Opportunities for Foreign SaaS Companies in China

More and more software solutions are being delivered via the cloud rather than locally installed. There is an enormous and growing market for these Software-as-a-Service (SaaS) offerings in China. Many of the most advanced global SaaS companies are American, and it is no surprise that these firms’ technology are often the leading products in China.

China’s New Data Security Law

With online data privacy protection not having been a priority for too long, companies should be aware that China is now stepping up its game with the new Data Security Law (DSL) that was passed on 10 June 2021 and comes into effect on September 1, 2021. A separate draft of the Personal Information Protection Law (PIPL) has also been in draft circulation and is expected to be passed and come into effect at the end of 2021.

China’s Company Chop System and Risks to Foreign Investors

Since June 2020, a fight over the control of the China subsidiary of ARM, a leading semiconductor company, has centered around the possession of the company chop. ARM was reported to have fired its head of China, Allen Wu, who is still registered as the legal representative of ARM China. With control over the company chop and business licenses, Wu would seem to have a powerful weapon to use as a bargaining chip with ARM’s shareholders outside of China, even though there is no doubt he will eventually be removed from his position. How can physical possession of the company chop cause so much trouble for ARM’s shareholders?