China's Data Market Faces Nascent Stage Despite Government-Led Nurturing: Activation Challenges and Strict Regulatory Risks

China - Ekhbary News Agency

China's Data Market Faces Nascent Stage Despite Government-Led Nurturing: Activation Challenges and Strict Regulatory Risks

Despite the vigorous efforts by the Chinese government, spearheaded by the National Data Bureau, to foster a market for digital information and data resource trading and sharing, the actual market's activation remains in its early stages, according to expert assessments. This indicates that complex legal, technical, and corporate perception challenges arising during the assetization and circulation of data are interacting, despite the government's strong will and infrastructure development efforts.

At a recent Korea-China Science and Technology Forum held in Beijing, Attorney Kim Hoon of Shanghai Jintiancheng Law Firm stated, "Although the government has issued guidelines for Chinese state-owned enterprises and banks to assetize and circulate data, the risks are still considered too high, and thus actual transactions are not actively occurring." The forum, themed 'Digital Competition and China's Cyber Security Strategy in the New Cold War Era,' served as an important platform to discuss China's data policies and response strategies for Korean companies. Attorney Kim also pointed out that technical and practical issues related to the objective evaluation of data value and price are factors hindering market growth. He added that despite the institutionalization of data-backed loans for corporate data in the financial sector, actual results have been slow.

China expressed its strong commitment to fostering the data economy by officially launching the National Data Bureau in October 2023, which oversees digital information operation and management. Outwardly, the country has shown steady growth over the past two years, establishing data exchanges in major cities such as Shanghai, Guiyang in Guizhou Province, and Beijing, and encouraging the participation of government agencies, telecommunication companies, universities, and enterprises in data trading and exchange. As a result, the Shanghai Data Exchange, the largest in scale, recorded a transaction volume of 5 billion yuan (approximately 1.058 trillion Korean won) as of 2024, and 3 billion yuan (approximately 630 billion Korean won) in the first half of last year alone, showing a 50% year-on-year growth rate. However, analysis suggests that it remains questionable whether this quantitative growth translates into genuine qualitative growth and active participation from businesses.

During the same forum, Shin Pansu, Chairman of the Shanghai & East China Korean IT Enterprises Association, emphasized the impact of China's strengthened data security laws, known as the 'Data Three Laws' (Network Security Law, Data Security Law, Personal Information Protection Law), and necessary precautions for Korean companies. Shin warned that the level of penalties for violating the Data Three Laws is extremely severe. Specifically, he explained that "failure to comply with 20 essential security requirements can result in a fine of up to 5% of the previous year's revenue or revocation of business licenses," indicating that this is a stronger level of sanction than the European Union's General Data Protection Regulation (GDPR) or Korea's Personal Information Protection Act. Furthermore, he added that fines of up to 100,000 yuan (approximately 21.1 million Korean won) can be imposed not only on legal entities but also on directly responsible individuals or representatives, posing a significant risk to working-level employees. Shin urged particular attention to AI-related provisions, including the Network Security Law, which was revised after approximately eight years and came into effect on January 1st of this year.

The Chinese government places the data economy at the core of its national strategy, pouring immense resources and policy support into it. However, the inherent characteristics of data, such as the difficulty of value assessment, uncertainty regarding ownership and scope of use, and a strict regulatory environment, continue to act as high barriers to entry for market participants. For foreign companies, in particular, understanding and complying with China's complex and powerful data regulations has become a critical task for business operations. In the future, for the Chinese data market to move beyond its nascent stage and achieve genuine activation, practical incentives that market participants can feel, clear guidelines, and a flexible approach that can ease the burden of regulatory compliance will be required, in addition to government policy support. This will be an essential process for China's leap towards becoming the digital powerhouse it aspires to be.

Ekhbary News Agency