China's cyber laws could saddle firms with redundant data centers: U.S. lobby

Shanghai Tower is illuminated in the Lujiazui financial district of Pudong in Shanghai, December 25, 2014. REUTERS/Aly Song (Reuters)

BEIJING (Reuters) - Chinese restrictions on transferring data overseas would burden firms with building "redundant" data centers in China and hamper domestic companies expanding abroad, the American Chamber of Commerce in China said on Tuesday. China has introduced a series of policies in recent years to keep financial and personal data such as credit history and health records on Chinese soil, particularly since intelligence contractor Edward Snowden disclosed details of U.S. spying. China is not alone in weighing such measures, with countries including Russia, Germany and Brazil ratifying or extensively debating similar proposals in response to the spying. Technology companies, on the other hand, said such localization would lead to inefficiency, with U.S. search giant Google Inc saying it would result in the "balkanisation", or fragmentation, of the Internet. The U.S. chamber, which has become increasingly vocal in the past year as China implemented new cyber security regulations, said in a report on Tuesday that "the damages to economic growth ... outweigh any theoretical benefits to security." The chamber cited a study by the European Centre for International Political Economy that said localization could cause China's gross domestic product to fall by 1.1 percent. China has mentioned data localization in seven laws or policy papers since 2010, including in laws governing state secrets and security, according to the chamber. The U.S. and China should drop localization initiatives under a bilateral investment treaty now being negotiated, it said. The same day, U.S. Secretary of Commerce Penny Pritzker, in a visit to China, said cyber security threats must be addressed without creating barriers to trade or investment. Chinese officials, for their part, have repeatedly said China's cyber security regulations are in line with prevailing international standards and are no more onerous. Some technology vendors have begun making changes in response to the data localization movement internationally. Microsoft Corp said it would abide by such national demands while Apple Inc said it would store Chinese user data for its iCloud service at data centers operated by China Telecom Corp Ltd. (Reporting by Gerry Shih; Editing by Christopher Cushing)