Cross-border data flows + "Low altitude economy" + Foreign investment

In this issue of the MERICS China Industries Brief, we cover the following topics:

1. Beijing eases cross-border data flow requirements for foreign business 
2. MIIT prepares “low-altitude economy” for lift off with new equipment plan 
3. State Council issues twenty-four more measures to bolster foreign investment 
4. Standardization Action Plan supports China’s tech development 
5. The green machine – China boosts green manufacturing across sectors.

1. Beijing eases cross-border data flow requirements for foreign business 

At a glance: The Cybersecurity Administration of China (CAC) published its Provisions on Facilitating and Regulating Cross-Border Data Flows. Effective immediately, they represent a significant relaxation of requirements for cross-border data transfers. The changes include the CAC:

• Waiving requirements for data processors to obtain clearance for the transfer of non-sensitive personal information of under 100,000 people (up from 10,000) and for the transfer of employees’ personal data for human resource purposes;
• Restricting the requirement to file and obtain clearance to cases in which the data processor is designated a critical information infrastructure operator (CIIO), processes data explicitly designated as important, or exports large amounts of personal data (relating to one million or more people annually, or over 10,000 people if the data is sensitive);
• Exempting cross-border data transfers under common business scenarios such as cross-border manufacturing or e-commerce, if no personal or important information is involved.

MERICS comment: The new provisions show authorities want to reduce overhead for foreign companies working in China – the appeals by foreign business lobbies seem to have been heard. The title of the provisions suggests China is aware it needs to stem the dramatic drop in foreign investment it has seen in recent years. The published document mentions “Facilitating” first, while the draft had given pride of place to “Regulating”.

Previous regulations were requirements based on the Data Security Law (DSL) and the Personal Information Protection Law (PIPL), which created significant reporting overhead for foreign companies in China. Broadly, the changes lift reporting duties from smaller and medium-sized businesses, and business-as-usual cases of data transfer.

The definition of “important data” remains vague. Data deemed important triggers different reporting requirements and turns data operators into CIIOs. But the new rules allow companies to operate under the assumption that data is “non-important” until notified otherwise by industry regulators. Large multinationals in pharmaceuticals, finance and intelligent vehicles and other businesses that export large amounts of personal data will continue to face reporting obligations and security reviews before they can export data.

Article: Provisions on Facilitating and Regulating Cross-Border Data Flows (促进和规范数据跨境流动规定) (Link)
Issuing body: CAC
Date: March 22, 2024

2. MIIT prepares “low-altitude economy” for lift off with new equipment plan 

At a glance: China’s State Council agreed to 24 measures to boost foreign-investor sentiment when it promulgated its ninth 国办发 “State Council Document” of the year. The steps are similar to (though more detailed than) 24 previous measures agreed by the same body in August 2023 and set priorities in several key areas by:

• Expanding market access, ensuring a level playing field and solving administrative issues in areas like data transfer and talent flows;
• Underlining Beijing’s need to attract foreign technology to enter the market and localize production in areas in which China lags behind other countries;
• Signaling Beijing’s continued interest in foreign investment to drive growth and business confidence when Beijing has limited resources to stimulate the economy.