The US-China Business Council (“USCBC”) released a report on February 5, 2018. The report identifies three key areas in which the China Cybersecurity Law (the “CCL”), which came into effect in June 2017, has posed significant challenges to companies’ ability to conduct business in China, and sets forth detailed recommendations to the Chinese regulators to address such challenges. We previously discussed the CCL and the international business community’s concerns regarding the law’s expansive scope, prescriptive requirements, and lack of clarity on a range of critical issues. The new USCBC report raising many of these same concerns can be accessed here.
The report discusses three challenges, based on interviews with technology executives, namely: (i) the impediments and disruptions to the business operations caused by CCL’s data policies, including requirement of local data storage and restrictions on cross border data transfer; (ii) the stifling impact of China’s overly restrictive licensing regime on the use and innovation of global cloud products and services in China; and (iii) the unlevelled play field in technology procurement resulting from the overly broad regimes for cybersecurity review of technological products and services. The report generally echoes the areas of concerns voiced by global companies since the adoption of the CCL and its various implementation rules.
The USCBC’s recommendations call for the Chinese government to, among other things:
- narrow the broad scope of the current policies;
- provide much needed clarity on various key open issues under the CCL;
- follow global best practices more closely;
- open cloud computing services to foreign companies;
- allow foreign investors in Chinese joint ventures to retain ownership and control of software and other propriety technology licenses; and
- ensure that policies are implemented in a non-discriminatory and non-preferential manner.
The report represents a further step in the continuing efforts by the USCBC, on behalf of its member companies, in asserting greater influence over the contours of the CCL’s implementation. In many places in the report, the USCBC invites the Chinese government to be more consultative when drafting new rules and standards under the CCL so that global best practices can be incorporated. As concerns over the CCL’s impact grow and international pressure mounts, the Chinese government may reconsider some of its approaches under the CCL and become more open to constructive conversations to achieve its policy goals while also addressing the various concerns of the international business community.