New Shanghai data centre ‘to be step towards freer flows’
Lingang free-trade zone facility will adopt global standards to address foreign business concerns
Shanghai has inaugurated a data flow service centre in the Lingang free-trade zone, with pledges to adopt internationally recognised standards in a step towards freer cross-border data flows and to address the concerns of foreign businesses.
The centre will seek data cooperation agreements with Singapore and New Zealand, as well as countries involved in the Brics economic cooperation bloc and Beijing’s signature Belt and Road Initiative, with applications including electronic invoices and proof of payments, blockchain and digital identity mutual recognition.
Additional data flow scenarios are being tried out in Lingang, including “easier access” to overseas websites for foreigners who have checked into a designated hotel, as well as streamlined data exchanges for healthcare companies without the need to share raw data or sensitive personal information, according to the Jiefang Daily newspaper.
“It will explore ways to elevate services to match standards set out in the Comprehensive and Progressive Agreement for TransPacific Partnership (CPTPP) and the Digital Economy Partnership Agreement (DEPA),” Ding Rui, the centre’s director, told the newspaper.
The centre is the first of its kind set up by Shanghai’s cyberspace administration to help entities navigate requirements for compliance at “minimal costs and time,” Ding added.
However, the vetting power would be held by the cyberspace watchdog, and the centre could only advise businesses and submit applications on their behalf.
China’s onerous, opaque data security structures that limit or prohibit outbound data transfers are perennial challenges facing foreign businesses.
Beijing has been pushed to loosen the shackles and balance security with business demands in its latest charm offensive to reassure and retain foreign firms amid a slump in foreign investment and an exodus of firms. In recent weeks, President Xi Jinping and other leaders have received foreign business delegations, sending the clearest message yet that the country is open for business and working to address concerns and complaints.
The new centre in Lingang is set to be at the forefront of data classification and formulation of lists and protocols to handle important data.
“Gradual relaxation is a welcome move, walking the talk of Beijing’s pro-business rhetoric, but foreign firms want implementation details and faster, wider roll-out,” said Yan Shaohua, an international studies researcher at Fudan University in Shanghai.
“They want to see how the Lingang centre will benchmark services against CPTPP and DEPA standards.”
The CPTPP Asia-Pacific trade deal includes binding provisions restricting data localisation and imposing requirements on cross-border transfer. It also prohibits members from requiring a business to use or locate computing facilities in a country as a condition for conducting business.
China has applied to join the CPTPP and DEPA, but clauses concerning data transfer and the location of computing facilities have been flagged as the most problematic areas, said Zhao Jingwu, a law professor at Beihang University in Beijing.
Fudan’s Yan added his survey of European companies in Shanghai found many were unsure if widely-deployed workarounds for easier data transfer and access, like the use of VPNs, would attract fines or punishments.
“If the hotel room scenario for expats to access foreign websites is allowed, can the trial be expanded to workplaces?” Yan said.
A 2023 survey by the American Chamber of Commerce in Shanghai showed 70 per cent of the 325 respondents labelled data transfer and processing restrictions, and other cybersecurity requirements, as a hindrance to business and the top regulatory challenge.