China's New Cybersecurity Law Brings Enforcement Crackdown

In Short

The Situation: Earlier this year, the People's Republic of China enacted its Cybersecurity Law, which granted authorities broad, explicit powers to monitor and investigate activities falling under its purview, along with the ability to penalize violators.

The Result: Just a few months after the Cybersecurity Law's implementation, numerous instances of zealous enforcement have been reported.

Looking Ahead: Companies can expect enforcement actions to continue, and should thoroughly review their current procedures to ensure they are in compliance.

Even before its enactment on June 1, 2017, the Cybersecurity Law of the People's Republic of China ("Cybersecurity Law") sparked outcry from the international community. Under the Cybersecurity Law, regulatory authorities are not only provided with more explicit and wider monitoring, investigative and enforcement powers, but also the ability to penalize both companies and responsible personnel. In the last few months since the Cybersecurity Law came into effect, the Chinese government has already zealously exercised its enforcement powers under the Cybersecurity Law. The regulatory authorities throughout China have already concluded multiple investigations, issued a wide range of penalties and fines to offending companies, and show no signs of slowing pace.

This article provides a high-level review of these recent cases to underscore the importance of compliance with China's Cybersecurity Law and provide some practical guidance to companies to navigate this new and evolving legal landscape.

Recent Investigations

In July 2017, internet police in Shantou City, Guangdong Province, penalized a Shantou technology company for violating Article 14 Paragraph 1 of the Administrative Measures for the Tiered Protection of Information Security and Article 21(5) of Cybersecurity Law on the grounds that the company did not fulfill its obligations to conduct security evaluations for its information systems. The internet police ordered the company to implement corrective action to remedy the offense pursuant to Article 59 of the Cybersecurity Law.

During this same period of time, a website for a teacher training and education institution in Yibin City, Sichuan Province, was penalized for failing to implement the Cybersecurity Law's tiered system of cybersecurity protections and security assessment, which resulted in serious cybersecurity loopholes that led to network intrusion incidents. Not only was the company fined 10,000 yuan (~$1,500 USD), the managerial officer (termed "legal representative" under Chinese law) was personally fined 5,000 yuan (~$750 USD) pursuant to Article 59 of the Cybersecurity Law.

In early August, the Cybersecurity Department of Chongqing Municipal Public Security Bureau penalized a technology company in Chongqing City for violating Article 21(3) of the Cybersecurity Law alleging the company failed to take technical measures to preserve the user access weblogs. The bureau ordered corrective measures within 15 days.

Also in August, the Public Security Bureau in Suqian City, Jiangsu Province, penalized a network operator for violating Article 47 of the Cybersecurity Law because the network operator allegedly allowed network access to an unlawful website. The Public Security Bureau ordered the network operator to take corrective action pursuant to Article 68 of the Cybersecurity Law, which included ceasing the transmission of such information, deleting relevant files, and preserving relevant records.

On August 11, the Cyberspace Administration Offices in Beijing and Tianjin found BOSS Zhipin, an online recruitment portal, in violation of Articles 24 and 48 of the Cybersecurity Law on the grounds that the portal provided users—who did not provide their true identity information—with information services, and hence, failed to fulfill its security management obligations. The Cyberspace Administration Offices ordered BOSS Zhipin to take down the relevant webpages.

On August 17, the Cyberspace Administration Offices in Zhejiang Province and Hangzhou City investigated against five major online platforms, viz. Taobao (the largest Chinese online shopping website), financial information service provider Hexin Flush, social shopping network Mogujie, and popular entertainment platforms Xiami.com and Peiyinxiu, on the grounds that these platforms breached the Cybersecurity Law, and other related regulations including the Administrative Measures for Internet Information Services, Provisions on the Administration of Account Names of Internet Users, etc. Specifically, the Cyberspace Administration Offices claimed that Taobao sold prohibited goods, illegal VPN tools, and network accounts; Hexin Flush and Peiyinxiu disseminated harmful messages; and Mogujie and Xiami.com had illegal and irregular user accounts. The Cyberspace Administration Office in Zhejiang ordered these online platforms to take corrective action, including to remove harmful information and irregular user accounts, conduct comprehensive security review, provide emergency response and technical support, and report progress to the authorities. The Cyberspace Administration Offices further ordered Taobao to remove all prohibited goods and take serious actions against all noncompliant online shops. It similarly required Hexin Flush to commence comprehensive verification procedures and suspend the operation of the system at issue. Mogujie and Xiami.com were likewise ordered to suspend new users' registration for seven days.

A company in Xinzhou City, Shanxi Province, was also recently investigated and penalized under the Cybersecurity Law on the grounds that its corporate website was subject to security vulnerabilities that could be easily exploited by SQL Injection, one of the most common web-hacking techniques. Law enforcement concluded that the security vulnerabilities posed a serious threat to the website's information security. Both the provincial and municipal internet police issued administrative warnings and ordered corrective action.

