‘A lot of uncertainty’ in China is sending companies to the exits

Still, the company hung on in the China market until now. While Yahoo didn’t go into details about its reasons for leaving China, its announcement occurred as the new data protection law came into effect November 1, which industry executives said would require multinational companies to make significant and costly changes to their processing and storage of data.

The law has broad consumer-protection measures that limit companies – Chinese and foreign – from collecting consumers’ personal information without their consent, and from storing more personal data than necessary. It also restricts the transport out of the country of Chinese nationals’ personal data, an especially onerous restriction for multinational tech companies.

“It’s created a lot of uncertainty,” said Lester Ross, policy head of the American Chamber of Commerce in China, about the new personal data law. He said AmCham has been communicating with Chinese regulators to request a period of forbearance to give US companies more time to comply.

Clarisse Girot, Asia-Pacific director of the Future of Privacy Forum, said the Chinese law is largely modelled on Europe’s General Data Protection Regulation, implemented in 2018. But she said China’s version diverges from GDPR in its stipulations for China’s national sovereignty over data, instead of being purely about consumer rights.

The law also comes amid broad pressure on businesses from Xi’s “common prosperity” campaign, a populist push to narrow the country’s wealth gap. A number of China’s most powerful companies have come under regulatory crackdown over the past year, and businesses have scrambled to make large philanthropic donations to prove they are supportive of the government effort.

US video game maker Epic Games gave up its pursuit of the China market on November 15, several months after Beijing banned children from playing video games on school nights. Epic’s popular game Fortnite had been available on a trial basis in China for more than two years, but it failed to gain regulatory approval for a formal release.

The departure of some foreign tech companies means less competition for local players, but it could bring longer-term challenges. China has benefited from the presence of leading overseas high-tech companies, which has helped advance the nation’s technological know-how through joint-ventures and tech transfer agreements.

Ross said that China’s strict entry restrictions during the pandemic have been yet another challenge for business, as has an energy crunch that has disrupted factory production across the country. He said he hasn’t heard of any foreign executives receiving quarantine exemptions while entering China, unlike some other Asian countries, such as South Korea, that have allowed exemptions for business trips.

Several smaller American companies that were considering entry into the China market have shelved those plans because of the country’s coronavirus restrictions, Ross said, without identifying them.

Loading

Most nonessential travel into and out of China is still prohibited, and those able to travel to the country must complete at least three weeks in quarantine. In one northern Chinese city, Shenyang, the quarantine length was extended this month to a whopping 56 days, in a strong deterrent against visitors.

The Washington Post

The Business Briefing newsletter delivers major stories, exclusive coverage and expert opinion. Sign up to get it every weekday morning.