Shanghai to Allow Faster Offshore Data Transfers for Foreign Firms

Officials in Shanghai are looking to speed up approvals for foreign firms wanting to send local data offshore, sources say.

The move is seen as a major easing of China’s stringent data rules that were unveiled over a year ago.

The Shanghai government discussed the ‘fast-track approval initiative’ in recent weeks with representatives of some foreign firms operating in the commercial hub, including western banks and asset managers, two of the four sources said.

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The planned move comes as China is looking to woo foreign investors as the world’s second-largest economy grapples with a sluggish post-pandemic recovery, a prolonged real estate slump, and a deepening markets turmoil.

Foreign financial firms have been lobbying the Chinese authorities to allow cross-border sharing of information, after Beijing tightened control of data generated within its borders in a national security drive.

The rules unveiled in 2022 require all “important” offshore transfer of data related to operations within the country to clear security reviews by the Cyberspace Administration of China (CAC), causing confusion and concern among foreign firms.

Shanghai is likely to allow foreign firms to transfer data offshore by leveraging its sprawling free trade zones, which enable the local government to offer tax and other incentives to global companies operating there, said the two sources.

The Shanghai government’s plan, details of which have not been reported previously, will be separate from the CAC’s cross-border data transfer approval system, which will continue to be applicable for foreign institutions in the rest of the country, they added.

One of the sources said the Shanghai government’s initiative was likely to be implemented this year.

All the sources declined to be named due to the sensitive nature of the matter. And the Shanghai government and the CAC did not respond to requests for comment.

Shanghai plans to enable financial institutions to transfer operational data overseas under national data transfer security protocols, the Shanghai city government said in a statement on its website on Tuesday, without providing details.