China: China's Internet Sovereignty

Last Updated: 3 March 2017
Article by Edward J. Epstein

Endless hacking of US servers and WikiLeaks revelations may lead one to overlook that China, almost 40 years after the Cultural Revolution, is still wringing its hands about national security and US hegemony. The difference in our internet age is that worms, rootkits and cyberbots have been added to traditional armories. The prevailing view in China is that the US exercises too much influence in cyberspace and China's new so-called Cyber-Security Law (effective June 1, 2017) is a good example of the legal expression of this cyber-angst. It must be understood in the context of China's established concept of territorial sovereignty and the profusion of laws and regulations that now protect its "cyber-borders."

Protecting China's National Security

The Cyber-Security Law essentially aims to protect national and political security by strengthening China's electronic borders, surveillance and response systems (and the importance of this is reflected by China's President and CCP General Secretary, Xi Jinping, chairing the CCP's Central Leading Group for Internet Security and Electronic Information). It follows the hurriedly enacted National Security Law (effective July 1, 2015) which already includes in its goals "maintaining cyberspace sovereignty, security and development interests" (Article 25) and "to defend the people's democratic dictatorship and the socialist system with Chinese characteristics" (Article 1). In cyberspace, the Cyber-Security Law has extended their goals to prohibit any activity that would "incite subversion of national sovereignty, the overturn of the socialist system, inciting separatism, undermining national unity, advocating terrorism or extremism, inciting ethnic hatred and discrimination, disseminating violent, obscene or sexual information, creating or disseminating false information to disrupt the economic or social order [...]" (Article 12).

The Anti-Terrorism Law (effective January 1, 2016) extends to cyberspace the prevention of terrorism, surveillance and responses to terrorist activities, and it was particularly controversial outside China because an early draft required telecoms and internet service providers to install "back-doors" to their technology and source code of encryption software. (Draft for Comments, Article 15). This in turn would have required the suppliers of such technology to do the same and would have spelled the end of most foreign participation in China's telecoms and value-added telecoms industry. These provisions were toned down to require service providers to give "technical support and assistance such as technical interfaces [i.e. back-doors] and decryption for the prevention of and investigation into terrorist activities..." (Article 18) Whether or not this provision amounts to the same thing in practice remains to be seen, but the Cyber-Security Law has skirted this issue with somewhat vaguer provisions (see below).

Key Provisions of the Cyber-Security Law

The Cyber-Security Law applies to:

  • Network operators (Article 9)
  • Providers of network products and services (Article 22)
  • Critical information infrastructure operators (Article 34)
  • Any person and organization using networks (Article 12)

"Network operators" are broadly defined as "owners and administrators of computer information networks as well as network service providers." It seems unlikely that any user, however, would fall into even such a broad definition merely by virtue of using the internet to connect to its internal communications network.

"Critical information infrastructure" is currently defined as "public communication and information services, power, traffic, water, finance, public service, electronic government and other critical information structure" that if compromised could endanger national security or welfare, people's livelihood or the public interest [...]." (Article 31) The law anticipates that critical information infrastructure will be further defined and some commentators have speculated that it could be stretched to capture any sort of business operating in China that is reliant on the telecommunications network for its operations or delivery of services. This seems unlikely, but it remains to be seen.

"Providers of network products and services" are not defined at all.

All of this terminology is inconsistent with the international usages adopted by the Ministry of Information Industry, is broadly defined and even differs from the Anti-Terrorism Law. Although such inconsistencies are common in Chinese legislation, there is no rule of statutory interpretation that would limit the scope of one expression or another.

The first three regulatory subjects have numerous security obligations, including:

  • Mandatory testing and certification of network and computer equipment (Article 20)

This is a controversial provision among foreign suppliers of network equipment and software to China, who fear that they could be asked to provide source code, encryption data or other critical IP to government authorities. Although specific regulations can be expected on Article 20, such concerns appear to be well-founded because Article 45 places an obligation on authorities to keep commercial secrets confidential.

  • National security reviews of equipment and software or services that may have an impact on national security (Article 30).

This provision in the draft law prompted more than 40 business groups from the US, EU and Japan to lobby Premier Li Keqiang, arguing, ultimately to no avail, that national security review would impede foreign business access to China. On February 4, 2017, a Draft of Measures on Network Product and Service Security Review was issued for a 30-day period for public comments. The reviews will cover a wide range of areas including the risks from the development process and technology support of the network product and key components, the risk of illegally collecting, storing, handling and utilizing customers' data and risks from software or services that may have an impact on national security and the public interest (Article 4). Government and Party departments, as well as critical information infrastructure operators are prohibited from procuring network equipment and services that have not undergone a security review.

