Just as anywhere in the world, also in China, companies are facing the threat of cyber attacks. Companies are increasingly suffering breaches of data, which may often lead to the leakage of customer information, outage of service, and perhaps even the possibility of litigation. In July 2015 only, the government agency handling national cyber-security emergency response reported to have received nearly 12,000 cyber incidents and such figures caused that president Xi Jinping started to handle cyber security as an issue of national security.

In the following months, Chinese government adopted the National Security Law, a bill which for the first time addressed the concept of cyber security and advocated the prevention and punishment of online criminal activity. However; the act did not specify the nature of measures or punishments through which these ends were to be achieved. As a precursor to the more specific Cyber Security Law, the National Security Law included the national security review and oversight of all internet information technology products and services, representing a very broad range of industries that could be facing more thorough government oversight.

In early July, China released a draft of a Cyber Security Law for public comments. The draft law applies to wide range of internet-related activities and business (including the construction, operation, maintenance, and use of Internet network, as well as the supervision and management of cyber security within mainland China). In general, analysts describe major effect of the act as placing the burden of responsibility on Chinese and multinational companies to protect their users from any potential data breaches (especially from introducing provisions such as: requiring operators of network product and services to obtain consent when collecting user information; requirement on critical infrastructure operators to store personal information of citizens’ and other important data within mainland China. Furthermore, it also gives authorization to national cyberspace authorities to collect, analyse and report cyber security information and conduct related activities).

The draft law still needs to be approved by the Standing Committee of the National People’s Congress (NPC), but the draft law itself received active feedback by numerous industry organizations representing foreign and multinational companies operating in China, voicing their concerns over the future of their operations. Despite the original intention to protect the country’s cyberspace (and by extension its users and businesses), the outcome appears to the the very opposite effect. Especially foreign companies in China now fear that the measures to protect the cyberspace will also (or especially) lead to the fact that foreign companies being disadvantaged and thus Chinese government will hit two flies with one shot by putting administrative obstacles into the way of foreign businesses.

Recent meeting between Obama and Xi in Washington as well as first U.S.-China dialogue on fighting cybercrime held last week will hopefully clear the sky and help address the concerns raised against the draft law.

Sources:»USCBC Issues Letter on Cybersecurity Provision in Appropriations Bill» US-China Business Council, https://www.uschina.org/washington-update/uscbc-issues-letter-cybersecurity-provision-appropriations-bill

«China Cybersecurity Fears Prompt Business Groups to Press Obama» Wall Street Journal, http://www.wsj.com/articles/business-tech-groups-press-obama-on-china-competition-concerns-1439361855

«China’s draft cyber law raises concerns for foreign businesses» Financial Times, http://blogs.ft.com/beyond-brics/2015/11/02/chinas-draft-cyber-law-raises-concerns-for-foreign-businesses/

«10 Issues With the China-US Cybersecurity Agreement» Inc. http://www.inc.com/joseph-steinberg/why-the-china-us-cybersecurity-agreement-will-fail.html

«U.S. & China hold first cyber crime dialogue» China Cooperative, http://www.china-cooperative.com/#!US-China-hold-first-cyber-crime-dialogue/ht21m/566252800cf212bd6be6f036

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