The moves have also rattled investors, and last month analysts at JPMorgan Chase & Co. called the Chinese internet sector “uninvestable,” partly due to regulatory worries.
“Like most governments, Beijing is still figuring out how to thread the needle between protecting data security and enabling cross-border data trade,” said Kendra Schaefer, head of digital research at Trivium China, a consultancy in Beijing.
“It’s uncertain how rigidly existing rules will be enforced, and to what extent they will be adjusted over the long term in response to complaints by foreign businesses.”
Many U.S. companies are working with regulators at the regional level of the Chinese government to help them navigate the regulatory environment, the US-China Business Council’s report said. They’re also putting more resources into local teams to review compliance issues, it added.
The report said companies in the auto, hospitality, health care and financial services industries were more heavily regulated than others. It cited potential higher business expenses, such as purchases of local servers, that could cost as much as several millions of dollars.
“At a minimum, companies would like to see clarity on how they can comply and they want to be a part of that discussion,” said Matthew Margulies, the council’s senior vice president of China operations. “There are legitimate safeguards necessary for privacy and data security — no one disputes that — but there’s a concern that the security elements of the equation are kind of outweighing or overshadowing some commercial realities.”
