Data rules risk making China a ‘digital island’, warn US companies
Data rules risk making China a ‘digital island’, warn US companies

Data rules risk making China a ‘digital island’, warn US companies

China’s “uniquely restrictive” data laws risk increasing U.S. companies’ costs of doing business in the No. 2 economy and could lead to digital decoupling, warns a new report from a U.S. enterprise group.

The government’s restrictions on cross-border data movement, ambiguous regulation and inconsistent enforcement “are particularly challenging for multinational corporations,” according to the U.S.-China Business Council, which describes itself as a private organization of more than 260 U.S. companies operating in the Asian nation. .

“If the policies are implemented rigidly, one possible outcome is the creation of data islands that force companies to locate technology, people and processes and disconnect them from global operations,” the business group said in the report released Thursday, which was based on discussions. with more than 30 U.S. companies.

The government of Chinese President Xi Jinping has introduced a series of rules on data, privacy and cyber security over the past five years, citing the need to better protect personal information and strengthen national security. The government also wants to build digital infrastructure and data centers around the country with the goal of creating a market for data that drives economic growth.

The strategy is also politically driven, with Xi declaring last year that he intended to pursue “platform” companies that collect data to create monopolies. The government later hit Alibaba Group Holding Ltd with a record fine of 2.8 billion. USD (RM11,99 billion) for abuse of market dominance and asked other top Internet companies to correct anti-competitive practices.

The measures have also rattled investors, and last month analysts at JPMorgan Chase & Co called the Chinese Internet sector “uninvestable”, in part due to regulatory concerns.

Many U.S. companies worked with regulators at the regional level in the Chinese government to help them navigate the regulatory environment, the report from the U.S.-China Business Council states. They also put more resources into local teams to review compliance issues, it adds.

The report said companies in the auto, hospitality, healthcare and finance sectors were more tightly regulated than others. It mentioned potential higher business expenses, such as purchasing local servers that could cost as much as several million dollars.

“Businesses want to at least see clarity on how they can comply, and they want to be part of that discussion,” said Matthew Margulies, the council’s senior vice president of China’s operations. “There are legitimate security measures that are necessary for privacy and data security – no one disputes that – but there is a concern that the security elements of the equation somehow outweigh or overshadow some commercial realities.” – Bloomberg


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