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Global companies are accelerating efforts to separate and localize their data in China, driven by the tightening of data regulations and rising geopolitical tensions. Companies such as McKinsey, Boston Consulting Group, and Oliver Wyman are splitting their IT systems to comply with the country’s data and anti-espionage laws. The revised anti-espionage law introduced criminal sanctions, making businesses more cautious about sharing sensitive information.
Moreover, Chinese raids on US consultancies and semiconductor companies have further increased concerns about data security and compliance in China. To address these concerns, companies have started reorganizing their systems, creating separate versions for China and investing in Chinese servers. Additionally, China’s Cyberspace Administration has implemented data security assessments for outbound data, pushing companies towards localizing their data to mitigate risks. European companies have also been decoupling their China IT systems, while financial institutions face significant compliance costs.
This trend extends beyond traditional industries, as even retailers are cutting out Chinese customers from their global loyalty programs. The push for data localization reflects the challenges faced by businesses operating in China due to complex regulations and geopolitical tensions.
For more information on this topic, please contact our team or refer to the sources below.
The movement towards data localization in China aligns with the country’s increased regulation and control over data. As China’s internet regulator enforces data security assessments, companies are prioritizing localizing data within China rather than risking cross-border data transfers. These efforts come with compliance costs, with financial institutions facing significant challenges in fully complying with China’s data laws. Companies across various industries are reorganizing their IT systems and even excluding Chinese customers from global loyalty programs. The complexities and risks associated with operating in China continue to drive organizations to adapt and localize their data management strategies.
For media inquiries and additional information, please reach out to our team. Contributing reporters: Nian Liu (Beijing) and Cheng Leng (Hong Kong).
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