Data Localization Requirements: What You Need to Know in 2025

China's data localization requirements are evolving rapidly. This comprehensive guide explains which data must be stored locally, cross-border transfer restrictions, and practical implementation strategies for international AI companies.

Understanding Data Localization

Data localization refers to the legal requirement to store certain types of data within a country's borders. China's Data Security Law and Personal Information Protection Law (PIPL) impose strict localization requirements that international companies must understand and comply with.

For AI companies, this is particularly critical because training data, user interactions, and model outputs may all be subject to localization requirements depending on their classification.

What Data Must Be Stored Locally?

1. Personal Information of Chinese Citizens

Under PIPL, personal information of Chinese citizens collected within China must be stored within China. This includes:

• Basic personal information (name, ID number, phone number, email)
• Biometric data (facial recognition, fingerprints)
• Location data
• Behavioral data (browsing history, purchase records)
• AI interaction data (chat logs, voice recordings)

2. Important Data

The Data Security Law requires that "important data" must be stored within China. While the exact definition varies by industry, for AI companies, important data typically includes:

• Training datasets containing Chinese user data
• AI model outputs that could impact national security or public interest
• Data related to critical information infrastructure
• Large-scale datasets (typically over 1 million users)

3. Industry-Specific Requirements

Certain industries have additional localization requirements:

• Financial services: All financial data must be stored locally
• Healthcare: Medical records and health data require localization
• Education: Student data and educational records must be stored in China
• Critical Information Infrastructure: All data must be localized

Cross-Border Data Transfer Restrictions

Even if data is stored locally, transferring it across borders requires compliance with strict regulations. PIPL requires one of three mechanisms for cross-border transfers:

1. Security Assessment

Required for transfers of "important data" or large volumes of personal information. The Cyberspace Administration of China (CAC) conducts security assessments that can take 3-6 months.

2. Personal Information Protection Certification

Obtained through accredited certification bodies. Suitable for smaller-scale transfers but requires ongoing compliance monitoring.

3. Standard Contract

Using the CAC's standard contract template. Most practical for many companies but requires careful implementation and ongoing compliance.

Practical Implementation Strategies

1. Data Classification and Mapping

The first step is to conduct a comprehensive data audit:

• Identify all data collected from Chinese users
• Classify data by type (personal information, important data, etc.)
• Map data flows and storage locations
• Identify cross-border transfer needs

2. Infrastructure Setup

Establish compliant data storage infrastructure:

• Partner with compliant cloud service providers in China (Alibaba Cloud, Tencent Cloud, etc.)
• Set up separate data centers for Chinese user data
• Implement data segregation and access controls
• Ensure backup and disaster recovery within China

3. Compliance Documentation

Maintain comprehensive documentation:

• Data processing records
• Cross-border transfer approvals and contracts
• Security assessment reports
• Regular compliance audits

Common Mistakes to Avoid

• Assuming anonymization exempts data: Even anonymized data may be subject to localization if it's classified as "important data"
• Underestimating scope: AI training data often qualifies as "important data" requiring localization
• Ignoring industry-specific requirements: Some industries have stricter requirements
• Inadequate cross-border transfer compliance: Even localized data may need approval for processing outside China

← Back to Blog