With Chinese President Xi Jinping (習近平) targeting China’s massive tech giants, the big question now is how he would get them to share key data as part of a sweeping plan to transform the world’s second-biggest economy.
Until recently, China’s megafirms, such as Jack Ma’s (馬雲) Alibaba Group Holding Ltd and Tencent Holdings Ltd, have operated in a similar way to US counterparts Facebook Inc and Alphabet Inc, harnessing user data to refine an expanding array of digital services. Since more data lead to better products, the tech platforms often become natural monopolies — giving them enormous wealth and power that also opens the door for abuses.
More US lawmakers have started calling for legislation to break up the US firms, but so far those efforts have failed to gain much traction. Europe has focused mainly on giving users more control over data and levying hefty antitrust fines against companies like Google.
China, by contrast, is going further than any other country to rein its tech behemoths. Xi last month declared his intention to go after “platform” companies that amass data to create monopolies and gobble up smaller competitors. Chinese regulators followed up by slapping a record US$2.8 billion fine on Alibaba for abuse of market dominance, and gave dozens of other top Internet firms a month to rectify anti-competitive practices.
While part of the motivation is political, a potentially more important aspect is China’s attempt to create a market for data that unleashes its value and propels growth. Beijing is pouring money into digital infrastructure, drafting new laws on data usage and building new data centers around the nation, with the goal of positioning China as a leader in transforming the world economy over the next few decades.
“This is not a short-term initiative — it is a complete national refocusing on data as an economic driver,” said Kendra Schaefer, head of digital research at Trivium China, a consultancy in Beijing. “With such significant upsides, you are also potentially looking at a scenario where companies are more willing to adapt to Chinese net controls to gain access to the market.”
China’s digital economy grew much faster than national GDP in 2019, underscoring its significance to future growth, the Chinese Academy of Information and Communications Technology said.
Market researcher International Data Corp projected that China would hold about one-third of the world’s data by 2025, or roughly 48.6 zettabytes — about 60 percent more than the US, or equivalent to more than 10 trillion DVDs.
One big challenge would be how to get some of the nation’s biggest holders of data on board. The bluntest way would be to seize their data outright, which some hardliners have suggested.
Zhao Yanqing (趙燕菁), a professor at Xiamen University’s School of Architecture and Civil Engineering, made the case for nationalizing the data of big tech giants at a Chinese economic forum. Since China blocked foreign firms like Google and Facebook, local companies like Alibaba and Tencent received a benefit that should now be shared with society, he said.
“Only by establishing public ownership for platforms can we ‘tame’ capital,” Zhao said, according to a transcript published by the nationalistic news site Guancha.
Still, most analysts view that as unlikely. While Xi has a long history of knocking back billionaires who could pose a threat to the Chinese Communist Party (CCP), he also wants to find a way to ensure growth is more evenly distributed among the nation’s 1.4 billion people. Although China is a one-party state, the party has staked its legitimacy in part on hitting targets for improved living standards — and a booming digital economy is key to success.
Nationalizing data could quickly backfire, stifling innovation at a time Xi needs technological breakthroughs as the US works with allies to prevent China from obtaining advanced computer chips.
“You need companies that are very competitive,” said Liu Lizhi (劉立志), an assistant professor at Georgetown University who has written about data politics in China. “Nationalization of data would hurt the tech companies. If you take away the data, the companies will lose their incentive and their ability to innovate.”
So Chinese officials are focused on crafting legislation on data ownership that addresses concerns from a range of competing interests. Local officials in tech hub Shenzhen might differ with antitrust bureaucrats on how much proprietary data companies must share, while security departments could clash with economic ministries on issues like data security.
Much of the other work involves setting standards for datasets that are not uniform between different entities and provinces. This would allow them to be more easily used on new data exchanges, such as the one launched in Beijing that aims to allow companies to trade anonymous proprietary data — effectively a pilot for a national data trading system.
So far, similar projects set up in past years in cities like Shanghai and Guiyang in southern Guizhou Province have only received tepid reception, partly because they are disconnected from each other and only hold small pools of data. While it is crucial for big tech platforms and other private companies to buy in to the exchanges, the still-evolving regulatory framework is putting many players off.
“Data in China is very fragmented and lacks common standards, which makes it difficult and expensive to exploit,” said Camille Boullenois, a consultant with Europe-based Sinolytics. “Drafting standards and encouraging cross-provincial databases will help incentivize data trade.”
Until recently, Chinese lawmakers focused mostly on security. A 2017 law gave authorities the right to access to almost all private data when necessary and demanded foreign firms store data from Chinese customers locally, forcing Apple Inc to open a data center with local officials.
