China: Impending Cyber Security Law: Cross-Border Data Transfer Will Be Restricted For The First Time

Although the legislative timetable for its dedicated Personal Data Protection Law remains undecided, China has promulgated several other laws and regulations for protecting personal data, in response to the booming network technology and Internet economy. Also, China has amended its Law on Protection of Consumer Rights and other relevant laws to meet the rapidly changing social needs. Among these various legislations, the Cyber Security Law attracts the most attention, as it is not only the first time that a fundamental law will provide systematic protection to personal data but also the first time that cross-border data transfer will be explicitly restricted, which will significantly impact corporations' business operation in China.

1. Legislative Background

The year of 2014 marks the 20th anniversary of China's gaining access to the Internet. Over years of development China has marched into an all-round Internet era. Various economic, social and cultural benefits notwithstanding, the Internet also poses potential risks and threats including cyber torts, unfair competition on the Internet, hacker attacks and data breaches, etc. to the well-functioning of the society. Among them the cyberspace security issue has become an increasingly crucial subject under discussion in various countries around the world.

China's top authorities attach great importance to the issue of cyberspace security. On 27 February 2014, the Central Leading Group for Cyberspace Affairs headed by President Xi Jinping was founded. However, up until this point China has yet to pass a law which specifically deals with cyberspace security issue. The relevant provisions are currently scattered among different laws and regulations.

The Standing Committee of National People's Congress is currently drafting the first fundamental law in the cyberspace area. Until 4 August 2016 the second draft of the Cyber Security Law of the People's Republic of China (hereinafter the "Second Draft") has finished soliciting public opinions. Should everything goes as planned the Cyber Security Law will be promulgated within this year. After its promulgation the law is believed to have a significant impact on corporations operating in China.

2. Current Situation of Cross-Border Data Transfer Regulation

In recent years the Chinese government has paid an increasing attention to the issue of cross-border data transfer. Nevertheless, the current regulations have not reached a comprehensive level of regulation in terms of categories of data and scope of application. For instance, Article 24 of the Regulation on the Administration of Credit Reporting Industry issued by the State Council on 21 January 2013 provides that "A credit reporting agency shall, within the territory of China, organize, store and process the information collected within the territory of China. A credit reporting agency shall provide information for an overseas organization or individual in compliance with laws, administrative regulations and relevant provisions of the Credit Reporting Industry Regulatory Department under the State Council." Article 6 of the Notice of the People's Bank of China on Improving Work Related to the Protection of Personal Financial Data by Financial Institutions of the Banking Industry issued on 21 January 2011 provides that "Personal financial data collected within the territory of China shall be stored, handled and analyzed within the territory of China. Unless otherwise stipulated by laws, regulations and provisions of the People's Bank of China, financial institutions of the banking industry shall not provide domestic personal financial data to overseas countries." It is clear that the above-mentioned regulations apply only specifically to credit reporting industry and banking financial institutions, with a relatively narrow range of protected data.

In addition, as the first national standard for personal data protection, Article 5.4.5 of the Information Security Technology - Guideline for Personal Data Protection within Information System for Public and Commercial Services provides that "Without the expressed consent of a subject of personal data, or in the absence of explicit provisions of laws and regulations, or without the approval of the relevant competent department, an administrator of personal data may not transfer personal data to an overseas receiver of personal data, including an individual located overseas or an overseas-registered organization or institution." It is obvious that this guideline provides a much broader definition of personal data and covers a much wider scope of application. However, as "guiding technical document" the guideline is not legally binding on relevant corporations or individuals.

Corporations operating in China should note that the Cyber Security Law under enactment will for the first time restrict cross-border data transfer on a national law level.

3. Specific Restrictive Regulations of Cross-Border Data Transfer in the Second Draft

With regard to the issue of cross-border data transfer, the Cyber Security Law under enactment poses an unprecedented comprehensive restriction in terms of the level of legislation, scope of application, category of data, procedural rules and legal liability.

3.1 Subject

According to Article 35 of the Second Draft, the regulated subjects of the cross-border data transfer shall be the "operators of critical information infrastructure". Article 29 provides that critical information infrastructure refers to infrastructures "damage, loss of function or data breach of which could severely endanger national security, national economy and the people's livelihood, or public interests"; the specific scope of such infrastructure and its security measures "are to be laid down by the State Council".

