The Framework

Vietnam’s data localization mandates appear in multiple legal documents, most notably Decree 53 (guiding the Cybersecurity Law), which requires that certain domestic and foreign service providers store specified categories of Vietnamese users’ data in Vietnam for a prescribed period. Foreign companies may also be required to establish a local presence if they fail to address violations committed via their platforms upon government request. In addition, under Vietnam’s Personal Data Protection Decree (PDPD), organizations transferring personal data across borders must prepare and submit a cross-border transfer impact assessment (TIA) to authorities and maintain it for inspection. These obligations also apply to those who process Vietnamese citizens’ personal data solely on overseas servers, making the scope of regulation considerably broad. Vietnam’s new Data Law similarly underscores the government’s prerogatives over certain “important” or “core” data transfers, stipulating that such exports must ensure national defense and security. Although broad restrictions on these categories were eased before the law’s adoption, the final legislation still warns that certain cross-border transfers could face additional scrutiny in the future.[1]

Implications for U.S. Technology Companies

These localization and compliance requirements disproportionately burden large U.S. tech companies, which typically process and store massive volumes of data for global user bases. They must now potentially restructure their infrastructure to maintain servers within Vietnam and expend additional resources on legal reviews, TIAs, and ongoing communication with Vietnamese authorities. Failure to comply could lead to penalties or forced local office requirements. The financial and administrative costs may discourage U.S. companies from expanding or continuing some services in the country, placing them at a disadvantage relative to smaller foreign or domestic firms that have fewer cross-border data streams.

How China Benefits

By forcing large U.S. tech companies to spend more time and money meeting data-localization and legal-compliance demands, the playing field in Vietnam shifts away from these foreign providers. As U.S. firms either scale back their services or pass along higher costs to users, Chinese companies—often newer entrants with fewer existing commitments—can more nimbly fill the market space. This dynamic effectively lowers competitive barriers for Chinese platforms, allowing them to grow more quickly and establish a larger presence in Vietnam’s digital economy once the regulatory burdens weaken U.S. companies’ standing.

Endnotes