China: An Overview Of China's New Cybersecurity Law

Originally published by Anderson Kill

China's new Cybersecurity Law, effective on June 1, 2017, was adopted at the 12th People's Republic of China National People's Congress. Before this statute was formally enacted, China already had some administrative rules and regulations in place to govern data and privacy protection. However, the enactment of the new Cybersecurity Law is a good indication that China is now focusing more attention on these priorities.

Before delving into the details of the new Cybersecurity Law, it is important to have a general picture of the unique data and privacy protection legal system in China. Unlike the U.S. and many developed countries in the world, China did not have a series of uniform data and privacy protection laws before the new Cybersecurity Law became effective.

The new law integrates cybersecurity, data and privacy protection into different industrial regulatory laws -- for example, the Postal Law, the Commercial Banking Law, the Practicing Lawyers Law, the Medical Practitioners Law, and the Provisions on Protecting the Personal Information of Telecommunication and Internet Users. Moreover, the Chinese government does not have a special authority to enforce its data and privacy protections. Companies or individuals can only seek enforcement and remedies in front of tribunals.

Due to the lack of centralized laws and authority protection, it can be complicated and difficult to take action or seek uniform legal guidance on data and privacy infringement in China, especially for those foreign companies not familiar with the Chinese judicial system and business environment. Although the new Cybersecurity Law is not a centralized law that regulates all aspects of data and privacy protection across all businesses, it gives clearer legal guidance on the issues related to cybersecurity and privacy protection in China.

Broad categories of "service providers" affected

Unlike the US, China is a civil law country, which means all the laws are codified statutory laws -- case law has little influence. The new Cybersecurity Law does not apply to all companies, but the key provisions apply to two major types of service providers – the "network operator" and the "operator of critical information infrastructure." The law has very broad definitions for these two categories, and the absence of common law interpretation affords the government and authorities a wide range of discretion in real practice.

The term "network operator" includes owners, administrators and service providers of networks. This term may capture any companies that maintain computer networks to operate businesses or provide services in China. The term "operator of critical information infrastructure" applies generally to those who provide

public communications and information services, energy, finance, transportation, water conservation, public services and e-governance, as well as other critical information infrastructure that could cause serious damage to national security, the national economy and public interest if destroyed, functionality is lost or data is leaked.1

Even companies headquartered outside China that use a network to manage business within the territory of China may fall within these broad definitions. As in the U.S., the Chinese government claims the right of final interpretation on what services, if compromised, may damage national security, economy and public interests, and this is going to be decided on the basis of case-by-case analysis.

Responsibilities under the new law

The Cybersecurity Law identifies the responsibilities of network operators and operators of critical information to safeguard infrastructure. A network operator is required to follow certain privacy safeguard procedures to protect networks from interference, destruction or unauthorized access, and to prevent network data from being leaked, tampered with or stolen.2 An operator of critical information infrastructure has to store "personal information" and "important data" within China, unless the business passes the government security assessment. This means that if some companies need to transmit data to their overseas affiliates, they will have to restructure their mechanisms regarding data transfer, in order to avoid violation of the data localization requirements under the new law. This requirement reflects the tendency of the Chinese government to put more emphasis on localizations of business and personal data.

Other requirements in the Cybersecurity Law

In addition to the data localization requirements, the Cybersecurity Law addresses other key aspects of cybersecurity and privacy protection.

Cybersecurity Protection

  • Critical information infrastructure operators that purchase network products and services that might affect national security must pass a national security review. Critical network equipment and special cybersecurity products can only be sold or provided after being certified by a qualified establishment and found to be in compliance with national standards.3
  • Network operators are required to clarify responsibilities within their organizations, and ensure network security by implementing sound internal security protocols, appropriate technological measures and reporting processes.4

Privacy Protection

  • Network operators are required to give notice and obtain consent before collecting personal information.5 The personal information can only be collected in a legal and proper manner.6
  • Network operators must gather and store personal information under the requirements of law, administrative regulations and agreements with users. If the operator violates the provisions of law or regulations, an individual has the right to request that the operator delete the collected personal data.7
  • Network operators have responsibilities for cybersecurity supervision and shall maintain the confidentiality of all personal information. Operators shall not disclose, tamper or destroy personal data.8

Penalties

The Cybersecurity Law establishes different categories and different levels of penalties, including monetary, administrative and criminal penalties. For example, violators of the data localization requirement will face fines of around $7,700 to $77,000. Individuals can also be subject to penalty: personal violations may face fines about $1,500 to $15,000.9 The maximum fine is around $155,000. The Chinese government is authorized to issue warnings, suspend business licenses or permits, or block websites.

Conclusion

The Cybersecurity Law establishes a range of new responsibilities for broadly defined categories of network service providers and operators. Some of those new responsibilities may reach companies not domiciled in China that do business in China.

The enforcement of the new law may prove arbitrary in some cases due to the wide discretion invested in the authorities by the law's broadly defined terms. Application and interpretation of the law going forward requires close monitoring by all entities that maintain a presence in the country or serve the Chinese people.


Footnotes

1 Article 31

2 Article 21

3 Article 35 and Article 23

4 Article 21 and Article 49

5 Article 22 and Article 41

6 Article 41 and Article 44

7 Article 41 and Article 43

8 Article 45 and Article 42

9 Article 66


Eric W. Huang is an attorney in the New York office of Anderson Kill and a member of the Corporate and Securities Group. Mr. Huang has a particular focus on advising and assisting Chinese businesses in the U.S. market, and U.S. businesses in the Chinese market. His practice encompasses a broad range of matters involving international business, including mergers and acquisitions, corporate financing and compliance. He has relationships with major law firms in China and counsels clients in both the U.S. and China. Mr. Huang can be reached at (212) 278-1255 or ehuang@andersonkill.com.


Anderson Kill practices law in the areas of Insurance Recovery, Commercial Litigation, Environmental Law, Estates, Trusts and Tax Services, Corporate and Securities, Antitrust, Banking and Lending, Bankruptcy and Restructuring, Real Estate and Construction, Foreign Investment Recovery, Public Law, Government Affairs, Employment and Labor Law, Captive Insurance, Intellectual Property, Corporate Tax, Hospitality, and Health Reform. Recognized nationwide by Chambers USA and best-known for its work in insurance recovery, the firm represents policyholders only in insurance coverage disputes - with no ties to insurance companies and has no conflicts of interest. Clients include Fortune 1000 companies, small and medium-sized businesses, governmental entities, and nonprofits as well as personal estates. Based in New York City, the firm also has offices in Philadelphia, PA, Stamford, CT, Washington, DC, Newark, NJ and Los Angeles, CA.

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
Similar Articles
Relevancy Powered by MondaqAI
 
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”

Related Topics
 
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
 
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
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

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 or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.

Disclaimer

The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq 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 of the Content or performance of Mondaq’s Services.

General

Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions