China’s “uniquely restrictive” data laws risk boosting US firms’ cost of doing business in the No. 2 economy and could lead to digital decoupling, a new report from a US business group said yesterday.
The Chinese government’s curbs on data movement across borders, ambiguous regulation and inconsistent enforcement “are particularly challenging for multinational firms,” said the US-China Business Council, which describes itself as a private organization of more than 260 US companies operating in the Asian nation.
“If the policies are implemented rigidly, a possible outcome is the creation of data islands that force companies to localize technology, people and processes, disconnecting them from global operations,” the business group said in a report that was based on discussions with more than 30 US companies.
Chinese President Xi Jinping’s (習近平) government has introduced a raft of data, privacy and cybersecurity regulations over the past five years, citing the need to better protect personal information and improve national security. The government also wants to build digital infrastructure and data centers across China with the goal of creating a market for data that propel economic growth.
The strategy is also politically driven, with Xi last year saying he intended to pursue “platform” companies that amass data to create monopolies.
The government later hit Alibaba Group Holding with a record US$2.8 billion fine for abuse of market dominance and told other top Internet companies to rectify anti-competitive practices.
The moves have also rattled investors.
Analysts at JPMorgan Chase & Co last month called the Chinese Internet sector “uninvestable,” partly due to regulatory worries.
“Like most governments, Beijing is still figuring out how to thread the needle between protecting data security and enabling cross-border data trade,” said Kendra Schaefer, head of digital research at Trivium China, a consultancy in Beijing.
“It’s uncertain how rigidly existing rules will be enforced, and to what extent they will be adjusted over the long term in response to complaints by foreign businesses,” Schaefer said.
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