(Yicai) July 6 -- As companies expand internationally, the data resources, algorithm models, and digital infrastructure they build overseas are becoming increasingly valuable assets. At the same time, these digital assets are exposing businesses to new security risks and challenges.

As governments around the world tighten regulation of digital assets, issues including cross-border data flows, artificial intelligence, and cybersecurity are increasingly being brought under regulatory frameworks. Effectively identifying and responding to these requirements while strengthening digital compliance capabilities has become a pressing challenge not only for Chinese companies expanding abroad, but also for policymakers and legislators.

Chinese Overseas Digital Assets Face Differentiated Risks

Overseas digital assets refer to the digital resources that companies generate, control, or use during their overseas operations, investments, and services, and that possess economic value, strategic importance, and regulatory sensitivity. They include not only data, algorithms, and platform networks that directly generate commercial value, but also cloud service nodes, digital infrastructure, local operating entities, compliance qualifications, and market access rights that support international operations.

Chinese companies' overseas digital assets are not evenly distributed, and the risks they face vary significantly across regions. The United States is a market characterized by both high-value platform assets and intensive security scrutiny. For example, TikTok and Temu have built extensive user bases, transaction networks, and advertising businesses in the US. However, once these assets become politicized or are broadly framed as security concerns, companies may face app bans, forced restructuring, supply chain restrictions, or even market exit. By contrast, the European Union relies more on regulatory tools covering data protection, platform responsibility, competition policy, consumer protection, and foreign subsidy reviews to oversee businesses.

Southeast Asia, China's geographic and cultural neighbor, has become one of the fastest-growing regions for Chinese companies' digital assets thanks to its large population and rapid mobile internet adoption. The region hosts a substantial share of Chinese firms' platform ecosystem and cloud service assets.

By comparison, the Middle East and Latin America are dominated by digital infrastructure assets. Chinese companies are deeply involved in smart city, digital government, and public security projects across the Middle East, while many have also established extensive telecommunications equipment and information service networks in Latin America. These assets typically involve long project cycles, strong customer dependence, and high sunk costs, making them particularly vulnerable. Changes in external security conditions or public procurement policies can quickly undermine the market positions and service networks companies have spent years building.

Overseas Companies Urgently Need Stronger Digital Compliance Capabilities

As the global digital regulatory landscape becomes increasingly complex, companies expanding overseas must prioritize compliance to better protect their digital assets. Before entering new markets, businesses should identify potential risks involving data flows, platform responsibilities, supply chain security, and investment reviews, while incorporating compliance requirements throughout product development, data management, platform operations, marketing, and risk control.

Companies should continuously improve their data compliance systems to meet host-country regulations. Rather than relying on the domestic practice of centralized data retrieval, they need to determine which data generated by different business lines must be stored locally and which can legally be transferred across borders, ensuring that routine data access can withstand regulatory scrutiny in target markets.

Firms should also move from reacting to disputes after they arise to embedding compliance into product and business development from the outset. Privacy protection and limits on excessive data collection should be treated as fundamental requirements when designing products, developing new features, or planning marketing campaigns.

Companies must also ensure that their core processes are traceable and explainable. For sensitive areas such as algorithmic recommendations, advertising distribution, and content moderation that are likely to attract overseas regulatory scrutiny, businesses should establish clear internal review and documentation mechanisms so they can explain their decision-making processes and isolate potential risks if regulators launch inquiries or investigations.

Building a Robust Professional Support System for Overseas Expansion

As companies expand abroad, they face increasingly interconnected legal, data, technology, security, tax, audit, and public relations challenges. Strengthening their ability to manage overseas digital asset risks requires not only stronger internal compliance awareness and systems, but also a well-developed professional support network.

Industry associations, professional service providers, and relevant authorities can establish dynamic databases and case repositories covering key markets, industries, and regulatory developments to help companies monitor changes involving data localization, platform responsibilities, foreign investment reviews, and supply chain sanctions.

Looking ahead, companies expanding overseas will increasingly need multidisciplinary professionals with expertise in data governance, algorithm auditing, cybersecurity, export controls, international public relations, and crisis communication. Particularly in the digital sphere, many compliance challenges require close collaboration among legal, technical, and business teams.

Yan Haifeng is vice president and a professor at East China University of Science and Technology (ECUST) and director of the Lingang-ECUST Research Institute of Free Trade Zone Innovation. Peng Delei is dean and a professor at ECUST's School of Law and a researcher at the Lingang-ECUST Research Institute of Free Trade Zone Innovation. Wen Kai is a doctoral student at ECUST.

Editor: Emmi Laine