China seeks to grease the wheels of its economy with data-related initiatives

With repeated talk of decoupling in some of world’s most high-profile boardrooms, the mainland Chinese government on Sunday took steps to arrest some concerns. Its State Council – China’s highest executive organ – released the Opinions of the State Council on Further Optimising the Foreign Investment Environment and Increasing Efforts to Attract Foreign Investment (Opinions).

Welcome pro-investment stance

Despite the Opinions being short of a catchy abbreviation, reading in the press and various WeChat fora, the general reception of the international business community towards the policies seems very positive – overall, the Opinions are being seen as a pro-foreign investment nod in the right direction, in what otherwise has often recently been an escalating tit-for-tat of countermeasures between the US and China in the name of national security. Intended or not, this has largely led to a growing sense of risk in China’s tech and data space.

Contrary, then, to the usual narrative, the Opinions comprise 24 measures which seek to enhance opportunities for foreign players operating in the Middle Kingdom.

Freer cross-border data transfers

One such item is a hint towards “exploring” freer cross-border transfers of China's "new oil": data. Following the burden imposed on international businesses through the implementation of security assessments and standard contracts in the last 12 months, schemes to streamline multinationals’ data exports sounds extremely promising.

Data-related highlights

Granted, not much detail is given on the proposals outlined in the Opinions and not all the ideas are new, but here are some highlights and immediate reflections:

• Green channel - The Chinese authorities will “establish a green channel for eligible foreign-invested enterprises” to speed up approval and filing processes for CBDTs. As some organisations pass the one-year mark of tolling with self- and regulator-led assessments, this initiative could be excellent – subject to seeing the small print. 
  
  Which enterprises will be eligible? As different regulators begin pushing out sector-level rules, will pilots be industry-specific or industry-agnostic given certain areas of the economy are more readily sustainable drivers of grow?
  
   
• Liberalisation centred on metropolitan hubs - Beijing, Tianjin and Shanghai, as well as the sprawling Greater Bay Area (GBA), are mentioned as areas for additional relaxations. Of course, special schemes for Hong Kong SAR, the GBA and elsewhere have been pencilled in before, and are a common feature of China’s FTZs and SEZs. 
  
  Yet, concrete reforms have tended to be delayed as national security considerations often take precedence in planning phases. Will the Opinions usher in something different this time? If so, what tangible measures will be offered that do not risk high tax players simply shopping around between localities for the best benefits – leading to disruption instead of a more level playfield across the broader business ecosystem?   
  
   
• Innovative service platforms and compliance service providers - are to be introduced to support law-abiding operators. Quasi state-owned intermediaries have been muted before – such as in Lingang on the outskirts of Shanghai in a bid to attract MNCs to the new commercial hub. 
  
  However, private businesses – particularly with overseas HQs – can be hesitant to open up to what is perceived as continual governmental audit. In particular, customer confidentiality and general transparency concerns slow adoption. What reassurances will the Chinese government give this time to change perceptions – misplaced or otherwise?

Looking ahead

Clearly questions remain as to how and when the measures will become fully operational, including whether we will have to wait for more granular guidelines to implement the Opinions in practice. 

Nevertheless, the 24 points under the Opinions – including the proposals on more efficient cross-border data transfer mechanisms – are a refreshing change to the normal drumbeat of geopolitical uncertainty.

Our team will keep you posted as and when we hear more!