3.2 Category of Data

Article 35 of the Second Draft provides that "citizen's personal data and crucial business data collected and generated by operators of critical information infrastructure during their operation in the People's Republic of China shall be stored domestically." Hence the regulated data are limited to those collected or generated within China and mainly covers two categories: (1) citizen's personal data; (2) crucial business data. The Second Draft is unclear as to the definitions of these two categories, especially the definition and extension of the latter, which can be expected to be laid down in the subsequent legislation, law enforcement or judicial practices.

3.3 Regulation Methods and Requirements

The Second Draft provides that in principle the above-mentioned two categories of data shall be stored within China, however "where the cross-border data transfer is truly necessary for business operation, a security assessment shall be conducted in accordance with the measures jointly issued by the cyberspace information administrations and relevant departments of the State Council unless otherwise stipulated by laws or administrative regulations."

3.4 Legal Liabilities

Article 64 of the Second Draft provides that "Where an operator of critical information infrastructure, in violation of Article 35 of this law, stores network data overseas or provides network data to an overseas receiver, the competent authorities shall instruct the operator to correct illegal conducts, issue warnings, confiscate illegal gains and impose a fine between 50,000 and 500,000 yuan. The competent authority may in addition order the operator to cease relevant business, suspend operation for correction, close down websites, revoke relevant business permit or business license. Executive personnel or other personnel directly responsible shall be imposed with a fine between 10,000 and 100,000 yuan."

In summary, although the Cyber Security Law is still in the draft stage with possible future revisions and improvements, its provisions on the restriction of cross-border data transfer are likely to remain in the final version and should be heeded by corporations operating in China. In addition, the Second Draft is still not clear enough as to the scope of critical information infrastructure, security measures, security assessment, specific categories of data, etc. Hence to ensure compliance in every aspect including data collection, storage and cross-border transfer, it is also advisable for corporations operating in China to be kept informed of the legislative process and to pay close attention as to the subsequent regulations or measures issued by the State Council and relevant departments as well as the decisions made in law enforcement and judicial practices.

Dentons is the world's first polycentric global law firm. A top 20 firm on the Acritas 2015 Global Elite Brand Index, the Firm is committed to challenging the status quo in delivering consistent and uncompromising quality and value in new and inventive ways. Driven to provide clients a competitive edge, and connected to the communities where its clients want to do business, Dentons knows that understanding local cultures is crucial to successfully completing a deal, resolving a dispute or solving a business challenge. Now the world's largest law firm, Dentons' global team builds agile, tailored solutions to meet the local, national and global needs of private and public clients of any size in more than 125 locations serving 50-plus countries. www.dentons.com.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Authors
Events from this Firm
6 Dec 2017, Webinar, New York, United States

Join Dentons for a complimentary webinar focused on the ongoing challenge of integrating new technologies into existing information governance policies and risk management frameworks.

7 Dec 2017, Seminar, Cape Town, South Africa

Dentons South Africa would be delighted if you could join us for our upcoming event.

8 Dec 2017, Seminar, Johannesburg, South Africa

Dentons South Africa would be delighted if you could join us for our upcoming event.

 
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
 
Email Address
Company Name
Password
Confirm Password
Position
Mondaq Topics -- Select your Interests
 Accounting
 Anti-trust
 Commercial
 Compliance
 Consumer
 Criminal
 Employment
 Energy
 Environment
 Family
 Finance
 Government
 Healthcare
 Immigration
 Insolvency
 Insurance
 International
 IP
 Law Performance
 Law Practice
 Litigation
 Media & IT
 Privacy
 Real Estate
 Strategy
 Tax
 Technology
 Transport
 Wealth Mgt
Regions
Africa
Asia
Asia Pacific
Australasia
Canada
Caribbean
Europe
European Union
Latin America
Middle East
U.K.
United States
Worldwide Updates
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these terms & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.

Disclaimer

Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.

Registration

Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.

Cookies

A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.

Links

This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.

Mail-A-Friend

If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.

Emails

From time to time Mondaq may send you emails promoting Mondaq services including new services. You may opt out of receiving such emails by clicking below.

*** If you do not wish to receive any future announcements of services offered by Mondaq you may opt out by clicking here .

Security

This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.