  • The retention within China of all personal and critical data collected in China (in the case of critical information infrastructure operators) (Article 37).

The law does allow for the government to permit such data to be stored outside China under special circumstances, but China does not currently have any provisions equivalent to "Safe Harbor" or its successor "Privacy Shield." Many telecoms and internet service providers in China only require personal data to be retained for 60 days, but the Cyber-Security Law has set the personal data retention period for network operators and providers of network products and services at six months (Article 21(3)).

Mere "users," however, have no specific security obligations that are not already provided by other laws and regulations in China, and these are summarized in Article 12 and include "to abide by the Constitution and laws, observe public order and respect social morality, not endanger network security, not use the network to engage in activities endangering national security, national honor and interests, not to incite subversion of national sovereignty or the overturn of the socialist system, not to incite separatism, undermine national unity, advocate terrorism or extremism, not to incite ethnic hatred and discrimination, not to disseminate violent, obscene or sexual information, not to create or disseminate false information to disrupt economic or social order, as well as infringing on the reputation, privacy, intellectual property or other lawful rights and interests of others and other similar acts."

The official Chinese position is to restrict freedom of speech in cyberspace as elsewhere for existential and national security interests and to justify the right to take security measures in cyberspace on the grounds of "state sovereignty and international norms and principles that flow from sovereignty" and "apply to State conduct of information and communications technology-related activities, and to their jurisdiction over ICT infrastructure within their territory."1

VPN Crackdown

Although China has an army of "internet police" (mostly young short-term workers assisted by the internet content service providers themselves) who scour the internet and social media for offending content, the first line of defense is the "Great Firewall of China," which blocks great swathes of internet content on servers outside China. Famously, Google, Twitter, Facebook and the New York Times are all blocked, but so too are thousands of news media, academic, technical, business and professional sites. This has given rise to an industry of VPNs which pierce the Great Firewall to give users access to blocked sites. Many are corporate VPNs that allow foreign and Chinese multi-national corporations to connect with their private networks and the internet outside China's Great Firewall. Others are consumer oriented VPNs, sometimes called "drainpipes," for surfing the internet and watching foreign film and television. It is not yet illegal to use VPNs for purposes that are not in themselves unlawful, but it is unlawful for any business in China to supply VPN services without approval.

In a recent five-page Circular, the Ministry of Information Industry announced a rectification campaign against unlicensed internet service related activities, which included the supply of VPNs. It also reminded ISPs to register customers supplied with international private lines and to ensure that such customers use these lines for internal office connection purposes only and not to connect to data centers or platforms to conduct commercial telecom business.2

Such is the sensitivity of the topic that many Chinese internet users and foreign media almost descended into panic, and the Ministry quickly issued a clarification that the Circular would not affect the normal use of private lines or other international network connections established or leased by MNCs or foreign trade enterprises for internal office needs.3 For the users of "drainpipes," however, it may be another story.

How Should MNCs Operating in China Respond?

For mere users of the internet, international private lines and VPNs in China, there should be no immediate impact of the Cyber-Security Law, except for the six-month personal data retention requirement. It is to be expected that Chinese ISPs and network providers will update their service contracts accordingly. As these are contracts of adhesion, the user's option is only to agree or terminate the service. Users may consider amending their employee handbooks and other relevant protocols to ensure that local employees are aware of their obligations to observe local laws and practices when using the internet, such as provided in Article 12.

For foreign suppliers of network equipment and software, however, the situation will remain unclear until further regulations on mandatory testing and security review are adopted.

The Cyber-Security Law will come into effect on June 1, 2017.

Footnotes

1. Fang Bang Xing quoting from the UN General Assembly Report of the Group of Government Experts on Developments in the Field of Information and Telecommunications in the Context of International Security, June 24, 2013 para. 20 as cited in People's Daily Online June 23, 2014 "Cyber Sovereignty: An Unavoidable Discussion Topic."

2. Circular of the Ministry of Information Industry concerning Cleaning up and Regularizing the Internet Network Service Provider Market Gongxinbu Xinguanhan (2017) No. 2 of January 22, 2017.

3. Ministry of Information Industry Responds to VPN Cleaning Up Will not Affect Normal Operations of Enterprises Shanghai Securities News January 26, 2017.

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.

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Edward J. Epstein
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