Tech stocks plunge as China passes strong data privacy laws

On Friday, the Standing Committee of the National People’s Congress passed the Personal Information Protection Law. It will take effect from November 1. The state-run Xinhua News Agency said that the law prohibited the illegal collection, use, transmission, disclosure, and trade of “people’s personal information.” This law is meant to curb the growing power of tech firms especially those who have listed overseas and those who have made several acquisitions in the recent past.

 

After the law was passed, Chinese stocks fell by approximately two percent. Some of the major companies who saw a fall in share price included

 

  • JD
  • Xiaomi

 

Health information companies that are affiliated to Alibaba, JD and Ping An Insurance saw a larger fall of 13 percent or more. The Hong Kong Tech Index declined by over 10 percent this week.

 

Earlier, China had not laid down any specific law that dealt with the collection and utilization of such data. Enforcement of data privacy issues depended on different legal provisions present in different existing law.

 

Although all the provisions of the law have not been released, the news agency also reported that the law had clarified the rules that govern the “processing” and “provision” of personal information outside the country.

 

In recent months, a few Chinese companies, including Didi, which was listed in the U.S. have faced crackdown from Beijing regulators. The ride hailing app was accused of illegal collection and use of personal information. Regulatory agencies have been fining companies that list overseas of violations of the country’s laws and practices. The agencies said that the misuse of data would affect national security.

 

The law also encompassed stronger regulations of China’s public surveillance systems. The state broadcaster CCTV said that companies could not target individuals with marketing using personal information. Any personal information could be processed only after obtaining individual consent.

 

Companies who broke the law could be suspended or terminated. Companies who refused to make corrections in their current systems of operations to follow the law would face a fine that could reach a million yuan which is approximately $153,000.

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