China is taking notice of the growing focus on data privacy and protection issues by taking two significant steps toward clarifying the country’s approach to protecting personal information. Most recently, China issued the “Information Technology Security — Guideline for Personal Information Protection Within Information Systems for Public and Commercial Services” (the “Guideline”). Issued on Feb. 1 as a “State standard” to provide data privacy guidance, the Guideline provides recommendations only and is not legally binding. However, the Guideline is emerging only shortly after China promulgated the legally binding “Decision of the Standing Committee of the National People’s Congress on Strengthening Online Information Protection” (the “Decision”) on Dec. 28, 2012. The Guideline marks the latest step by the Chinese authorities to address data privacy issues following a number of recent high-profile cases involving unauthorized use and disclosure of personal information. Together, the Guideline and the Decision are indicative of the increasing attention being paid to data privacy issues in China. The provisions of the Guideline are particularly worth noting as they are likely to form the foundation of future legally binding data privacy laws.

The Guideline

There is no overarching data protection law in China. A number of overlapping and sometimes contradictory national, regional, local and sector-specific rules, regulations and guidelines touch on data privacy issues. Nonetheless, a number of recent data privacy scandals involving high-profile companies has raised public awareness of the issues and seems to be resulting in some changes. On Mar. 15, 2012, “Certain Regulations on Standardizing the Order of the Internet Information Service Market” came into effect (the “Regulations”). The Regulations apply to Internet information service providers (broadly, any company that operates a website) and are among the more far-reaching, legally binding efforts to regulate the collection, use and security of personal information. They contain the first legal definition of personal information, which is defined as “information that can identify users independently or in combination with other information.”

Although non-binding, the Guideline provides further details relating to the protection of personal information. The Guideline establishes eight basic principles regarding the handling of personal information. These principles are:

1. Information collectors should have specific and clear purposes as well as justifiable reasons when processing personal information. 
2. Organizations should collect no more information than is necessary to fulfill their purposes and must delete the information once its intended use has been fulfilled. 
3. Information collectors must inform individuals in a clear, understandable and appropriate manner of the purpose, scope and use of personal information that is collected and of the measures which will be taken to keep the information secure. 
4. Information collectors must obtain consent to the collection of personal information. 
5. Information collectors must ensure that all personal information is complete and up to date. 
6. Organizations must take appropriate management and technical measures to keep information secure. 
7. Organizations must not continue to use information once the purpose for which it has been collected has been fulfilled. 
8. Organizations must clearly define internal responsibilities for personal information, must take appropriate measures to implement the responsibilities and must keep records of data processing.

The Guideline divides personal information into general and sensitive personal information. However, no detail is provided regarding what information will be classed as sensitive. Regarding consent to the collection of data, the Guideline provides that collectors of personal information may obtain general information on condition that an individual does not object. Sensitive personal data, on the other hand, may only be collected with the prior authorization of the individual. It appears that the intention is to allow “opt out” consent for the collection of general information but make the collection of sensitive personal information subject to “opt in” consent, although no clarification is provided.

The Decision

The Decision, which, unlike the Guidelines, is legally binding and has generated much attention because while it contains data privacy provisions, it also requires network service providers (not defined in the Decision) to require their users to supply verified identity information when registering on websites that provide Internet publication services (online forums, blogs and microblogs, etc.) or registering for Web site access services. The details of the so-called “real-name registration” have not yet been announced, and therefore how it will be implemented in practice remains unclear.

The data privacy provisions in the Decision apply to “personal electronic information,” which is described (though not formally defined) as “electronic information that is able to identify the identity of individual citizens and electronic information concerning the personal privacy of citizens.” No further guidance is given. Many of the data privacy-related provisions broadly overlap with some of the principles contained in the Guideline, although in the case of the Decision, they are legally binding. The Decision requires “network service providers” and other enterprises or public institutions to specify the use, method and scope of personal electronic information collected and to obtain the individual’s consent to the collection of such data. The Decision does not provide any guidance as to how or when such consent should be obtained. The Decision also requires network service providers or their employees keep personal electronic information strictly confidential and not divulge, tamper with, damage, sell or illegally provide others with such information. These entities also must take technical and other measures to ensure the security of personal electronic information and to prevent such information from being leaked, damaged or lost. No detail is provided regarding the types of measures that might be appropriate.

Network service providers are required to take unspecified remedial measures in the event that personal electronic information may be or has been leaked, damaged or lost. Finally, it is worth noting that the Decision bans sending electronic marketing to the landline, mobile numbers or personal e-mail address of an individual without the individual’s consent or after the individual has explicitly refused to receive such information. This extends the existing ban on sending unsolicited marketing e-mails.

Implications

Companies should be aware of the increasing attention paid to data privacy issues in China and the recent expansion of the rules, regulations and guidance from the authorities in this area. Although not binding, the Guideline constitutes the most comprehensive guidance so far from the Chinese authorities regarding data privacy, and it is likely that it will be used as the basis on which to develop a comprehensive binding data privacy law in the future. For now, it appears that the purpose of the Guideline is to promote a culture of protection and controlled use of personal information in China and to improve the security measures used by public and private organizations to protect personal data.

Although comprehensive, binding legal provisions may be somewhat slow in coming, the general public is becoming sensitized to data privacy issues. As a result, the reputational damage caused by a failure to secure personal information or its use could be significant. Companies doing business in China should therefore make sure their employees are aware of China’s existing data privacy rules and guidelines and that they have policies and procedures in place to support compliance.

Stephanie Sharron, co-chair of the Technology Transactions and Sourcing practice, contributed to this alert.