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Changes in China's data privacy rules to impact businesses

Daryl Guppy
Daryl Guppy • 5 min read
Changes in China's data privacy rules to impact businesses
Find out what changes there are in China's data privacy laws.
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It wasn’t just Western countries which were aghast at the way Facebook bullied Australia and forced changes to the proposed Australian media code. This sovereign State face-off with big tech ploughed some lines in the sand. In many ways, it confirmed a view that was already developing in China and encapsulated in the General Data Protection Regulation (GDPR) proposals presented to the Lianghui, or Two Sessions, meeting this week.

The approach taken by China differs in some important ways from the EU approach and has an impact on every company doing business in China. The GDPR is designed to answer several questions.

The first is identifying the major hurdles in personal information protection in an era of big data. We know the user does not have the tech skills to protect their personal information. They must rely on the coercive power of the State to provide the protection. The big tech companies will not do this voluntarily because the potential for profit is too great. Surveillance capitalism relies on gathering, for free, personal data which can then be sold. The Facebook debacle in Australia shows how strongly they will move to protect profits.

China has learned from other countries. It observed the way big tech sidelined the legal structure. Many agree with Facebook’s ban on former US President Donald Trump. But this decision was made without reference to the legal structures of the State. It was, in essence, a personal decision and that is a challenge no State can accept. The GDPR changes this and that is an important feature for future business activity in China.

China has concluded that the only effective protection comes from an externally imposed State penalty. It is a decision accepted in the EU and gaining some traction in the US.

The first step is a break-up of the large tech companies to prevent consolidation of services such as when Facebook captured WhatsApp. We have already seen China taking steps to limit the power of its big tech providers, from Tencent to Ant Group. The second challenge is to protect personal data from misuse by others. The Cambridge Analytica’s use of “scraped” data has been replicated by multiple companies.

The third level is protection from hacking, so personal data cannot be stolen and used for criminal activity. It is clear that stricter rules with State sanctions will conflict with the commercial benefits of surveillance capitalism. This is why Facebook bullied Australia into changing the law.

China’s personal information protection law includes provisions arising from this analysis of Western interactions with big tech. The key features for companies doing business in China include the need for clearer consent given to personal information collection and how it is used. The GDPR has a wider definition of what is personal information and includes parts that are of great commercial value.

The rules are based on explicit consent, not inferred consent. This is a key focus. There is a greater network responsibility for security of personal data. This responsibility is enforced by the capacity to assign individual culpability for breaches. This takes culpability away from the “corporation” and hands it to named individuals. This is perhaps the most significant change for business operations in China.

Technical outlook for the Shanghai market

The Shanghai Index had a savage fall, breaking below a series of support levels. However, the sell-off has developed consolidation around two support features. The first of these is the historical support area near 3,540. The second support feature is the lower edge of the long-term group of averages shown on the Guppy Multiple Moving Average (GMMA) indicator.

The most important feature of the current pullback is the way the longterm GMMA is showing limited compression. This suggests that traders are involved in the retreat, but investors have not yet fully joined the retreat. Confirmation of this will come if the index can develop an effective and sustainable rally from these support features.

Failure of these support features means the index will continue to fall towards the longer-term and well-established support feature near 3,450. This level has previously acted as a strong resistance level, starting in July 2020. This level has now changed its function and will act as a support level should the index continue to fall.

Trading band analysis provides an effective way to set targets and to identify support levels when the market retreats. This trade band analysis does not provide insights into how quickly, or slowly, the downtrend will develop.

The framework of the trading band structure of the Shanghai index comes from the long-term sideways trading pattern that dominated the last half of the 2020 trading year. Trading bands are patterns of support and resistance that are equally spaced. The resistance levels that inhibit the market rise in a rising trend change their function and become support levels when the market retreats.

The breakout above 3,620 had a target near 3,710, and this was achieved. The retreat from 3,710 first tested the support strength of 3,620 and then lower support near 3,540. Both these levels failed, and this opens the potential for a substantial trend correction and a re-test of long support near 3,450.

The GMMA provides trend analysis. The long-term group of averages remains well separated, but it is beginning to show some compression. This group of averages is used to track the way investors are thinking about the market. Wide separation shows investors are bullish and support the trend. The doji pattern day on Feb 26 suggests the index fall may be a temporary dip below 3,540. The doji pattern is often associated with trend exhaustion and reversal.

The longer-term uptrend shows broad separation in the long-term group of averages in the GMMA indicator. This shows investor support for the uptrend. If investors were also sellers, then the long-term GMMA would show rapid compression as the market pulled back. If this develops, it will signal a more significant market retreat.

Highlights

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