China's digital policy: a threat to European business models

October 1, 2021

China is pursuing ambitious goals: Digitization is to provide an additional boost to the economy and help secure political stability. The regulation of digitization in the country provides the framework for this (see also Demary et al., 2021). A multitude of laws and bills regulate access and use of data, consumer protection and cybersecurity. From a European perspective, the problem is that most of these regulations have a wide scope of application and include far-reaching access options for the Chinese state, for example to proprietary data. In addition, there are strict requirements regarding the storage of data and the transfer of data abroad, as well as the social credit system, which collects data on individuals, but above all on companies. In the event of a poor rating in this system, the Chinese government can make it more difficult for foreign companies to do business.

Another structuring element of China's digital policy is the collaboration between business, the state, and the party, which manifests itself, for example, in the blocking of market access for foreign tech companies to protect domestic companies. At the same time, China is also striving for international influence in the digital sphere with its own software and hardware as well as intensive participation in standardization bodies.

Economic policy recommendations

Chinese digital policy can certainly have an impact on European business models. From a European perspective, it is therefore important to become and remain active in various fields of action to keep the European economy internationally competitive in the digital sphere:

  • Greater transatlantic cooperation in digitization, for which the Biden administration in the USA offers new opportunities, would be a useful means to deal with the Chinese digitization strategy.
  • In addition, the competitiveness of European companies should be fundamentally strengthened, for example through better framework conditions for start-ups and the completion of the EU's digital
  • single market.
  • The EU should continue to make progress in setting smart framework conditions for the digital world, which it has already done well with the General Data Protection Regulation (GDPR), for example.
  • Finally, a continuous dialogue between China and the EU on digitization issues should be promoted to achieve productive cooperation between the EU and China instead of the latter closing itself off
  • further.