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Report

EU's new GDPR privacy law could both hurt and benefit Chinese firms

June 14, 2018


Abstract : On May 25, the EU implemented what has been characterized as the strictest security law in history - the General Data Protection Regulation - which could bring not only challenges but also new hopes for Chinese companies, according to media reports.

gdpr

(Andrea Jelinek, head of the European Data Protection Board (EDPB), a new European body created to enforce the General Data Protection Regulation)

On May 25, the EU implemented what has been characterized as the strictest security law in history - the General Data Protection Regulation (GDPR). The move could bring not only challenges but also new hopes for Chinese companies, according to media reports.

In the immediate future, Chinese companies will have to make certain changes to comply with the new regulation, but in the long run, they will face challenges that could hurt not only their current business models, but also their technological innovation efforts, according to the Global Times.

However, at the same time, the regulation offers a rare and unusual opportunity for China to rethink its laws and regulations related to the protection of consumer data, especially since consumers are an ever-growing group increasingly relying on a burgeoning e-commerce industry, said the report.

Immediate Impact 

After the EU regulation came into effect, many Chinese companies had to make immediate changes in order to comply with the law, according to a report released by Beijing-based newspaper the China Youth Daily on June 5.

A slew of Chinese companies, from telecom equipment maker Huawei Technology Co. to internet giants Tencent Holdings and Alibaba Group Holding, have all applied for fresh authorization so they can operate legally in the EU in the wake of the GDPR's enactment, the report said.

In the case of Tencent, the company released a new update to its popular QQ social networking platform and shut down the old version to comply with the new law, according to the report, adding that other popular apps such as WeChat and map services provider AutoNavi Holdings have also adopted new measures.

Although the China Youth Daily report did not mention the specific issues the EU's new regulation has caused for Chinese companies, experts noted that the cost could be tremendous.

"The GDPR will cost companies a very high price," Liu Quan, a Chinese industry expert, was quoted as saying by the Beijing-based Economic Observer newspaper. "To comply with the strict data protection mechanism set by the GDPR, companies have to pay out a huge amount of money to ensure compliance."

According to a survey issued by PWC among a number of US companies operating in the EU, 77 percent of firms said they might have to invest somewhere between 1 million U.S. dollars and 10 million U.S. dollars to meet all standards under the new regulation, while 9 percent said their expenses could now exceed 10 million U.S. dollars. 

Companies that violate the new law could be slapped with a fine equating to 4 percent of their total revenue, or even 20 million euros (23.5 million U.S. dollars), a penalty much higher than the above mentioned adjustment costs, Reuters reported on May 25. 

"Four percent of a company's revenue usually exceeds their profit, so all companies will be impacted, whether it's an internet giant or a small or medium-sized company," Liu said.

The new law could also dampen innovation driven by Chinese tech companies, which prosper thanks to continuous efforts, said Liu Deliang, a law professor at Beijing Normal University, according to the China Youth Daily report. 

The Bright Side

Although the GDPR could cause short-term pain for some Chinese companies, there is also a positive side, according to Liu cited in the Economic Observer report.

There are still no special laws and regulations for protecting personal data in China, even though that issue is currently in crisis mode, Liu said. "(In China), personal data is often violated. It is being illegally collected, stored, processed and used for criminal activities," he said.

By complying with the strict EU regulations, Chinese companies could learn to better protect user data, "therefore, it is conducive to improving the competitiveness of Chinese companies in the global market," Liu noted.

(This article is based on an report by the Global Times)

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Keyword: china EU-GDPR privacy

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