Internet and VPN in China

China boasts a cutting-edge internet infrastructure, with a high internet penetration rate of almost 80% and fast (including mobile) speeds. The country's 5G technology and widespread free WiFi further highlight its advanced infrastructure. Its efficient digitalization and thriving app market are also noteworthy.

There are apps for (almost) everything: whether you want to hail a taxi, pay for a bottle of water at the convenience store or turn on the air conditioning at home just before leaving work - no problem. Dining out can even be a breeze: scan the QR code, order from the app's digital menu and pay on the spot - quickly, digitally and conveniently.

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But where there is light, there is shadow. As incredibly advanced and convenient as digitization is, China's internet is more like an intranet. It is connected to the global network only through a few points, which also act as a sieve. This sieve, China's internet censorship, also known as the “Great Firewall”, blocks many websites and online services, especially Western ones. Anyone doing business in China must ensure that their IT infrastructure is not dependent on blocked or restricted services.

Virtual Private Networks (VPN) can offer a solution in this regard. However, due to their ability to circumvent censorship, VPN services are heavily regulated in China. Only authorized VPNs may be used, and failure to do so can result in severe penalties.

In addition to the use of VPNs, subsidiaries in China should also be vigilant when collecting data that they want to share with the parent company. Typically, ERP or CRM systems are used for this purpose. This is particularly important as China has enacted a number of laws and regulations in recent years relating to data protection, data security and cross-border data transfer. Compliance with these regulations is critical.

China blocks a wide range of websites and internet services, including search engines such as Google and social media platforms such as Facebook, X and YouTube, as well as a large number of foreign news sites. At first glance, this may only be inconvenient for foreign employees of the Chinese subsidiary.

In addition to complete blocks, the Great Firewall also occasionally restricts services that are not actually blocked, for example if they use tools, plug-ins or other services that are blocked in China. This can result in slow loading times, disconnections or other technical problems. Companies in China should therefore take care to design their IT infrastructure so that blocked tools are not required to maintain core IT functions. Careful planning and adaptation of IT systems can help minimize the impact of the Great Firewall and ensure smooth operations. This is particularly true for internal cloud and communications services.

Marketing also needs to be adapted. If a company uses Western social media platforms, it will not reach anyone in China. Local social media channels should be set up, e.g. on WeChat, Baidu, Weibo, Douyin, QQ or Xiaohongshu, to name but a few. 

When entering the market, companies should therefore plan their internet strategy and internal networking and communication accordingly. It is also important to constantly monitor the legal framework and adapt it if necessary.

Given the monitoring and restriction of the internet by the Great Firewall, the use of a VPN may be necessary and useful. The use of a VPN is generally not allowed in China unless the VPN service has been approved by the Chinese government. A VPN service can only be approved if it contains a backdoor that allows government authorities access. This means that VPN services authorized in China lack a key feature, which is the security of the service.

Although unauthorized VPN services can technically work if they are not already blocked, their use is strongly discouraged. The VPN ban is mainly enforced against companies, while individual users such as foreign employees or tourists are less affected. Companies that violate the ban may face severe penalties.

Even when using authorized VPN services, connection problems can occur. Such issues may be caused by official restrictions on access to foreign Internet resources, for example on politically sensitive days. Companies should be aware that even authorized VPN connections are not always reliable, and disruptions can occur. The IT infrastructure should be designed to minimize the impact of short-term slowdowns or outages on work processes and digital communication.

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The Chinese legal framework for data protection is currently highly fragmented, creating a complex regulatory environment. Companies must deal with overlapping requirements and ensure compliance with all relevant laws. The most important laws include the Personal Information Protection Law (PIPL), the Cybersecurity Law (CSL) and the Data Security Law (DSL).

Certain types of data, particularly “critical data” and “personal data”, must be stored in China. This may limit the ability to consolidate or transfer data with the parent company. Companies will also need to ensure that their IT systems and cloud storage comply with localization requirements.

The transfer of data outside China is subject to strict regulations, which usually require security assessments, certifications and contractual agreements if certain thresholds are exceeded.

The evolving nature of China's data protection laws, coupled with ambiguous provisions that are open to interpretation or subject to interpretation, can lead to uncertainty in the application and enforcement of the rules. Nevertheless, Chinese regulators are becoming increasingly vigilant with respect to data protection. Failure to comply can result in significant fines, reputational damage and even criminal liability.

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China boasts a cutting-edge internet infrastructure and impressive digitalization, offering significant advantages for businesses and individuals. However, this is counterbalanced by strict internet censorship and complex data protection regulations, which pose considerable challenges for companies. While VPNs can be a solution, they are subject to strict regulation and carry inherent risks. To operate successfully in China, companies must meticulously plan their IT infrastructure and data management strategies, adapting them to local conditions.

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