The review requirement forms part of new policy guidelines released by the Central Committee of the Chinese Communist Party and the State Council The guidelines reflect how Beijing has been ramping up its efforts to boost the country’s digital economy by applying commercial rules to data.
Chinese authorities will impose a strict review of data processing, cross-border data transfers, and mergers and acquisitions (M&A) activities involving foreign capital that could affect national security, as Beijing moves to safeguard what it considers as sensitive information.
That approach forms part of new policy guidelines released on Monday by the Central Committee of the Chinese Communist Party and the State Council, the country’s cabinet. The guidelines aim to boost the country’s data market, while addressing issues such as data rights and trading profit distribution.
The release of the guidelines follows last year’s passage of China’s Data Security Law, which treats some domestically generated information as a matter of national security and proposed a review requirement, but did not provide specific guidance. China had earlier set up a process for initial public offerings (IPOs) overseas to go through a security review if the business involves the data of more than one million Chinese consumers.
Under the new guidelines, implementing a national security review on certain deals supports Beijing’s efforts to build an “orderly” mechanism for cross-border data flows. Other measures that the guidelines cover include taking part in formulating international rules and technical standards in areas like digital currency.
The guidelines aims to lay the groundwork for what Beijing calls a “fundamental data system”, which will cover areas such as defining the data rights of different entities, management and supervision of information, and trading and profit distribution in the data market.
A detailed mechanism for defining data rights will be established for public, corporate and personal information, according to the new guidelines.
It provides three main types of data rights. These are the right to hold data resources, the right to process and use data, and the right to manage data products.
The guidelines reflect how Beijing has been ramping up its efforts to boost the country’s digital economy by applying commercial rules to data, which the central government regards as a new production factor that is in the same category as land, capital and human labour.
Data exchanges have already been launched in major cities across China. In November, trading kicked off at the state-run data exchange in the southern tech hub of Shenzhen, allowing companies to buy and sell data the way they do with regular commodities.
Despite that push, the government has not allayed the concerns of businesses in terms of higher compliance costs in handling data and an inadequate trading framework that remains vague on data ownership and other relevant rights.