China’s leaders are now focused on using big data to help governments provide better services. Firefighters can use it to respond to calls quicker, while data from hospitals can help track citizens and stem the spread of COVID-19. It would form the foundation of everything from smart cities to financial regulation to surveillance operations against political dissidents.
The Chinese government is developing a digital yuan that would compete with Ant Group Co’s Alipay and Tencent’s WeChat Pay, which together account for nearly all of the mobile-payments market, allowing the People’s Bank of China to gather enormous amounts of data on transactions. Authorities have also made significant advances with a system for measuring the social credit of companies on everything from tax payments to environmental protection to product quality.
For now, Chinese authorities have said they would not force companies to hand over data. On a trip this month to the Guiyang data center, a local CCP official told Bloomberg that companies are mostly concerned they would lose their competitive edge if they part ways with an essential resource.
“With regard to the use, development and trade of data, we’re still exploring the mechanisms,” Guizhou Provincial Big Data Development Administration Deputy Director-General Hu Jianhua (胡建華) said. “For enterprises, they have the ownership of the data. We encourage them to make their data open, but not force them to do so.”
One possible solution is for the government to become coinvestors with the companies. Bloomberg reported last month that China proposed establishing a joint venture led by the People’s Bank of China with local technology giants that would oversee the data they collect from hundreds of millions of consumers.
The Financial Times on Friday last week reported that Ant Group is resisting such a proposal, which risks facing the same obstacles as when Tencent and Alibaba reportedly refused to share data with the central bank several years ago after it set up credit scoring company Baihang.
Data privacy is the “biggest obstacle” the government faces in dealing with the tech giants, said Angela Zhang (張湖月), author of Chinese Antitrust Exceptionalism and director of the Centre for Chinese Law at the University of Hong Kong. “There is an inherent tension between protecting consumer privacy and promoting competition among different platforms.”
Executives at China’s biggest firms have sought to blunt the damage from Xi’s crackdown.
After the Alibaba probe wrapped up, chief executive officer Daniel Zhang (張勇) told investors that the company would continue to work with regulators on data privacy. Earlier this month, companies including JD.com Inc and Meituan pledged to play fair in data usage after Guangzhou antitrust regulators summoned them to a meeting. Robin Li (李彥宏), chairman and CEO of top search company Baidu Inc, last month proposed to top Chinese lawmakers a pilot program to break up barriers in data flows among Internet companies.
The companies’ reactions show they are spooked after years of limited measures to align with government policies, said Dev Lewis, a research fellow at Digital Asia Hub in Shanghai.
“Now that mirage has been lifted,” he said. “The onus is now firmly on the platform if they want to reinstate that. They need to take the initiative on the data front.”
Last week, Microsoft cofounder Bill Gates and his wife, Melinda Gates, said in a statement that they have decided to end their marriage. The news immediately caused a global sensation. When my daughter heard that I was going to write a newspaper op-ed to comment on the matter, she made sure to remind me not to focus on the divorce agreement or the handling of the world’s richest couple’s wealth. Instead of talking about how much money Melinda Gates would get from the divorce, my daughter wanted me to focus on the many sacrifices she has made, and on her many
Taiwan has finally become an ongoing public issue in Canada, due in part to its success in keeping out COVID-19, and the Chinese Communist Party’s successful efforts to offend just about everyone in Canada. Following the lead of right-wing US politicians, Canadian conservative pundits and Canadian Shadow Minister of Foreign Affairs Michael Chong (莊文浩) of the Conservative Party, politicians are urging Canada to “recognize Taiwan.” There is a small problem here for Canada, which has a different history of relations with Taiwan than the US. For Canada to “recognize” Taiwan as things stand would be to re-recognize the Republic of China
Given China’s regional might, it is little surprise that the nation casts a long shadow across Asia — including in its media coverage. However, we are now seeing a disturbing trend of Western media casting a favorable light on China, right as it stands accused of suppressing democracy in Hong Kong, interning Uighurs and obscuring investigations into the origins of COVID-19. At the same time, important coverage of Asian democracies, such as Taiwan’s 20-place leap in the Democracy Index last year — in the midst of a pandemic that brought major constrictions of democratic rights in many places — gets
Would the US be prepared to risk a catastrophic war with the People’s Republic of China (PRC) to protect the Republic of China, better known as Taiwan? US President Joe Biden laid out his vision clearly last month. He sees the rivalry between the PRC and the US as a global conflict between democracy and autocracy, and Taiwan is unquestionably one of Asia’s most successful democracies. In 1954, then-US president Dwight D. Eisenhower threatened to use nuclear weapons after China shelled a rocky islet near Taiwan’s coast, when the country was still a military dictatorship. Things were different then. The US