China: Classified Protection And China's Cybersecurity Law

Last Updated: 4 December 2019
Article by Henry (Litong) Chen

Compliance can be both an obligation and a privilege. Obligation means the basic requirements that have to be met, any shortcomings in which may subject you to punishment. Privilege means the extra benefits that are nice to have, a lack of which could make you less competitive.

Classified protection ("CP") is an obligation and a privilege under China's Cybersecurity Law ("CSL"). If certified under CP, a company has prima facie evidence that its network system meets some basic safety obligations under the CSL; any loopholes that are red flagged can then be plugged up. With the obligations satisfied, the company can fend off possible investigations or punishments resulting from the loopholes in cybersecurity. However, CP does not come without "shortcomings", one of which is that you may need to store your data in China, which could be worrisome for non-Chinese enterprises.

How is CP conducted?

Under CP, network systems are graded from Level 1 to Level 5. The higher the level is, the more requirements are needed to be complied with. The certification entities (which need certification licenses) run the testing and decide which level a network system is at, and advise where there are vulnerabilities. However, a certification entity is not allowed to provide rectification services, just as a referee cannot simultaneously be a player – the rectification services will have to be provided by rectification entities, which tackle the vulnerabilities in IT, processes and control measures of the network system. Although a rectification entity does not need a license for its rectification services, the rectification entity has to have capacity in both IT and risk management.

Level Damaged objectives Extent of Damage Classification suggestions Nature of the Network
Level I  

Legitimate rights and interest of

relevant citizens, legal persons and other organizations
General Damage It is generally applicable to the information systems of townships, the general information systems of some country-level units, and the information systems of small private enterprises, individual enterprises and primary or secondary schools. General Network
Level II  

Legitimate rights and interest of

relevant citizens, legal persons and other organizations
Serious Damage It is generally applicable to the important information systems in some county-level units, and the general internal information systems of state organs, enterprises and institutions above the prefectural level, such as the office system and management, excluding sensitive information such as work secrets and trade secrets.
Social order and public interest General Damage
Level III  

Legitimate rights and interest of

relevant citizens, legal persons and other organizations
Extreme Damage It is generally applicable to the important internal information systems of important enterprises and public institutions above prefectural level, such as work involving commercial secrets, office systems and management systems of sensitive information, and important areas of important departments across the province, city or national (province), which is used in the networking operation of production, scheduling management, operation and command of important information systems, or provinces or nationwide networks running an important branch of the information system at the provincial cities of the system, the central ministries and provinces (city) portals and important sites, networks across the province, etc. Important Network
Social order and public interest Serious Damage
National security General Damage
Level IV National security and public interests Extreme Damage It is generally applicable to the especially important systems of important departments in important fields of the country, as well as the core systems such as the dispatching system of the national railway, civil aviation, electric power and other departments, and the core systems involving the national economy and people's livelihood in dozens of important industrial departments such as banks, securities, insurance, taxation and customs. Particularly Important
National security Serious Damage
Level V National security Extreme Damage It is generally applicable to the extremely important system in the important sectors of the country's important fields.  

Extremely

Important

Why is CP important?

Simply, CP can help plug loopholes and tackle vulnerabilities in network systems. We may learn the importance of CP from the cases below.

Case #1:

Code repository GitHub was hit by a distributed denial of service (DDoS) attack which peaked at 1.35 Tbps via 126.9 million packets per second. According to a statement the incident persisted for around nine minutes and originated from over a thousand different autonomous systems (ASNs) across tens of thousands of unique endpoints. 

"The first portion of the attack peaked at 1.35 Tbps [between 17:21 and 17:30 UTC] and there was a second 400 Gbps spike a little after 18:00 UTC," said Sam Kottler, manager of Site Reliability Engineering.

This attack registered even larger than the peak of the attack on Dyn in 2016, according to Wired. By the end of February of 2018, there were 25,000 Memcached servers in China exposed on the Internet.

If the systems in China in use of Memcached servers had gone through CP under CSL, the incidents could have been most probably avoided.

Case #2:

Fiat Chrysler issued a safety recall affecting 1.4 million vehicles in the US, after security researchers showed that one of its cars could be hacked. The hackers had taken control of a Jeep Cherokee via its internet-connected entertainment system. As a result, Chrysler issued a voluntary recall to update the software in affected vehicles. 

From the cases above, you may realize that CP or similar risk management system is not just something nice to have. It is an insurance or a golden shield to manage risks and fend off liabilities. CP is a compliance threshold for network safety. Different network systems may have some peculiar features. CP for a code repository like GitHub should be different from CP for autonomous driving in many dimensions, such as how to determine levels and how to deal with vulnerabilities.

Is CP compulsory?

The answer is yes for any network operator – basically every business operator with a network is a network operator, no matter whether it is a critical information infrastructure operator ("CIIO") or not. CSL provides for a compulsory CP test for a CIIO once a year.

CSL defines CIIO as a network system in the sectors of public telecommunication and information services, energy, communication, water resources, finance, public services and electronic public services. Once sabotaged, the CIIO could cause great and irreparable damage to itself and the entities around. China is drafting implementation rules for CSL to give a clear definition and description of a CIIO.

CP is compulsory as well for non-CIIOs. If graded Level 3 or above, CP must be conducted at least once a year. Although many non-CIIOs did not undertake CP yet in spite of the legal requirements under the CSL, some did it to get the privilege of extra protection from being hacked and from being punished, especially for those that rely on the Internet for delivery of products and services. It should be expected that law enforcement will be tightened on non-CIIOs when law enforcers are more experienced and implementation rules are more sophisticated and practical.

In some industries such as hoteling and logistics, CP is compulsory on a de facto basis. CP certification is a prerequisite condition to obtain the business license in the industry of hoteling and logistics.

Case #3:

The website of a "teacher development platform" in Sichuan was hacked. A local cybersecurity department found that the website had not carried out CP compliance since it launched – obviously, the cybersecurity department thought that the hacking could have been stopped if the platform had adopted appropriate control measures. As such, the local authority issued an administrative punishment to the website operator with a fine of RMB 10,000. 

If the platform refuses to carry out the remedial actions as suggested by certification and rectification bodies, the refusal could bring criminal liabilities to the platform and its executives.

Where is the place to store data?

According to CSL, a CIIO must store its personal identifiable information ("PII") and important data in China. CSL does not provide such a requirement for non-CIIOs. However, in order to get certified under CP, a company has to store its data in China, which seems bad news for MNCs. However, in practice, there could be some leeway, which mostly depends on how necessary the data is that has to be transferred and stored outside China. 

Case #4:

A global hotel group consisting of tens of thousands of hotels centralized the management of data in a headquarters that is not located in China. The concerned certification body still gave a green light to the CP certification of the hotels that are located in China. However, a company that is certified by the same certification body was requested to take back its data from a server located outside China because the company does not have to transfer and store its data outside China.

Therefore, a multinational company will have to manage well how and where to collect and store its data in order to get certified for classified protection under China's Cybersecurity Law. What is more important, a multinational company should seriously consider getting classified protection to have its network vulnerabilities checked and plugged up. As such, the company could reduce the risk exposure and liabilities (which could be both administrative and criminal) under Cybersecurity Law and the Criminal Law.

About Dentons

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
 
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
 
Related Articles
 
Up-coming Events Search
Tools
Print
Font Size:
Translation
Channels
Mondaq on Twitter
 
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please 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