AmCham China Warns of Data Localization Risks to Innovation
April 14, 2015 – Data localization requirements are increasingly hindering the ability of foreign companies to innovate in China, according to a report released today by the American Chamber of Commerce in China with the support of the US Chamber of Commerce. The report, Protecting Data Flows in the US-China Bilateral Investment Treaty, urges China to reconsider the need for such requirements and offers an alternative to data localization based on the principle of “accountability” that should be incorporated into the bilateral investment treaty being negotiated between the US and China.
“The impact of ongoing data localization requirements raises significant questions regarding China’s commitment to its innovation strategy and goals,” said James Zimmerman, Chairman of the American Chamber of Commerce in China. “In particular, we have to ask whether the Chinese government is willing to allow foreign companies to compete and succeed in the information and communications technology sector – as well as numerous other sectors reliant on the movement of data across borders – and thereby contribute to China achieving its innovation objectives.”
The report highlights pressing policy considerations for the members of both chambers related to China’s data localization requirements, cross-border data restrictions, and investment prohibitions in the cloud. These issues damage the business climate, impair the ability of companies to compete in China and restrict their ability to integrate their China operations with their global business platforms.
However, the report shows that the “accountability” principle has successfully demonstrated the possibility of both enhancing data protection and fostering economic growth. This principle places responsibility on the organization carrying out the cross-border transfer, rather than on the data subject or regulatory authority. The transferring organization has an affirmative responsibility to establish rules and procedures that achieve actual data protection, or to participate in a system that does so. The principle has been adopted or referred to in laws, rules or guidelines in a number of jurisdictions in the Asia-Pacific region, including Singapore, the Philippines and Australia.
“The reality is that data today is what goods were when China joined the World Trade Organization,” Zimmerman said. “It is simply untenable to have a bilateral investment treaty between the two largest economies in the world without providing investors the guaranteed right, with very limited exceptions, to store their data and move their data globally according to business needs.”
To download a digital copy of the report, please click here.
About AmCham China
The American Chamber of Commerce in the People's Republic of China is a non-profit, non-governmental organization whose membership comprises more than 3,800 individuals from over 1,000 companies operating across China. The chamber's nationwide mission is to help American companies succeed in China through advocacy, information, networking and business support services. AmCham China is the only officially recognized chamber of commerce representing American business in mainland China. With offices in Beijing, Tianjin, Dalian, Shenyang and Wuhan, AmCham China has more than 60 working groups, and holds more than 300 events each year. Visit: www.amchamchina.org
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