What does the newly-established National Data Bureau mean, for you?

The brief history of data regulation in China shows that the Chinese government has a dual mandate of both security and development

Among the institutional reform of Chinese government that was announced last week, the 国家数据局 National Data Bureau (NDB) has attracted much attention. For those of us who work in China’s data industry though, this is not surprising.

As I have pointed out during a podcast with Ginger River Radio, China has quickly evolved from the stage of setting up basic legal framework for data regulation, to the stage of encouraging data utilization in order to drive economic growth. It shows the government is serious about unlocking the value of data as the fifth factor of production (besides labor, capital, land and technology). Both the so-called “20 Data Measures” as well as the creation of NDB are developments along this line.

In this post, we will translate a news article about the NDB by 南方周末 Southern Weekly, a renowned weekly news publication, to give you better context regarding this new government agency. [If you are already familiar with the subject, you can skip to the bottom of the post, where we provide you with our advice for your investment and business opportunities in China.]

The title of the article is 国家数据局成立，它将改变什么？ What changes will the creation of the National Data Bureau bring about.

What changes will the creation of the National Data Bureau bring about?

"Formation of the National Data Bureau." On the afternoon of March 7, 2023, Mr. Xiao Jie, State Councilor and Secretary General of the State Council announced the birth of this new agency in a note on the State Council's institutional reform program.[Paragraph redacted]

According to the description of the State Council's institutional reform program, the National Data Bureau, as a national bureau managed by the National Development and Reform Commission (NDRC), is responsible for coordinating and promoting the construction of the data infrastructure system, coordinating and promoting digital China, digital economy, digital society planning and construction, etc.

The National Data Bureau brings together previous responsibilities undertaken by the Office of the Central Cyberspace Affairs Commission to study and formulate the construction plan of digital China, coordinate and promote the informatization of public services and social governance, coordinate and promote the construction of smart cities, coordinate the development, utilization and sharing of nationally important information resources, and promote the cross-sectoral interconnection and interoperability of information resources, and previous responsibilities undertaken by the NDRC to coordinate and promote the development of the digital economy, organize and implement the national big data strategy, promote the construction of basic system of data factor, and promote the layout and construction of digital infrastructure.

"Not quite the same as the previous rumors." Jingtian Gongcheng Law Firm partner and data law expert Mr. 袁立志 Yuan Lizhi wrote in his WeChat Moments that the responsibilities of the National Data Bureau are only data development and utilization, and there is no mention of data security protection. Although it did not consolidate these powers under one ministry, but the establishment of a vice ministerial unit at the national level dedicated to data development and utilization is already significant to alleviate the current difficult situation of data circulation and utilization.

[BAiGUAN note: Mr. Yuan Lizhi is one of the earliest and most renowned legal experts in China on data issues. BigOne Lab, which powers this newsletter, has also worked with Mr. Yuan closely since founding. If you wish to connect with Mr. Yuan, please subscribe and shoot us a message.]

Professor 高富平 Gao Fuping, Director of the Data Law Research Center at East China University of Political Science and Law, told Southern Weekend reporters that in the future, all aspects of social development and digital transformation are closely related to the use of data. Data is the most basic resource, and utilizing data resources well is related to the enhancement of China's competitiveness. It is indeed necessary to have a unified department responsible for the formulation of data policies and regulations.

1. Why is NDB managed by NDRC?

Multiple data industry practitioners told Southern Weekend reporters that they had not heard of the establishment of such an organization before. "After the reform plan was announced, it was circulating in our social circle," they said.

Yuan Lizhi believes that the emergence of the NDB is not surprising, as there have been frequent legislative actions in the field of data in recent years. From the Cybersecurity Law to the Data Security Law, it is not difficult to see that previously the focus in the data field was more on security and protection.

However, in 2021, there has been a growing call to promote the circulation of 数据要素 data resources, and the government has responded to social demands by establishing data resources markets and releasing "20 Data Measures".

In January 2023, Yuan Lizhi attended a seminar on data resource circulation and made a brief speech. After the meeting, officials from the NDRC contacted him to discuss the practical aspects of data resource circulation. "There are seriously inadequate legal provisions to support data utilization and development," said Yuan Lizhi. When providing legal services related to data enterprises, it is difficult to find legal basis that supports the development, utilization, and sharing of data. He can only look for them in some very macroscopic documents published by government departments, but these macroscopic expressions are often difficult to counteract specific legal restrictions.

He found that many projects tend to get stuck on compliance clauses, which has become a common problem faced by the data industry.

For this purpose, Yuan Lizhi specially communicated with the staff of the National Development and Reform Commission and suggested the creation of a "positive list". The purpose of the "positive list" is to tell the enterprises what they can do, and to "give them peace of mind". Yuan Lizhi believes that the list does not need to be comprehensive. Initially, only typical scenarios and cases need to be selected to clearly inform enterprises that data can be developed and utilized in these situations, "which can solve the urgent needs of many enterprises".

