China's top legislative body has passed a data security law, strengthening Beijing's control over digital information amid a crackdown on local technology giants and market access disputes with the US.
The legislation was approved on Thursday by the National People's Congress standing committee, state broadcaster China Central Television said.
An earlier draft called for establishing a categorical and hierarchical system for data and risk-assessment mechanisms.
The bill urged national security reviews of data handling, saying that harmful overseas activities should be "pursued for legal responsibility".
The law represents "another important piece in the overall data protection regulatory jigsaw in China", said Carolyn Bigg, a lawyer who specialises in intellectual property and technology matters with DLA Piper in Hong Kong. Companies will need to wait for guidance and technical standards on the practical measures they must take to comply, she said.
"It remains a complex - and increasingly onerous - compliance framework for international businesses to navigate through," Bigg said.
President Xi Jinping is seeking to wrest control of vast reams of information produced by companies such as Alibaba and Tencent as part of broader efforts to position China as a leader in big data.
Beijing has been pouring money into data centres and other digital infrastructure to make data an economic driver and help shore up the Communist Party's legitimacy.
China's digital economy grew much faster than GDP in 2019, according to the Chinese Academy of Information and Communications Technology. The country will hold about a third of global data by 2025 - about 60% more than the US - said market research firm IDC.
The data security law is expected to provide a broad framework for future rules on internet services, to ring-fence, prise open and ease tracking of valuable data in the interests of national security.
Among those rules may be guidelines on how certain types of data must be stored and handled locally, and requirements on companies to keep track of and report the information they possess.
The National People's Congress is also drafting personal information protection
legislation, expected to be adopted this year.
China's push parallels debates in the US, where legislators have called for the breaking up of internet titans like Facebook and Alphabet, and in Europe, where regulators have prioritised anti-trust actions and giving users more control over data.
US President Joe Biden ordered a security review of foreign software applications on Wednesday after revoking Trump administration bans on Chinese-owned apps TikTok and WeChat that had faced opposition in US courts.
Like their US counterparts, Chinese tech giants such as Alibaba and Tencent have focused on harnessing user data to refine an expanding array of digital services. This led to natural monopolies, giving the platforms enormous wealth and power, and also opening the door for abuses.
Now, Xi has declared his intention to go after "platforms" that amass data to create monopolies and gobble up smaller competitors. That has led to a crackdown on China's tech sector with regulators fining Alibaba a record $2.8bn (about R38bn) for abuse of market dominance, and warning dozens of other top internet companies to rectify anti-competitive practices.
– Bloomberg Opinion. For more articles like this please visit Bloomberg.com/opinion.
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