China Proposes Easing of Cross-Border Data Controls — Update

By Jiahui Huang

China's cyberspace regulator proposed easing its stringent cross-border data-security controls, a move seen as an attempt to placate concerns by foreign businesses wary of the country's tightening grip over data in recent years.

Technology stocks in Hong Kong rose sharply Friday after the release of the draft rules. The Hang Seng Tech Index ended 3.8% higher, while Alibaba Health Information Technology gained 11% and JD Health rose 7.8%.

The rules could make it easier for these and other companies to transfer commercial data in and out of China.

A set of draft rules proposed by the Cyberspace Administration of China says transfers of data relating to international trade, academic collaboration, global manufacturing and marketing activities that don't contain personal information or other data deemed "important" by authorities would no longer need to go through certain steps, such as undergoing a security review or obtaining specific consent to be transferred.

The language in the proposed loosening is vague, making it difficult for analysts to immediately parse how it might translate into changes in business practices in the real world.

"We believe the final version could be changed since, now, it's a little bit too broad and easy," said Yik Chan Chin, a professor in Communications at Beijing Normal University. "The definition of 'important' data needs to be addressed by other departments instead of just CAC," she said.

China's existing Personal Information Protection Law currently requires a number of checks, including security evaluations and certifications, for cross-border data transfer.

The regulator posted the draft rules on its website late Thursday, and is seeking public comment on the proposed regulations until Oct. 15.

Despite the uncertainty in how and when the loosening might unfold, investors and some analysts saw the move as another attempt by Beijing to convince foreign businesses that China remains a welcoming market despite a series of high-profile moves taken against Western businesses and their workers.

Chinese authorities have taken an increasingly tough stance on foreign businesses this year. The Wall Street Journal reported earlier Friday that a senior executive at U.S. risk advisory firm Kroll has been barred from leaving mainland China for the past two months.

The loosening could also lower compliance costs, said Angela Zhang, a Chinese law professor from Hong Kong University. "Businesses in China have faced heightened compliance costs. This latest proposal to relax the data transfer rules appears designed to mitigate such concerns."

Write to Jiahui Huang at jiahui.huang@wsj.com

(END) Dow Jones Newswires

September 29, 2023 09:03 ET (13:03 GMT)

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