“China comes with even more strict rules for tech companies”

The Cyberspace Administration of China (CAC) is coming soon with even more new rules to curb the power of technology companies. Parties that have more than 100 million users or that have a worldwide turnover of 1.5 billion euros will soon have to request permission if they want to invest in the country. It is unknown when the new rules will come into effect.

That’s what insiders say to Reuters news agency.

China and the struggle against the power of technology companies

The Chinese Communist Party has been trying to regulate the power of tech companies for some time now. Last summer, President Xi Jinping presented a package of measures to achieve that goal. Among other things, he introduced a ban on fake reviews, made proposals to better protect intellectual property and determined that technology companies should not make it technically impossible for each other to use each other’s services.

Since last November, new internet legislation has come into effect to better protect the online privacy of Chinese citizens. Technology companies have since been required by law to improve the storage of personal data. The principle of data minimization – that only data may be collected that is strictly necessary to offer a service – is also laid down in the Personal Information Protection Law.

Furthermore, rules have been formulated under which tech companies may collect personal data. From mid-February, companies with more than one million users will be required to undergo a security assessment before being allowed to list on the Chinese stock exchange. This is the so-called cybersecurity test. Trading or mining Bitcoin and other cryptocurrencies have been banned since last year. Finally, the Chinese supervisor may carry out audits to ensure that information security is in order.

Tech companies will soon need a permit to invest

According to anonymous sources, it doesn’t stop there. Insiders tell Reuters that the Cyberspace Administration of China has issued new guidelines. Tech companies that want to invest or raise money in China in the future must have permission from the regulator.

The rules apply to companies that have more than 100 million users or are allowed to record one and a half billion euros or more in turnover in the financial books. Internet companies operating in sectors blacklisted by the National Development and Reform Commission must also apply for a permit.

More details about the proposed rules are not available at the moment. The sources cited by Reuters have declined to be identified, as the plans have not yet been made public. Supervisor CAC did not want to respond to the reports.

High fines

Companies that do not comply with the rules can count on hefty fines. These can amount to almost 7 million euros or 5 per cent of the worldwide annual turnover. The regulator may also decide to revoke the business license.

Due to the new, strict rules, several companies have already decided to close their doors in China. Thus, Yahoo! late last year ceased doing business in the People’s Republic of China. The same goes for the developers of Fortnite, Epic Games. Microsoft no longer offers its LinkedIn service in China.

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