(Yicai) Aug. 19 -- Lingang Special Area, a key testing ground for economic and trade policies within the Shanghai Free Trade Zone, has begun constructing an International Data Processing Hub by leveraging policy support and institutional innovations, according to several insiders.

Lingang has built core infrastructure for a global data center to advance the hub's development, encompassing core nodes, edge nodes, and dedicated business zones, the insiders told Yicai on Aug. 15, the day the area started building the hub.

Compliant cross-border data dedicated lines are already in place to ensure secure, rule-abiding data usage, they noted, adding that Lingang provides solutions for local data processing firms to pursue innovative cross-border data business via physical isolation and electronic fencing.

Drawing parallels to China's well-known "processing with supplied materials" model in international trade, companies based in Lingang take raw data from overseas, process it, and convert it into usable data products.

Cross-border data processing requires firms to meet data compliance standards and maintain technical cost competitiveness, Wang Liang, an official from the Lingang New Area Administrative Committee's data division, said to Yicai.

"Data flow must comply with regulations," Li Ke, data director at Linke Zhihua Digital Technology, told Yicai. "Companies handling overseas data need dedicated lines to enable cross-border data transmission without the data entering the Chinese mainland."

Lingang's institutional breakthroughs and policy reforms made the business viable locally, which was why Linke Zhihua chose to set up operations in the area, Li pointed out. Founded only in May last year, the company has grown to 300 employees amid smooth business expansion, Li said.

Clients' overseas data is stored on local servers, while Linke Zhihua's data engineers in Lingang process it, including labeling it, via dedicated lines, Li noted, adding that throughout the process, such data never leaves the firm's local storage.

"Half our clients are domestic, half international, mostly large AI model developers and autonomous driving companies," Li said.

Lingang's dedicated global internet data channels have so far provided 38 data storage services to 25 firms, according to Wang. "The area has invested significantly in building dedicated lines with low latency, high bandwidth, and minimal packet loss."

In addition to providing a stable and compliant production environment for data companies, Lingang has also taken various measures to help them reduce operating cost pressure faced in the initial stage of business development, Wang noted.

Lingang has organized "group purchases" of cross-border data dedicated lines to help reduce the application time by about one month and usage fees by 80 percent, provided companies with flexible, high-quality, and low-cost computing power services, and as much of CNY10 million (USD1.4 million) in subsidies, offered "zero-rent" services for office spaces and apartments to firms and talents in key segmented fields, and provided one-stop comprehensive services for digital enterprises to expand overseas, Wang pointed out.

Beyond offering a stable, compliant operating environment, Lingang has rolled out measures to ease early-stage cost pressures for data firms.

In the pilot phase of cross-border data projects -- when data volumes are small -- dedicated line costs are a critical concern, said Liu Xinyu, general manager of Shanghai-based Junyue Shenghui Technology. Lingang's group purchase program helps firms save money and reduce startup pressures, he added.

"Hong Kong and Singapore have prohibitive labor and computing costs, plus limited capacity to handle large-scale digital processing demand from Europe and the United States," Wang said. "Meanwhile, although Southeast Asian countries like Malaysia have lower labor and computing costs, they lack robust digital infrastructure, and their workforce quality falls short of industry standards, making it hard to take on premium global data projects."

Lingang's concentration of colleges also provides a deep talent pool, Liu noted. "We need staff proficient in less common languages, including Thai, Indonesian, and Vietnamese, and local universities perfectly fill that gap."

Editors: Tang Shihua, Martin Kadiev