In the digital age, data has become a key factor of production, and its economic importance dictates that the free flow of data across borders will inevitably become a trade priority. Consequently, measures impeding data flows, such as data localization, have become integral to digital trade agreements. Data localization, a swiftly evolving concept in international law, faces controversy regarding its regulation, the rationale behind it, and the modes of its regulation. This research compares various regulatory models, elucidating the underlying logic and mechanisms of these approaches. It posits that selecting a regulatory model should be contingent on the maturity of a country's digital trade and the sophistication of its domestic digital governance. To gain a strategic edge in the digital economy's development and security, China should eschew blindly adopting a market-oriented internet industry structure and avoid constraining trade development negotiations with excessively stringent protection standards. It is advisable to pursue a limited trade regulation model, carefully delineating between acceptable and prohibited data localization measures, establishing reasonable exceptions, and anticipating the evolution of future case law and national practices.