Analysis: Economic security and digital trade: the future of EU–China data flows

Data flows between the EU and China face ongoing restrictions. A new analysis from the National Board of Trade Sweden identifies regulatory differences and security concerns as key reasons.

What is this analysis about?

This analysis examines the state of cross-border data flows between the European Union (EU) and China at a time when digital trade is increasingly affected by economic security concerns and diverging regulatory models. It assesses how the EU’s approach to data transfers differs from China’s and how these differences influence European firms’ ability to transfer data and operate across borders. The analysis also considers the broader geopolitical context and the EU’s de-risking agenda.

What are the main differences between the EU’s and China’s approaches to cross-border data transfer?

The EU and China take very different approaches to cross-border data transfers. The EU’s model is based on fundamental rights and follows an open but conditional system, where data transfers are allowed if specific legal safeguards are in place – particularly under the General Data Protection Regulation (GDPR). In contrast, China’s approach centres on cyber sovereignty and national security. It involves stricter controls, extensive data localisation requirements and broad state authority over access to data.

Given the different approaches, to what extent are cross-border data flows between the EU and China possible at present?

Cross-border data flows between the EU and China are possible in some cases, but they are very difficult in practice. From the EU side, transferring personal data to China is highly challenging because China is unlikely to meet the requirements for an adequacy decision, and it is difficult to ensure protection from government access. On the Chinese side, data transfers are often restricted by localisation rules and security assessments, which in practice force European companies to maintain separate solutions for the Chinese market.

While China has introduced limited flexibility through pilot initiatives, the overall framework remains restrictive. As a result, data flows between the EU and China are likely to remain constrained.

What can the EU do to enable digital trade with China while protecting the union’s economic security?

The analysis concludes that the EU should not expect deep regulatory convergence with China, but should instead focus on managing differences in a way that reduces costs and risks for European companies. This includes maintaining dialogue with China on practical barriers to data transfers and supporting European firms in applying risk management tools, such as encryption and other technical safeguards.

At the same time, the EU should strengthen its digital ties with trusted trading partners. This can be done by expanding modern digital trade agreements and digital partnerships and by actively participating in international initiatives such as Data Free Flow with Trust (DFFT). This approach could help improve Europe’s competitiveness while safeguarding its economic security.

What is the National Board of Trade Sweden?

The National Board of Trade is the Swedish government agency for international trade, the EU internal market and trade policy. Our mission is to facilitate free and open trade with transparent rules as well as free movement in the EU internal market. We provide the Swedish Government with independent analyses, reports and policy recommendations and take into account the views of businesses of all sizes in international trade policy-related matters.