Historically, China has always adopted a stringent and robust approach to managing online access. It was one of the first (and the few) nations to censure the Wikipedia website, for example, with the Chinese version of the site blocked entirely for a sustained period of time back in 2004.
This trend shows no sign of abating, however, with China set to enforce new and tenacious cybersecurity laws in the wake of an increasingly sustained threat. The nature of these laws, and their relative secrecy, may pose an issue for businesses, however, particularly those with an international focus.
How Will the New Laws Impinge on Businesses
Despite being rubber-stamped by the country’s parliament last year, this law has remained firmly under the radar and this lack of clarity has confusion, trepidation and uncertainty in equal measure. Initially designed as a key part of wide-ranging efforts by the Beijing government to keep control of the Internet within China‘s borders, the new laws were rushed through in the wake of Edward J. Snowden’s revelation that overseas technology firms could infiltrate the Chinese economy and help governments to spy.
While these may sound like perfectly sensible, if slightly unnecessary measures, the main question revolves around the restrictions that they place on existing businesses. Although some have argued that the measures may actually prove to be ineffective at preventing sophisticated cyber attacks and potential acts of terror, most private sector companies have expressed concerns that they will actually make it more expensive to operate in the country. In the case of overseas firms, it could actively prevent them from trading at all in China.
It will certainly have a big impact on how business is conducted in China, with the prevailing fear being that industries and business operatives are entirely unprepared for the implementation of the new laws. With many areas of clarification still required, and the precise impact of the legislation yet to be determined, we could see global businesses lose traction while the world’s financial markets also experience a short-term decline. For some firms, it may even be necessary to adapt their infrastructure and seek out new markets in order to counter the measure.
The Last Word: What About the Financial Markets?
From the perspective of the financial markets, China’s new laws could also have a significant impact. Even blue chip stocks that are reliant on the Chinese market could see their values fall, for example, while the currency sector could see significant depreciation. Over time, we may well see traders remove certain stocks and currencies from their portfolio, at least until the new laws have been adapted to successfully.
While these issues may be concerning, they are relatively short-term and should be easily overcome with time. The question that remains for firms is whether these near-term financial losses are offset by the benefits of the legislation and any increased security that they afford companies, particularly in an age when cyber and terror threats are rife. If this is the case, then we should all be prepared to cope with the short-term fallout for the greater, long-term good.