Notes From The China Desk

On September 11, the U.S. Department of Commerce’s Bureau of Industry and Security published a proposed rule in the Federal Register that would require quarterly reporting by organizations, companies, and corporations organized in the U.S. (including branches outside the U.S.) if they plan to either engage in artificial intelligence model training or acquire, develop, or otherwise possess a high-performance computing cluster for AI training. 

China recently enacted a revision to the PRC Law on Guarding State Secrets, and shortly after Hong Kong followed suit when it passed the Safeguarding National Security Ordinance.

On May 20, 2024, the PRC Ministry of Commerce (MOFCOM) announced the inclusion of three U.S. companies on its unreliable entities list over sales of arms to Taiwan. We discussed the implementation of the Unreliable Entity List here. The move mimics similar designations in February 2023, which we wrote about here, and follows recent actions by the BIS and Treasury to apply new export controls and sanctions on Chinese entities for allegedly doing business with Russia.

On September 28, 2023, the Cyberspace Administration of China (CAC) published Regulations to Standardize and Promote Cross-Border Data Flows (Draft for Comments) (the Draft Regulations). In current form, the Draft Regulations appear to clarify and walk back the requirements from prior regulations, including the Data Transfer Security Assessment Measures (Security Assessment Measures) and the Standard Contract Measures for the Transfer of Personal Information (the SCC Measures).

In early September 2023, the Standing Committee of the National People’s Congress adopted an amendment to China’s Civil Procedure Law (the Amendment). The Amendment will go into effect on January 1, 2024. The Amendment provides clarity and legal justification for Chinese courts to assert jurisdiction over foreign-related cases that involve Chinese individuals or specific subject matter.

Foreign companies should be aware that Chinese companies may attempt, and Chinese courts may accept, these types of cases despite the existence of forum selection and choice-of-law provisions in a contract.

The Notice will affect all mobile apps operating on internet networks in China. Mobile app developers or operators will have until the end of March 2024 to complete the filing.

On April 20, 2022, the Hangzhou Internet Court held a Chinese NFT-trading platform responsible for copyright infringement for the conduct of one of its users in Case No. (2022) Zhejiang 0192 Minchu No. 1008, the first publicized NFT infringement case in China.

Cadence Design Systems, Inc. v. Syntronic AB et al. is being recognized as one of the first significant decisions regarding discovery disputes involving Chinese companies claiming that Chinese law, specifically the recently enacted Personal Information Protection Law (“PIPL”), would prevent them from complying with discovery obligations in U.S. proceedings. 

With the release of the 2021 Negative List for the Market Entry of Foreign Investment[1] (“2021 Negative List”), which went into effect on January 1, 2022, China’s policy on foreign investment became clear—foreign companies may invest in unrestricted industries or invest passively according to the restrictions in Chinese law. 

On September 17, 2021, the Stock Exchange of Hong Kong published a consultation paper on Special Purpose Acquisition Companies (SPACs). 

China’s Notice to Prevent Minors from Indulging in Online Videogames, effective September 1, 2021, requires Chinese online videogame companies to limit playing time for minors to essentially three hours per week. 

On July 10, 2021, the Standing Committee of the National People’s Congress of the People’s Republic of China (PRC or China) passed the Anti-Foreign Sanctions Law (AFSL), which came into effect on the same day. The AFSL provides general authorization for countersanctions against countries, organizations, and individuals for issuing and implementing sanctions against China and its companies and individuals.