China's Data Governance: Data transactions via the market and national security

Author Name WATANABE Mariko (Gakushuin University)
Creation Date/NO. May 2022 22-J-019
Research Project Comprehensive Research on the Current International Trade/Investment System (pt.V)
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Digital technology has drastically changed the nature of the economy. The abuse of power that results from monopolization of consumer data, is damaging social welfare. This is mostly observed in acts of digital platform companies. This phenomenon has become a serious concern and has resulted in calls for government intervention. One possible remedy against this concern is to utilize competition law to limit the abuse of monopolizing power of data. This idea is shared between the United States and China. The competition authorities of both countries launched interventions against platform firms in 2021. The other potential remedy is building a data transaction market in order to enhance accessibility of data for a wide range of entities, including small enterprise and individuals. China announced its intention to embark on this policy both through central and local-level governments.

In China, data governance and state involvement in data transactions are developing with the combination of two different factors: enhancing the data transaction market and securing national security. This paper documents how the newly enacted data-related law and regulations define privacy, protection of personal information, government access and the data transaction market, the industrial policy for enhancing data transaction and data-related industries, and protection of national security. Its essence can be summarized as follows: (1) National security is emphasized much more strongly than protection of privacy and protection of personal information in comparison to other economies, (2) Cross border transactions are widely and heavily controlled by the government. (3) There is a very active to build institution of utilization and transaction of data. In terms of rulemaking governing cross-border data transaction, it is necessary to consider how to neutralize this heavy state involvement in data transactions and how to internalize rapid development of the big data market.