In September, Guangdong Communications Administration investigated the acts of four internet corporations, namely, Guangzhou Lizhi FM, Shenzhen Sanren Technology Company, Guangzhou Dongjing Computer Technology Company, and Alibaba Cloud (Aliyun), on the grounds of violation of the Cybersecurity Law, as described below:

• The Guangdong Communications Administration found that Guangzhou Lizhi FM violated Article 47 of the Cybersecurity Law as well as Article 16 of the Administrative Measures for Internet Information Services because the company did not immediately cease releasing and transmitting harmful information to prevent the information from spreading and to preserve relevant records. The company was issued a warning and ordered to take corrective action to remedy its noncompliance pursuant to Article 68 of the Cybersecurity Law and Article 23 of the Administrative Measures for Internet Information Services.
• Shenzhen Sanren Technology Company was found to have failed to request true identity information from users before providing network phone services, as required by Article 24 Paragraph 1 of the Cybersecurity Law and the Provisions on the Registration of True Identity Information of Telephone Subscribers. A fine of 50,000 yuan (~$7,500 USD) was imposed and the company was ordered to take corrective action, cease business operations, and close down its website pending rectification pursuant to Article 61 of the Cybersecurity Law and Article 17 of the Provisions.
• The Guangdong Communications Administration similarly found China's largest cloud provider Alibaba Cloud (Aliyun) in breach of Article 24 Paragraph 1 of the Cybersecurity Law for not requiring true identity information before providing network access services to users. The company was ordered by Guangdong Communications Administration to take corrective action pursuant to Article 61.
• The UC browser cloud acceleration service provided by Guangzhou Dongjing Computer Technology Company was found to have security vulnerabilities that resulted in the dissemination of harmful information, in breach of Article 22 Paragraph 1 of the Cybersecurity Law. The company was ordered to rectify its security measures including conducting a security assessment on its communications network, setting up regular security assessment mechanisms, and performing inspections on existing services.

Most notably, in August 2017, the Cyberspace Administration Offices in Guangdong and Beijing commenced investigations of China's internet giants Tencent's WeChat, Sina's Weibo, and Baidu's Teiba—often viewed as the Chinese counterparts to Facebook, Twitter, and Google respectively. In an effort to increase supervision of online content, on September 25, the Cyberspace Administration Office in Guangdong penalized Tencent on the grounds that its users had disseminated information the local authority considered misleading, inappropriate, or that jeopardized national security. The Beijing Cyberspace Administration Office subsequently penalized Sina and Baidu on similar grounds. All three companies were directed to remove all users who published unlawful information.

These recent cases demonstrate that Chinese authorities take seriously the Cybersecurity Law and companies can expect enforcement across China at the state and local level to only continue and increase. China's enforcement has not only impacted ISPs but also private companies. It also has focused on a vast array of violations of the Cybersecurity Law ranging from failure to conduct security evaluations of information systems (Article 21), failure to implement a tied system of cybersecurity protections (Article 21) to failure to monitor and manage prohibited information (Article 47). Companies should carefully review their existing policies, practices, and procedures in China and assess their compliance with the Cybersecurity Law. The legal regime in China is still evolving; thus, it also is important to closely monitor recent guidelines, measures, and regulations supplementing the new Cybersecurity Law.

For more information on the obligations of the Cybersecurity Law, visit Jones Day's previous White Paper and Alert.

Three Key Takeaways

1. Various authorities at the national, provincial, and local levels have initiated enforcement actions in China.
2. Internet companies and nontechnical companies and their responsible personnel have been subject to enforcement efforts tied to the Law.
3. Companies should carefully review their existing policies, practices, and procedures in China and assess their compliance with the Law.

Lawyer Contacts

For further information, please contact your principal Firm representative or one of the lawyers listed below. General email messages may be sent using our "Contact Us" form, which can be found at www.jonesday.com/contactus/.

Chiang Ling Li
Hong Kong
+852.3189.7338
chianglingli@jonesday.com  

Haifeng Huang
Hong Kong/Beijing
+852.3189.7253 / +86.10.5866.1216
hfhuang@jonesday.com  

Yunchuan Zhou
Hong Kong
+852.3189.7369
yczhou@jonesday.com  

Jennifer C. Everett
Washington
+1.202.879.5494
jeverett@jonesday.com  

Mauricio F. Paez
New York
+1.212.326.7889
mfpaez@jonesday.com

Todd S. McClelland
Atlanta
+1.404.581.8326
tmcclelland@jonesday.com  

Undine von Diemar
Munich
+49.89.20.60.42.200
uvondiemar@jonesday.com

Jörg Hladjk
Brussels
+32.2.645.15.30
jhladjk@jonesday.com

Richard Zeng
Washington
+1.202.879.3738
rzeng@jonesday.com

Special thanks to Hong Kong associates Elsa Liu, Grace Zhang, Eileen Li, and Sharon Yiu for their help in preparing this Commentary.

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