As Europe’s General Data Protection Regulation (GDPR) takes effect, companies around the world are racing to implement compliance measures. In parallel with the GDPR’s development, China’s new data protection framework has emerged over the past year and is in the final stages of implementing the remaining details. With similar and often overlapping obligations, full compliance with the GDPR and China’s data protection framework presents a significant new challenge for companies with operations in China.

Does the GDPR Apply to Companies in China?

The GDPR applies to the processing of personal data of people who are in the European Union, even for a controller or processor in China, where the processing of the data is related to:

  • The offering of goods or services to the data subjects in the European Union, regardless of whether a payment is required; or
  • The monitoring of people’s behavior in the European Union.

As a result, even if a Chinese company does not have any formal establishments in the European Union, the GDPR will nonetheless apply if it is conducting either of these two types of activities.

What Are the Requirements for Companies in China Subject to the GDPR?

The GDPR primarily focuses on two categories of entities: “controllers” and “processors.” These two types are similar to concepts in the Chinese rules.  “Controllers” are entities that, alone or jointly with others, determine the purposes and means of the processing of personal data. “Processors” are entities that carry out the processing of personal data on behalf of the controllers.

Key requirements for most controllers under the GDPR:

  • Implement appropriate technical and organizational measures to ensure and be able to demonstrate that processing is performed in accordance with the GDPR requirements
  • Implement data protection by design and default, including:
    • Taking measures to implement data-protection principles, such as data minimization, and
    • Ensuring that only the personal data necessary for each specific purpose of the processing is processed, particularly for the amount of data collected, the extent of the processing, and the period of storage or accessibility
  • Maintain detailed records of processing activities under the controller’s responsibility
  • Ensure a level of security appropriate to the risk represented by the data
  • Notify the supervisory authority if there is a personal data breach that is likely to result in a risk to the rights and freedoms of natural persons
  • Unless an exception applies, notify the effected data subjects if there is a personal data breach that is likely to result in a high risk to the rights and freedoms of those natural persons
  • Document any personal data breaches to clarify the facts relating to the breach, the effects, and the remedial actions taken
  • Formalize the agreement with the processor in a contract or other legal act that sets out the subject-matter and duration of the processing, the nature and purpose of the processing, the type of personal data and categories of data subjects, the obligations and rights of the controllers, and key details about the processing and related legal obligations
  • Carry out a data protection impact assessment where the processing is likely to result in a high risk to the rights and freedoms of natural persons
  • Appoint a data protection officer if the processing is carried out by a public authority (except a court acting in judicial capacity), the controller or processor’s core activities consist of processing operations that require regular and systematic monitoring of data subjects on a large scale, or the core activities consist of processing, on a large scale, special categories of data or personal data relating to certain criminal convictions or offences
  • Appoint processors only through binding written agreements that provide sufficient guarantees that the processing will meet the requirements of the GDPR and ensure the rights of the data subject
  • Comply with applicable cross-border data transfer restrictions and requirements

Key requirements for most processors under the GDPR:

  • Obtain authorization from the controller before engaging a subcontractor for processing, and implement the same data protection obligations for the subcontractor as apply to the original processor
  • Formalize the agreement with the controller in a contract or other legal act that sets out the subject-matter and duration of the processing, the nature and purpose of the processing, the type of personal data and categories of data subjects, the obligations and rights of the controllers, and key details about the processing and related legal obligations
  • Implement appropriate technical and organizational measures to ensure a level of security appropriate to the risk
  • Appoint a data protection officer if the controller or processor’s core activities consist of processing operations that require regular and systematic monitoring of data subjects on a large scale or the core activities consist of processing, on a large scale, special categories of data or personal data relating to certain criminal convictions or offences
  • Maintain detailed records of all categories of processing activities carried out on behalf of the controller
  • Ensure a level of security appropriate to the risk represented by the data
  • Notify the controller without undue delay after becoming aware of a data breach involving related personal data
  • Comply with applicable cross-border data transfer restrictions and requirements

For Companies Already Compliant with Chinese Rules, What Extra Steps Are Necessary for the GDPR?

As a key addition to China’s general framework, the Personal Information Security Specifications (Specifications) went into effect in May of 2018.  In addition to the similar timing as the GDPR, the Specifications have some overlapping scope and content with the EU rules.  Although the Specifications are a voluntary guideline, they build on an existing foundation for personal information protections found in the key laws and regulations, especially under the Network Security Law (NSL).  For companies in China exploring what extra steps are necessary for the GDPR, a critical first step is to clearly understand the key differences between the EU and Chinese rules, after which supplemental measures can be completed to address and resolve these gaps.

