corporate spying

German firms see their data at risk in China

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A warning signal. Source: DPA

German companies are getting testy about Beijing’s law that would force them to save their data on Chinese servers – even as they call on firms from the US to do the same in Europe.

But worry about corporate spying, already widespread, spiked this week after billions of euros’ worth of deals were signed between German companies and Chinese partners. The 33 agreements inked during the Chinese premier’s visit involve joint ventures between Voith and Chinese rail manufacturer CRRC, SAP and Suning Holdings, Siemens and State Power Investment and others.

Now, considering their data, the Germans are getting cold feet. China is particularly eager to cooperate in autonomous driving and the internet of things. Both will generate vast amounts of sensitive data.

The problem is a law passed in 2016 which would force foreign businesses to store data on Chinese servers and only use state-run networks to access the internet. That, say German business leaders, brings a major risk of industrial espionage.

Industry leaders warn the law is incompatible with the way machines and factories are interconnected around the world. Thilo Brodtmann manages an influential machinery-makers’ association and said it could do serious damage to China’s status as an industrial location. Dieter Kempf, president of German industry federation BDI, agreed. Beijing’s law would curb cross-border data transmission and hamper plans to deepen cooperation with Germany, he said.

Bone of contention

It also isn’t clear how Beijing plans to handle confidential data that was generated abroad, for example, data brought in to China by a service technician. “Will he be able to take the data back home with him?” asked Mr. Brodtmann.

The law is a huge bone of contention between Germany and China. They can only cooperate in technology if the security of data is guaranteed, according to Mikko Houtari, deputy director of the Berlin-based Mercator Institute for China Studies.

Speaking in Berlin, China’s premier sought to allay concerns. Mr. Li promised theft of intellectual property would be “relentlessly penalized.”

Also, China hasn’t yet switched off the lines that give companies unfettered access to the internet. But that doesn’t necessarily mean much, said Mr. Houtari of the Berlin institute. Beijing also hinted it would water down the rule on data storage in China. “In the past, we’ve often seen cases where reassurances were given initially, but then tough action was taken after all,” Mr. Houtari said.

On the ground, German managers are getting around the problem by transporting their most sensitive data offline. The companies they work for, meanwhile, are waiting to find out whether they’ll need official permission to transfer important data.

“At present we’re expecting the worst,” Mr. Brodtmann said.

Dana Heide covers digital policy and Sha Hua is China correspondent, both for Handelsblatt. David Crossland adapted this story into English for Handelsblatt Global. To contact the authors: heide@handelsblatt.com, hua@handelsblatt.com

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