What Encryption Standards Are Used by Chinese Firms Handling Overseas Data?

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As cross-border data transfers face increasing scrutiny, Chinese firms handling overseas data must implement strong encryption protocols to meet both domestic regulatory requirements and international standards. Encryption plays a vital role in protecting the confidentiality, integrity, and authenticity of data—especially when it involves personal information or sensitive business content. But what encryption standards do Chinese firms use, and how do they align with global practices?

The Role of Encryption in Cross-Border Data Management
In China, the regulatory landscape governing data security is rich people database shaped by laws such as the Cybersecurity Law (CSL), the Data Security Law (DSL), and the Personal Information Protection Law (PIPL). These laws mandate that companies must implement technical and organizational measures—including encryption—to protect data, particularly when it is transferred outside China.

Encryption is essential in two main contexts:

During transmission (in transit) – to protect data sent across networks or international borders.

During storage (at rest) – to secure databases, servers, and devices holding sensitive data.

Chinese Encryption Standards: National and Industry-Specific
Chinese firms are often required to use domestically developed encryption standards, especially when operating in critical sectors or when dealing with sensitive data. These standards are largely governed by the State Cryptography Administration and codified in the Commercial Cryptography Law, which came into effect in January 2020.

Key national standards include:

1. SM Series Algorithms (国密算法)
The SM (ShangMi) series of cryptographic algorithms are developed in China and widely adopted across industries:

SM1: A symmetric block cipher, similar in use to AES.

SM2: An asymmetric algorithm based on elliptic curve cryptography, similar to ECC, used for digital signatures and key exchange.

SM3: A cryptographic hash function comparable to SHA-256.

SM4: A block cipher algorithm used for data encryption, officially recommended as a national standard (GB/T 32907-2016).

These algorithms are required or preferred for:

Government systems

Critical infrastructure

Financial services

Telecommunications

Any firm seeking to pass Chinese security assessments for cross-border data transfer

2. TLS/SSL with SM Support
Many Chinese firms deploy Transport Layer Security (TLS) protocols embedded with SM algorithms. This creates a hybrid cryptographic stack compliant with both domestic and international requirements. The most common setup is TLS+SM2/SM3/SM4, often referred to as GMTLS (Guomi TLS).

Integration with Global Standards
To operate internationally, especially when transferring data to or from partners in Europe, the U.S., or Southeast Asia, Chinese firms must also accommodate international encryption standards:

AES (Advanced Encryption Standard): Used for symmetric encryption, especially when SM algorithms are not mandated.

RSA (Rivest–Shamir–Adleman): Common for secure key exchange and authentication.

SHA-2 family: For hashing and integrity verification.

TLS 1.2 or 1.3: Widely used for secure communication, often configured to support both SM and non-SM cipher suites.

In cross-border settings, a dual-layer encryption model is often adopted: SM algorithms for domestic compliance and international standards for compatibility with overseas partners.