way that complies with each government’s respective data privacy laws. Like China’s new law, though, these agreements are still works in progress.

“This is the Chinese government's entry into an emerging field that is going to be a huge area of policy development worldwide,” says Graham Webster, an expert in China-U.S. relations at Yale Law School.

Governments around the world, including the U.S. and in Europe, are grappling with uncertainty over how to maintain digital sovereignty and security while still capitalizing on the lucrative global digital marketplace. While the U.S. has taken a relatively hands-off approach, the EU is pursuing relatively strict data protection policies that are more in line with some of the measures in the new Chinese law, says Webster.