China has announced two new measures for Internet management.
The first is a revised regulation for cybersecurity review that is to take effect on Tuesday and require Internet companies holding the data of more than 1 million users to undergo a network security review before they can list overseas. The regulation also applies to companies that “affect or may affect national security.”
The threshold is not high — almost all Chinese Internet companies that are capable of going public overseas have more than 1 million users.
Moreover, as the new regulation does not specify whether it also applies retroactively, it will increase the uncertainty Internet companies face when developing their business.
It is also unclear to which other companies that process user data, but remain below the threshold, the regulation applies, as it does not define what “affecting national security” means.
The regulation lists key factors for evaluation, but based on China’s poor record in law enforcement, it leaves a lot of space for the Chinese Communist Party (CCP) to clamp down on Internet companies at will.
The other new measure, to take effect on March 1, is to govern the way technology companies can use recommendation algorithms and requires algorithm-based service providers to “adhere to mainstream values, actively disseminate positive energy, and to not use algorithms to engage in illegal activities or disseminate illegal information.”
Algorithms are one of the most widely used artificial intelligence technologies.
Many countries have scruples about supervising the highly complex algorithms, as it is difficult to predict how state intervention would affect the technology sector’s innovative potential. China “leads” the world in stipulating such a law, which might do more harm than good.
The biggest effect on companies would probably not be the fines imposed for breaching the regulation, but investigations as to whether a breach has occurred, with the CCP potentially accessing the source code of the algorithms that are critical to business secrets.
That chilling effect would inevitably kill the incentive for enterprises to innovate.
The regulation requires that companies’ Web sites, featured pieces, trending articles and pop-up windows “actively present content that conforms to mainstream values,” but it does not specify what it means by “positive energy” or “mainstream values,” giving the CCP greater control over public opinion on the Internet.
It essentially stamps the CCP’s mark firmly on the algorithms of Chinese private enterprises.
Intimidation is an important means for authoritarian or totalitarian regimes to consolidate power. In the past few years, the CCP has reinforced its propaganda about the threat the West allegedly poses to China, coupled with stipulating lots of Internet and investment regulations, to ensure that anyone or anything considered unfavorable to the CCP regime would be suppressed and controlled in the name of “national security” and to counteract “infiltration by Western forces.”
This is the way the CCP suppresses unfavorable political opinions at the smallest cost possible. It might be effective in the short term, but in the long term, it might suppress and limit social development and business innovation, and damage China’s investment environment, gradually eroding the very foundation of the CCP’s power base.
Kung Hsien-tai is director of the ethics department of Taiwan Financial Holdings.
Translated by Lin Lee-kai
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