China: Chinese Cybersecurity: Questions Remain Despite New Guidance

Last Updated: 19 September 2017
Article by Jake Huang and Jamie Rowlands

Despite coming into force on 1 June 2017, China's new Cybersecurity Law (the "Law" or the "Cybersecurity Law") continues to present many unanswered questions.

Although the Cybersecurity Law sets out the basic legal framework for China's enhanced control and protection of cyberspace, there is continued uncertainty regarding key provisions such as Key Information Infrastructures (KIIs) and security assessment provisions.

The Cybersecurity Administration of China has published draft regulations with the aim of alleviating some of the uncertainty. The first such draft, Measures for the Security Assessment of Personal Information and Important Data to be Transmitted Abroad (the "Measures"), was published in April 2017. More recently, on 11 July 2017, the draft Provisions on Protecting Key Information Infrastructures (the "Provisions") were circulated for public consultation. The public consultation ended on 10 August 2017.

Below, we assess the potential impact of the Measures and the Provisions and the extent to which they clarify the uncertainties caused by the Cybersecurity Law.

KIIs - What are they and what are the obligations?

As explained in previous articles, China's Cybersecurity Law broadly defines KIIs as "important industries including but not limited to public communications, information services, energy, transportation, finance, public services, [and] electronic government affairs". KIIs are infrastructures that "upon becoming destroyed, losing its function or where the data has been leaked, may severely endanger national security, the national economy, national health, or the public interest".

One of the key measures of the Law is the establishment of a default position that companies who operate KIIs are required to store "Personal Information" and "Important Data" collected or generated during their operation in China on servers physically located in China, subject to the exception explained in the Measures (discussed below). Personal Information is comprehensively defined by the Law and focuses on information that can in itself, or in combination with other information, be used to identify a natural person. Important Data, on the other hand, is not defined by the Cybersecurity Law and there is significant uncertainty about the type of information operators of KIIs will be obliged to store on Chinese servers.

The Law did set out a carve out to the above default position, which enabled operators of KIIs to transfer data out of China provided they go through a security assessment procedure. The problem is that the details of the security assessment procedure were not clearly set out in the Law. Uncertainties such as this, combined with a vague definition of KIIs, are likely to make it difficult for companies to know whether they are complying with the Law. As a result of this uncertainty, we recommend that companies should err on the side of caution when collecting and transferring data which could fall under the definition of "Personal Information" and/or "Important Data".

Measures Relating to Security Assessment

One of the primary drivers behind the Measures was to try to provide additional guidance as to the security assessment procedure to try to give better clarity on what data could be transferred out of China. The Measures state that the assessment procedure comprises two forms: self-assessment and assessment by the Chinese authorities.

Under the Measures, KII operators still face the most onerous obligations, because they must always go through both the self-assessment procedure and a security assessment by the Chinese authorities when transferring data overseas. However, the Measures extend the self-assessment requirement to include not just KII operators but also any network operator, individual or organisation collecting Personal Information and/or Important Data. The general position under the Measures is that self-assessment is all that will be necessary in order to transfer Personal Information and/or Important Data abroad. However, there are some exceptions to the general position; for example, network operators seeking to transfer significant amounts of data abroad will face further security assessment by the Chinese authorities.

What Changes are made by the Provisions?

The Provisions were introduced in order to focus on perceived deficiencies in the definition and regulation of KIIs.

They extend the definition of what amounts to so-called important industries in the context of KIIs from the original Law as drafted. Under the Provisions, "important industries" include:

  1. Government bodies and entities in industries such as energy, finance, transportation, water conservancy, medical and sanitary, education, social security, environment protection and public utility;
  2. Information network entities such as telecommunication networks, television broadcasting networks, internet networks, and entities providing cloud services, big data and other large-size public information network services;
  3. Research and production entities in industries such as science, national defence, large equipment, chemical, food and drug;
  4. ews entities such as radio stations, television stations and news agencies;
  5. Other key entities.

The inclusion of "other key entities", of course, allows for a wider application of the Cybersecurity Law and, once again, creates significant uncertainty. However, it should be noted that these industries will only be KIIs if their destruction, loss or damage will severely endanger national security, the economy, national health or the public interest. While the Provisions seek to clarify the "important industries" limb of the definition of KIIs, what is meant by "endangering national security, the economy national health of the public interest", remains undefined. Therefore, there is continued uncertainty in spite of the provisions which will provide little comfort to companies dealing with Personal Information or Important Data in China.

Conclusion

The draft Provisions' public consultation ended on 10 August 2017, and it is unknown when a final version will be published and take effect. However, we believe that these draft Provisions represent the authorities' attitude and shed some light on the areas to be covered in the final definition of KIIs.

Clear attempts to clarify the Law have so far fallen short to those doing business in China. At present, it is difficult for those processing, storing and transferring Personal Information or so-called Important Data to do anything other than adopt a conservative strategy by assuming they are an operator of KIIs.

There is hope that in the future the authorities will produce a guidebook identifying KII operators, and the Provisions state an intent to do this. For the purposes of the Law, as supplemented by the Measures and the Provisions, this means ensuring a self-assessment procedure is in place - to be carried out whenever data is transferred abroad. While the Provisions allude that any such guidebook will clarify the issue of KII operators, we do not know what it will say or when it will be published. Watch this space!

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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