China imposes national security review on data, merger deals involving foreign capital as Beijing tightens cross-border information flow

The review requirement forms part of new policy guidelines released by the Central Committee of the Chinese Communist Party and the State Council

The guidelines reflect how Beijing has been ramping up its efforts to boost the country’s digital economy by applying commercial rules to data

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The national security review requirement reflects Beijing’s efforts to tighten cross-border data flows and safeguard what it considers as sensitive information. Illustration: Shutterstock

Published: 7:00am, 21 Dec 2022Updated: 8:06am, 21 Dec 2022

Chinese authorities will impose a strict review of data processing, cross-border data transfers, and mergers and acquisitions (M&A) activities involving foreign capital that could affect national security, as Beijing moves to safeguard what it considers as sensitive information.

That approach forms part of new policy guidelines released on Monday by the Central Committee of the Chinese Communist Party and the State Council, the country’s cabinet. The guidelines aim to boost the country’s data market, while addressing issues such as data rights and trading profit distribution.

The release of the guidelines follows last year’s passage of China’s Data Security Law, which treats some domestically generated information as a matter of national security and proposed a review requirement, but did not provide specific guidance. China had earlier set up a process for initial public offerings (IPOs) overseas to go through a security review if the business involves the data of more than one million Chinese consumers.

Under the new guidelines, implementing a national security review on certain deals supports Beijing’s efforts to build an “orderly” mechanism for cross-border data flows. Other measures that the guidelines cover include taking part in formulating international rules and technical standards in areas like digital currency.

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The guidelines aims to lay the groundwork for what Beijing calls a “fundamental data system”, which will cover areas such as defining the data rights of different entities, management and supervision of information, and trading and profit distribution in the data market.

A detailed mechanism for defining data rights will be established for public, corporate and personal information, according to the new guidelines.

China imposes national security review on data, merger deals involving foreign capital as Beijing tightens cross-border information flow

The review requirement forms part of new policy guidelines released by the Central Committee of the Chinese Communist Party and the State Council The guidelines reflect how Beijing has been ramping up its efforts to boost the country’s digital economy by applying commercial rules to data

The review requirement forms part of new policy guidelines released by the Central Committee of the Chinese Communist Party and the State Council

The guidelines reflect how Beijing has been ramping up its efforts to boost the country’s digital economy by applying commercial rules to data