South China Morning Post

New Shanghai data centre ‘to be step towards freer flows’

Lingang free-trade zone facility will adopt global standards to address foreign business concerns

- Frank Chen frank.chen@scmp.com

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.

 ?? Photo: Handout ?? The new Lingang centre aims to meet standards set out in the CPTPP regional trade agreement that China has applied to join.
Photo: Handout The new Lingang centre aims to meet standards set out in the CPTPP regional trade agreement that China has applied to join.

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