China business capital okays foreign data exports sought by Tesla

China’s business and market capital, Shanghai, will allow companies to transfer some data overseas without security assessments.

The city has compiled a list of data that it deems “ordinary” for three sectors – intelligent and connected vehicles, mutual funds and biomedicine.

Overseas transfers of this “ordinary data” require the least regulation and will not need clearance from the country’s cyberspace regulator under new rules, according to government documents.

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The easing of rules marks a significant change in Beijing’s approach to data exports, especially with the authoritarian Xi Jinping government’s recent push to clamp down on such flows.

In 2022, the Chinese government passed a new law that required all “important” offshore transfer of data related to operations within the country to clear security reviews by the Cyberspace Administration of China.

The broad definition of the law caused indefinite delays in data transfers, confusion and concern among foreign firms.

Meanwhile, Elon Musk’s Tesla and other automakers, along with financial firms, have been lobbying Chinese authorities to allow cross-border sharing of information.

Volkswagen’s China chief told Premier Li Qiang last year that it needed more clarity on cross-border data transfers, saying the transformation of the auto sector is dependent on the international exchange of data, personnel and knowledge.

Tesla, in particular, has sought Chinese regulatory approval to transfer data generated by its electric vehicles out of China for its “Full Self Driving” system.

Data transfer permission was one of the topics on Musk’s agenda when he met with top Chinese government officials, including Premier Li Qiang, last month.

Tesla is now pushing ahead with plans to power the global development of the ‘self-driving’ system with data from China that could be processed within the country, part of a strategic shift.

Cross-border data ‘hub’

The Shanghai government’s announced the new scheme at an event on Friday, which saw the participation of Tesla, Ford and BMW.

The easing of data transfer rules comes at a time when the world’s second-largest economy is looking to lure foreign investment to tackle an ongoing slowdown.

The policy changes are part of a one-year pilot project that will allow companies registered in Shanghai’s free-trade Lingang Area to transfer data on the list overseas without needing further security assessments.

Tesla’s Shanghai factory is located in Lingang.

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Furthermore, the list of “ordinary data” will also be expanded over time, according to a government document.

The document details broader plans for Lingang to become a hub for cross-border data, as well as specific scenarios for each of the three sectors that would be classified as “ordinary data”.

For the auto sector, the data includes information involving manufacturing such as procurement and stockpile, research and development including auto design and tests, after-sales services and used car sales.

Beyond Shanghai, the cyberspace agency, said in September it was considering waiving data-export security assessments for some activities, such as international trade.