After learning the news [of the NDB], the chairman of a data company told the Southern Weekend reporter, "This is extremely favorable". His industry has generally faced compliance problems with data sources for a long time in the past.

Several practitioners in the data industry are happy to see the NDB being managed by the NDRC. "The data industry has a new force in addition to traditional security regulators." In Yuan Lizhi's view, it is only right that the NDB be subordinated to the NDRC, and the promotion and dissemination of the digital economy is precisely the original responsibility of the NDRC.

Some Internet industry sources told Southern Weekend that the incorporation of the NDB into the NDRC means that data is under the framework of development rather than the regulatory framework.

2. Local-central governments' working mechanisms need to be sorted out

Before the emergence of the "National Data Bureau", a number of provinces and municipalities across the country already had big data management departments.

According to perhaps incomplete statistics, there are at least 12 big data management departments in Guizhou, Fujian, Shandong, Zhejiang, Guangdong, Guangxi, Jilin, Henan, Inner Mongolia, Jiangxi, Shanghai and Chongqing only at the level of provinces and municipalities directly under the Central Government and autonomous regions.

Local big data management departments are called many things, such as big data administration, big data development bureau, big data development administration, big data bureau, big data application development administration, government service data administration, government service and digital construction administration, big data center, data resource administration and so on.

Not only are they called different names, but the institutional settings are also different. Some are direct agencies of local governments, while others are subordinate units of local economic and informatization departments.

Mr. 许可 Xu Ke, the director of the Digital Economy and Legal Innovation Research Center of the University of International Business and Economics, explained to the Southern Weekend reporter that the early batch was set up after the State Council issued the "Action Outline for the Development of Big Data". Each place adjusted according to the local organizational structure, and despite the differences in institutional settings, the essence is to build a digital government.

"In the future, the National Bureau of Data can manage the big data departments in various regions from top to bottom." Xu Ke said that data is not only a local matter. The problem is compounded by the unequal distribution of data resources across different regions, with some regions having high data value and others having low value. The former are active and the latter are passive, which is not conducive to data circulation and sharing. In order to build a unified national market, a unified coordination mechanism is needed.

According to Xu Ke, the National Data Bureau can first start to coordinate, share and develop and utilize public data in different regions, and promote the implementation of the rules related to data application nationwide along the direction specified in the "20 Data Measures", gradually including various types of data in the construction of data infrastructure, including enterprise data and social data, on-site data and off-site data.

Since there is a national data bureau, is it still necessary for local data management departments? In Yuan Lizhi's view, the answer is yes. Especially for the promotion of industrial development, different localities have to combine local reality. Only local familiarity with local data resources, including local government data, state-owned enterprise data, etc., can better support the development of local big data.

The establishment of the National Data Bureau let a number of data industry people have high hopes, said Xu Ke, the relevant authorities should accurately understand the special nature of data and data transactions, and respond to the real needs of enterprises in order to develop reasonable regulations.

"In a sense, the purpose of establishing a basic system for data resources is to provide an institutional arrangement that reduces transaction costs and helps both sides reach a deal quickly." What the authorities have to do is to introduce regulations that promote transactions rather than control constraints, Xu Ke said.

3. Balancing development and security

According to the aforementioned institutional reform plan, some of the functions of the Cyber Security Administration and the NDRC that involve data applications will be transferred to the National Data Bureau.

Gao Fuping, who has continued to promote the circulation and application of data factor for many years, observes that the National Data Bureau is positioned to promote economic development and serve the digital transformation of the whole society, rather than emphasizing security and personal information protection. The greatest value of data lies in its application, and the prerequisite for application is security.

During his research, Gao Fuping discovered that there are no mature global rules for the utilization of data resources. When discussing data protection, emphasis is always placed on protecting the interests of the data source, and few countries can empower holders with rights that allow them to both not monopolize data and realize its utilization. "20 Data Measures" provides a good framework and concept, but practical exploration is still needed for implementation.

In particular, the circulation of data resources in China is still mostly traded through the over-the-counter market, Gao Fuping said, "It is imperative for the National Data Bureau to explore an enforceable institutional rule for data circulation and utilization."

Currently, the scope of responsibilities announced by the NDB does not include data security and protection. This is somewhat surprising to Xu Ke, as both data security and utilization are essential components of data development, and excessive emphasis on either one will lead us further away from our ultimate goal.

Xu Ke analyzed that the reason for this may be that many of the previous rules and policies in the field of data have focused on security, and there is now a need to rebalance the emphasis on both data security and utilization. However, this does not mean that there will be a relaxation in the field of data security.

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