Business alarmed at Chinese plans to curb data transfer

China is building a "big data dam" to rival the Great Firewall blocking the internet, say US business leaders concerned about planned restrictions to the free flow of data across borders.

The American Chamber of Commerce in China said proposed rules to store data in the country will require foreign businesses to build costly data centres in multiple countries. The plans would also harm Chinese companies trying to go global and innovate, the chamber said in a report published on Tuesday.

China's government, for example, has proposed a new law on counter-terrorism that would require internet and telecoms companies to store data on servers in China and provide public security authorities with encryption keys.

Other regulations on data mobility cover population health information management, which currently prohibit the storage of personal health information overseas, and a law that prohibits transfers abroad of data containing state secrets. A set of administrative measures for credit agencies requires that information collected in China be processed in the country.

The chamber called on the US and China to guarantee the free flow of data in a bilateral investment treaty that is under negotiation. "The BIT should include clear language that expressly guarantees the seamless flow of data across borders," it said.

Penny Pritzker, US commerce secretary, alluded to the proposals at a speech in Beijing on Tuesday following a meeting with Chinese leaders. "We agreed we all have to address cyber security challenges without creating barriers," she said.

Revelations by Edward Snowden about US surveillance of private communications have provoked a global wave of "data localisation" aimed at keeping information safe and inside national borders.

Russia has led the way with a law signed last year by President Vladimir Putin that will come into effect in September. The law requires businesses directly collecting and processing data on Russian citizens to store it on Russian territory. A similar approach was discussed in Brazil but not pursued.

Manuel Maisog, a partner at Hunton & Williams, a law firm in Beijing, said the current policies could influence development of the internet. "Is the internet going to be an open place where you can find everything? Or is it going to be, figuratively speaking, a series of walled-off compounds, where there is a Russian internet, a Chinese internet, and you have to check in with a guard at the front gate before you go in?" he said.

James McGregor, greater China chairman of Apco, a consultancy, said more restrictions on the internet would further isolate China, which already has pervasive censorship.

"If China builds a "big data dam" to go along with the Great Firewall, they will seal China off from the world," he said.

Mr Maisog said data mobility laws predate the Snowden revelations. The EU limits transfer of personal data to any country that does not meet its own legal adequacy requirements for privacy, which have been stringent.

Many of the Chinese proposals are in draft form and could still change. Last month China's foreign ministry denied suggestions by a White House official that this law had been suspended after it was not submitted to the National People's Congress, the rubber-stamp parliament.

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