Comparison of the Top Ten Items under the GDPR and Chinese Rules:

No. Item GDPR Chinese Rules

1

 

Key Categories of Entities

Data Controller

Data Processor

Data Recipient

Network Operator

Network Product/Service Provider

Critical Information Infrastructure Operator

Personal Information Controller

Personal Information Processor

2 Age for Protection of Children 16 years old 14 years old
3 Sensitive Data In principle, no processing unless the circumstances are within the listed exceptions. Explicit consent required for collection, processing, use, or transfer.
4 Right to Be Forgotten and Deletion Right Data subjects have the right to obtain from the controller the erasure of personal information in several circumstances, including where: (a) the personal data is no longer necessary in relation to the purposes for which it was collected or otherwise processed; or (b) the data subject withdraws consent and there is no other ground for the processing. Data subjects have the right to obtain from the controller the erasure of personal information in several circumstances, including where: (a) controllers violate provisions of the laws and regulations in collecting or using personal information; or (b) controllers violate agreements with the data subject in collecting or using personal information.
5 Right to Data Portability The data subject has a right to obtain the personal data that he or she has provided to a controller in a structured, commonly used, and machine-readable format, and to transmit it or have it transmitted to another controller. After a request of the data subject, the personal information controller shall provide the data subject with a method of obtaining the following types of personal information copies, or directly transmit the following personal information copy to the third party on the premise of technical feasibility: personal basic information, personally identifiable information, personal health physiology information, and personal education or work information.
6 Consent Withdraw The data subject shall have the right to withdraw his or her consent at any time. The withdrawal of consent shall not affect the lawfulness of processing based on consent before its withdrawal.  Prior to giving consent, the data subject shall be informed thereof.  It shall be as easy to withdraw consent as to give it.

Personal information controllers should provide the method of withdrawing consent, and the corresponding personal information shall not be processed after withdrawal; and

data subjects have the right to refuse to receive personal information to push commercial advertisements, and to share, transfer, and disclose personal information, and providers must provide a method for withdrawing consent.

7 Automated Individual Decision-making Unless an exception applies, the data subject shall have the right not to be subject to a decision based solely on automated processing, including profiling, which produces legal effects concerning him or her or similarly significantly affects him or her. When decisions are made based solely on automatic decisions of information systems that clearly impact the rights and interests of data subjects (such as decisions on individual’s credit level and borrowing amount based on their user profile or using profiles in employment interview screenings), data controllers should provide methods for raising appeals or complaints.
8 Data Protection Officer / Person in Charge of Network Security

Entities need a DPO where the core activities consist of: processing operations which, by virtue of their nature, scope, and/or purpose, require regular and systematic

monitoring of data subjects on a large scale; or

there is processing, on a large scale, of sensitive data or information in relation to criminal convictions and offences.

 

Organizations that satisfy any of the following requirements should set up a full-time person responsible for personal information protection and a personal information protection body responsible for personal information security work:

1) the primary operations involve handling personal information and the scale of operations personnel is greater than 200;

2) currently handling the personal information of more than 500,000 people, or expecting to handle the personal information of more than 500,000 people within the next twelve months.

9 Data Breaches

Notification must be provided to the supervisory authority without undue delay and, where feasible, not later than 72 hours after the controller becomes aware of the data breach.

Criteria for when an organization becomes “aware” of the breach allows for a short period of investigation to determine, to a reasonable degree of certainty, that a breach occurred and to establish the possible consequences for individuals. If the notification to the supervisory authority is not made until after 72 hours, it must be accompanied by an explanation of the reasons for the delay.

When the personal data breach is likely to result in a high risk to the rights and freedoms of natural persons, the controller shall communicate the personal data breach to the data subject without undue delay.

Cases that are particularly significant shall be reported to the emergency office immediately.

Entities shall promptly notify the effected data subjects by email, letter, telephone, push notification, or other means.  If it is difficult to notify each individual, the entity shall issue warnings to the public.

10 Cross-Border Data Transfers Cross-border data transfers may only take place if the transfer is made to an adequate jurisdiction or the data exporter has implemented a lawful data transfer mechanism with the necessary approvals, contractual controls, or commitments. This area is currently unsettled for most types of companies operating in China.  The current restrictions apply to Critical Information Infrastructure Operators, and require them to store personal information and important data in China as well as to pass a security assessment before transferring the data out of China.  Additional rules are pending that should clarify the requirements for other types of entities.

Overall Impact of the GDPR for Companies in China

As shown above, the GDPR and Chinese rules share many common characteristics and requirements.  There are similar focuses, definitions, requirements, and even timing for implementation.  Reaching full compliance under either set of rules will cover many of the key obligations in both jurisdictions, but there are notable gaps and some important differences.  Nevertheless, there is also a significant opportunity for companies affected by both sets of rules to resolve both at the same time, which can more efficiently bring the company into a level of compliance with two of the more stringent data protection frameworks in the world.