With the move to clamp down on the tech firms, the Chinese administration established a law to oversee the accumulated data that spurs disputes in US markets. The National People’s Congress Standing Committee approved the legislation on Thursday.
The data security movement brings power to President Xi Jinping to charge the big tech giants with fines up to 10 million yuan ($1.6 million) due to the stockpiled data by online behemoths like Alibaba Group Holding Ltd. and Tencent Holdings Ltd. If the firms are found guilty of misusing the data, the government will have the right to cease their operational licenses and fine them. The new law will be effective from Sept. 1.
The rule applies to the companies that barter sensitive information with other countries. Also, companies that leak data to governing bodies abroad without permission will be charged penalties up to 5 million yuan along with ceasing business operations.
The Chinese government aims to be a global leader in big data, which persuaded the tech giants to offer the amassed data to the government. The administration passed strict security to protect the data. Today, data plays a crucial factor in driving economies; therefore, Beijing’s initiative to make sound data centers and build robust digital infrastructure is an attempt to launch a lucrative economy based on national data.
The shares of China were mixed Friday. Hong Kong saw a dip in Alibaba by 1.2% and a rise in Tencent and Meituan. Tech shares on China’s benchmark CSI 300 Index dropped 1.6%.
The IDC market study says that 75% of the Global data will be in China by 2025. The Chinese economy in the digital sector proliferated compared to the GDP in 2019.
The new rule will make data management more critical with enhanced frameworks, strict protocols to protect, share and store the data. The guidelines may also assert that the companies have proper data records and report information diligently to the government in national security interests.
Additionally, the NPC visions to have a similar law to protect personal information, which probably will be ratified this year.
The administration fined the tech giant Alibaba $2.8 billion to create a monopoly and warn others in the market to stop anti-competitive practices.