Data ‘disappearance’ in China makes it difficult for outsiders to access information

A new Chinese law on the protection of confidential data has made it much more difficult, if not impossible, for foreign investors to access information about China’s economy in recent months. Analysts say that the Communist Party of China is using this law to tighten control over strategic sectors to protect them from foreign competitors and adversaries.

What common cause links the following seemingly disparate news stories? Beijing’s decision on December 27 to limit foreign investment in Chinese tech startups; Chinese ships regularly disappear from international radar systems in recent months; and the delisting of Didi, China’s response to Uber, from the New York Stock Exchange (NYSE) in early December.

The answer lies in the Chinese Communist Party’s obsession with controlling access to what it considers to be sensitive economic data. Of course, the Chinese economy has long been somewhat enigmatic to foreign observers, but now it has become even more opaque.

The delisting of Didi, a major source of geolocation data, from the New York Stock Exchange just six months after its debut on the NYSE demonstrated, in particular, Beijing’s “fear that China’s American adversary may have access to confidential data and thus harm China’s national interests, especially with regard to national security, ”said Rebecca Arcesati, analyst at the Mercator Institute for China Studies in Berlin.

New regulations, vague definitions

Until recently, China lacked the means to maintain such strict control of data. But that changed on November 1, when Beijing introduced new data protection regulations. The measures were initially presented as a Chinese version of GDPR (General Data Protection Regulation), the EU data protection law. In fact, new Chinese laws enshrined a host of measures to protect the country’s consumers from the excessive exploitation of their data by internet giants.

However, the new law also contained steps to limit access to what the Chinese state considers sensitive data. “To begin with, people focused on the consumer protection aspect, but now we can see to what extent these new regulations provide the Chinese regime with a powerful tool for economic control,” said Zeno Leoni, specialist in Sino-US relations. from King’s. College London.

China’s new regulations are an especially powerful tool due to the vague definition of what constitutes sensitive data. “It is a very broad category and that has created a lot of confusion among Chinese and foreign companies alike,” Arcesati said. The ambiguity also allows the Chinese regime to change its understanding of “national interests” as Beijing sees fit.

“The scope of ‘national security’ has expanded considerably under [President] Xi Jinping, so people tend to take a very broad interpretation of what data should be protected, ”Arcesati continued. No one in China wants to appear to be taking national security issues less seriously than Xi.

So perhaps we are seeing Chinese officials acting with excess enthusiasm for fear of disappointing the almighty president. Chinese ships that went off the grid could reappear in radar systems after the country’s leadership defines the new laws more precisely.

Obstruct foreign competitors?

The new and sweeping data protection laws influence the goals of the Chinese leadership: “What we are seeing is very much in line with Xi Jinping’s long-term goal of decoupling the Chinese economy from that of the West, while reaffirming a greater political control over the nation’s economy, ”Leoni said.

What’s more, the Communist Party of China is pulling the rug under the feet of foreign companies by restricting access to economic data, especially in the disruptive and technologically advanced sectors that China is prioritizing, such as artificial intelligence and cars. autonomous.

International companies “do not have access to the same information as their local competitors, and that hinders their ability to compete in the Chinese market,” Leoni said.

In the eyes of the Chinese state, Leoni continued, this is the best way for the country to “avoid foreign competition, allowing Beijing to maintain strict control over the economic sectors it considers a priority.”

However, keeping economic data under lock and key carries risks for China.

Chinese companies that are still traded in New York, such as search engine Baidu and e-commerce titans Alibaba and JD, have seen their stock prices drop by 10 to 20 percent in a month, a sign that Western investors fear the same fate as I did. In the short term, there will be “missed opportunities” due to “China’s very political use of this data protection law,” Leoni said.

The law shows how much Xi is willing to sacrifice to build a self-sufficient Chinese economy, free from any foreign influence in strategic sectors.

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