The National People's Congress Standing Committee, China's top legislature, on Friday approved rules to enhance the protection of personal information online and safeguard public interests.
Lawmakers dismissed speculation the decision will dampen the public's enthusiasm to expose alleged corruption and abuse of power online.
The decision, which has the same legal effect as a law, was adopted by lawmakers at the final meeting of a five-day session, after first being proposed to lawmakers on Monday.
Companies and government employees who violate the rules can face penalties, including confiscation of illegal gains, license revocation and website closure, as well as a ban on engaging in Web-related business in the future.
The decision said it "ensures Internet information security, safeguards the lawful rights and interests of the people, legal entities or other organisations and safeguards national security and social public interests".
People who find network information that discloses their identities or infringes upon their rights, as well as those who suffer harassment from promotional messages, are empowered to demand service providers delete related information or take other necessary measures to stop such spamming.
Liu Yang, a bank officer in Beijing, said recently he has received many promotional messages from vocational schools that asked whether he was interested in securities classes.
"I am preparing for a licensing examination for securities, but I'd like to know how these schools could know that if the examination organizers didn't sell them my information," he said.
Li Fei, deputy director of the Commission for Legislative Affairs of the National People's Congress Standing Committee, said the development of the Internet has been accompanied by some side effects, such as information security.
Li indicated the decision was made in response to the expectation of lawmakers. He said at least 2,100 lawmakers in the past five years have suggested or submitted motions advocating legislation to protect online privacy.
In addition, the rules also include an identity management policy requiring Internet users to use their real names to identify themselves to service providers, including Internet or telecommunications operators.
"Network service providers will ask users to provide genuine identification information when signing agreements to grant them access to the Internet, fixed-line telephone or mobile devices or to allow users to post information publicly," the decision said.
Li explained service providers can allow users to use different names when publicizing information. They can allow users to register their real name with the companies but continue to use their cyber names online, because their information is hidden and protected behind the platform.
Some leading micro-blogging services, including Tencent Weibo and Sina Weibo, have started to ask their users to provide real names since March, in a bid to stop online rumours and create a healthy online environment.
China's three biggest telecom companies have also required individuals and enterprises to provide their real names when subscribing to data transmission services since September 2010.
Zhao Zhiguo, director of the communication safeguards bureau at the Ministry of Industry and Information Technology, said that almost all fixed phone users and 70 per cent of mobile phone users had registered their identities by November.
"Identity information is required ... since previous experience from criminal crackdowns has found that many websites do not have the personal information of their users. It is difficult to track down suspects, who have allegedly traded other's private information," Li said.
He dismissed the speculation that real-name identification will hamper the rising trend of using the Internet to uncover graft.
The Internet has played an increasingly important role in anti-corruption efforts. A string of officials have been investigated and sacked after their illegal activities or properties were exposed online.
Once illegal information is spotted, service providers are required to instantly stop the transmission of the information and take measures, including removing the information and saving records, before reporting to supervisory authorities.
They also have to cooperate with and offer technical support to supervising departments when they are conducting investigations on alleged rights infringement.
Chen Xinxin, legal researcher at Chinese Academy of Social Sciences, said the stipulation is not the same as real-name identification.
"It gives privacy to Web users since it takes a backstage management style and users can still use a Web name to post information," he said.
Yao Shujie, head of the UK-based University of Nottingham's school of Contemporary Chinese Studies, said the decision has some advantages and disadvantages.
"Its advantages lie in the fact that the number of Internet users is growing exponentially to such a point that the Internet can become a potential factor of social instability. Giving each Internet user an identity will help the government monitor Internet abuses," Yao said.
"The disadvantage is precisely the opposite. People may not like to be easily identified because they do not wish their identities to be known by others, particularly by the government."
Joel Brinkley, professor at the communication department with Stanford University, said it might be more of the company's responsibility to protect online privacy, rather than government's.
"In the US it's generally up to the businesses that have the information to protect them, and there are lots of American laws requiring companies to protect online information," he said.
"Everyone knows, maybe a few times a year, a company has a technical breakdown and information gets out, but most companies are pretty good about protecting your online information," he said.