Increased complexity when doing business in or with China

As response to the foreign sanctions (above all from the US) implemented against Chinese entities and individuals, various drastic counter legislative measures have been taken by China under 2021 which makes doing business in or with China more complicated.

Anti Foreign Sanctions Law

On 10 June 2021, Anti Foreign Sanctions Law became effective. It provides that entities and individuals (including their immediate family members and certain affiliated entities) involved directly or indirectly in implementing discriminatory restrictive sanctions against Chinese persons can be put on the Anti-Sanction List. Such listed persons may subject to denial of visa, deportation, seizure and freezing of assets in China, prohibition on transactions with individuals and entities in China.

Cybersecurity Law, PIPL and DSL

China has also built up a more complete data protection legal framework comprising of Cybersecurity Law (1 June 2017), Data Security Law (DSL) (1 September 2021) and Personal Information Protection Law (PIPL) (1 November 2021). PIPL requires obtaining a specific consent of the person concerned before sharing personal data with another processor or transferring it outside of China. PIPL may apply to processing activities performed outside of China but on personal data of people located within China.

DSL provides that data processing activities outside of China harming China’s national security, public interests or Chinese citizens or organizations’ legitimate interests shall be investigated for liability. It also prohibits providing any data stored in China to foreign judicial or law enforcement authority without Chinese authorities’ prior approval.

Vehicle data

The general data protection laws mentioned above are complemented by branch specific regulations or rules, e.g. Provisions on Management of Automotive Data Security (Trial) (1 October 2021). It provides that vehicle data processors (processing personal data and important data involved in the process of vehicle design, production, sales, use, operation and maintenance, etc.) must submit an annual report with various information to Chinese authorities.

Consequences of non-compliance

In case of non-compliance, a company may incur a fine up to 10 MRMB or 5% of the last year’s turnover, revocation of business license, and record in the Corporate Social Credit System.

What should you do?

Any company doing business with/in China is recommended to make a gap analysis and take necessary measures to fully comply with the laws. A company doing business with the US and China may need to choose side if a business restructure will not be sufficient.