China's data securities laws pose costly challenge for JPMorgan

CEO of bank's China fund management arm says 'more and more' resources needed

Eddy Wong, CEO of JPMorgan Asset Management's fully owned fund manager in China, is hoping to tap into a 26.53 trillion yuan ($3.73 trillion) mutual fund market in the country.   © Getty Images

ECHO WONG and KENJI KAWASE, Nikkei staff reporters

June 6, 2023 18:41 JST

 

HONG KONG -- JPMorgan Chase's fund management arm in China is devoting "more and more" time and money to complying with data security laws as Beijing tightens regulations, its chief says.

Eddy Wong, CEO of JPMorgan Asset Management's fully owned fund manager in China, said the "industry is very active" in trying to avoid crossing each "red line" created by mid-2021 Chinese laws governing personal information protection and data security.

"You just need more and more resources and people to make sure ... all these data are kept safely at the right locations," he told an industry conference on Monday.

"We just have to communicate with the regulators. For global firms [operating] worldwide, there is stuff that we might need, outside [China], which the current regulation could be prohibiting."

Wong added that "if the shareholder is from another country, the whole thing is even more complicated, because you might have two separate regulations."

Wong, who is hoping to tap into a 26.53 trillion yuan ($3.73 trillion) mutual fund market in China, spoke only days after JPMorgan CEO Jamie Dimon made his first visit to the mainland since the pandemic.

The two data laws passed in 2021 came as China launched a crackdown against tech companies such as ride-hailing group Didi Chuxing. In addition, China is forming a new national data bureau as part of its government restructuring plan, and has limited access to onshore databases such as academic resource China National Knowledge Infrastructure, and Wind, a financial data provider.

Legal experts told the conference that they were worried around the changes.

"We understand there's different requirements [but the] consequences of getting it wrong can be quite catastrophic for business," said Jeremy Lam, partner and head of financial services practice at law firm Deacons.

Data compliance is a growing cost "not only for global asset managers" but also for other entities in the Chinese market, said Sandra Lu, Shanghai-based partner at LLinks Law Offices.

Adding to the complexity, she said, was that the same business in China could be overseen by different regulators with different requirements.

"So I think that this is the challenge ... a lot of global asset managers under different sets of regulations," Lu said.

Ge Yin, Shanghai-based partner at Han Kun Law Offices, said the consolation for asset managers is that the Cybersecurity Administration of China, the top online watchdog, would be paying closer attention to companies in other sectors.

"The asset management industry is not the focus or the target of the data regulators like the CAC," Ge said. It is "more focused is on companies like Didi, Alibaba, TikTok, the platform companies which have substantial data. So as for [the] asset management industry, [they] don't need to be over concerned."

https://asia.nikkei.com/Business/Finance/China-s-data-securities-laws-pose-costly-challenge-for-JPMorgan