China takes next step in taming big tech with personal data law

China has been cracking down on its most powerful tech stars, including Alibaba Group Holding.
China has been cracking down on its most powerful tech stars, including Alibaba Group Holding.PHOTO: REUTERS

BEIJING (BLOOMBERG) - China has passed legislation setting out tougher rules for how companies handle user data, a move pushing forward its campaign to curb big tech's influence.

The country's legislature approved the Personal Information Protection Law, the China Central Television said in a report on Friday morning (Aug 20).

Details of the new legislation were not immediately released but earlier drafts required firms to get user consent to collect, use and share information, and to provide a way for them to opt out. Companies found breaking the rules could face fines of up to 50 million yuan (S$10.5 million) or 5 per cent of their annual revenue.

China under President Xi Jinping has been cracking down on its most powerful tech stars, including Alibaba Group Holding, Tencent Holdings and Didi Global in a bid to ensure its grip on society. The government is also moving to address consumer worries about the gradual erosion of their privacy as tech companies make rapid advances in the use of tools from facial recognition to big data.

The nation's legislature passed a related law in June that gave Mr Xi the power to shut or fine tech companies that stood in the way of his efforts to control vast reams of data they build. The moves come as some US lawmakers call for breaking up Internet titans like Facebook and Alphabet, and as European regulators prioritise anti-trust actions and giving users more control over data.

That legislation, which goes into effect Sept 1, would also help the Chinese government in its quest to make the world's second-largest economy a leader in big data. Beijing has been pouring money into data centres and other digital infrastructure to make electronic information a national economic driver and help shore up the legitimacy of the ruling Communist Party.

The new law promises to further hem in China's tech giants, already under fire from a thicket of regulations governing everything from how they strike deals and price services to the way they harness the enormous amounts of data hoovered up daily. Along with the earlier legislation, the privacy rules threaten to severely curtail a raft of online commerce services that rely on personalised data to target consumers and peddle their wares.

Drafts of the latest personal data law would tighten rules on user profiles that companies keep and the recommendations that apps can make. Any decisions that are automatically made in the apps must be "fair and just", Mr Zang Tiewei, a spokesman for a commission under the legislature, told a press briefing in Beijing last week.

They also allowed for restrictions on moving personal information across borders and required that any critical information be stored within China.

"Data localisation requirements are not new or unique to China, but in terms of practical impact for companies here, there is no question that 'letter of the law' compliance is more cumbersome now than before," said Mr Nathaniel Rushforth, cybersecurity and data counsel at DaWo Law Firm Shanghai.

"We should expect to see more frequent and substantial enforcement actions against all companies in China," he said.