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Hong Kong-China data transfer deal needs to overcome regulatory hurdles

The cross-border data transfer deal between Hong Kong and mainland China will create opportunities for companies in the Greater Bay Area (GBA), but the key to its success will depend on how governments solve differences in their regulatory frameworks, according to an EY partner.

The main challenge lies in the different requirements on data privacy and security under their respective frameworks, and negotiations will take time, Vincent Chan, a consulting partner at EY, said Thursday on the sidelines of the consulting firm’s two-day forum in Shenzhen.

Industries such as artificial intelligence, which rely heavily on big data analysis, will benefit from the freer flow of data under the cross-border deal, and the various interconnectivity schemes in finance between the GBA and Hong Kong are only meaningful with free data transfer, Chan said.

In June, the Cyberspace Administration of China (CAC), the country’s data watchdog, and Hong Kong’s Innovation, Technology and Industry Bureau agreed to draft rules for the safe flow of data within the region, under a national data security management framework.

While the CAC did not disclose details, it said the deal was expected to enhance data flows between the mainland and Hong Kong, bringing the full use of data into play.

China introduced new laws in recent years tightening controls on the transfer of cross-border data, including the Data Security Law and the Personal Information Protection Law, which impose tough penalties for the unauthorised collection, processing, storage and use of data generated in the country.

Hong Kong’s data is regulated under the Personal Data (Privacy) Ordinance and the Guidance on Personal Data Protection in Cross-border Data Transfer, which prohibit the transfer of personal information to places outside the city, except in certain circumstances.

The memorandum signed in June, which was years in the making, was meant to make Hong Kong an international data hub by offering a safe and orderly way to data transfer, starting with the GBA, Chan said.

The GBA is Beijing’s grand plan to turn Hong Kong, Macau and nine Guangdong cities – with a combined population of more than 80 million people, accounting for about one-tenth of China’s economic output – into a new economic powerhouse to rival the likes of New York’s Metropolitan Area and the Tokyo Bay region by 2035.

The changing regulatory landscape has also created business opportunities for EY despite macro headwinds and pandemic control measures that restricted cross-border travel between the mainland and Hong Kong over the past few years, according to the firm.

Compliance projects to meet new data privacy regulations in mainland China represented a major part of client demands when it came to the GBA, said Winson Woo, EY’s partner and leader of consulting in southern China. South China Morning Post

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