China data rules will exacerbate global fragmentation

Significance

However, internal and external challenges to reconciling these two objectives are growing. How other jurisdictions respond to China’s regime will have great influence on prospects for future international economic integration.

Impacts

• Foreign entities trying to do business with China will face an increasingly complex and still relatively opaque compliance environment.
• Incompatible data governance regimes in the EU and United States will reinforce ‘decoupling’ pressures, impairing trade with China.
• Multinational firms will localise operations to achieve legal compliance in different jurisdictions, promoting economic fragmentation.
• China may try to negotiate compatibility arrangements with the EU and United States, but is unlikely to achieve much success.
• Washington is leading negotiation of an Indo-Pacific Economic Framework covering digital trade, but in economic competition with China.