China mulls new state-backed agency to supervise tech knowledge: Report | Regulation Information
A move by the central bank would significantly tighten the influence of regulators on China’s fast-growing online businesses.
China’s government has proposed forming a joint venture with local tech giants to oversee the lucrative data it collects from hundreds of millions of consumers, according to those familiar with the matter.
The tentative plan, led by the People’s Bank of China, would mean a significant escalation in attempts by regulators to get a better grip on the country’s internet sector. It envisions the creation of a government-backed entity along with some of China’s largest e-commerce and payment platforms. Respondents requested not to be identified as the discussions are private.
The online companies would be first shareholders in the joint venture, although top executives would have to be approved by the regulator, the respondents said. The central bank did not immediately respond to a request for comment.
The proposal is one of a number of options being considered in order to crystallize Beijing’s goal of gaining greater control over the data, the online giants of Alibaba Group Holding Ltd. and Tencent Holdings Ltd. for young professionals like ByteDance Ltd. and Meituan collected. Companies were encouraged this month to open up data in areas from e-commerce to social media to promote healthy development of the sharing and online economies in a report that set out the Communist Party’s priorities.
US-listed Chinese stocks plummeted, with iQIYI Inc. down nearly 20% and Tencent Music Entertainment Group down 27%. This was the biggest drop since it was listed in 2018. Vipshop Holdings Ltd. collapsed 21%, the biggest drop in more than 5 years.
During an earnings call on Wednesday, Tencent chief executive officer Pony Ma said his guiding principle is to minimize platform access to user data.
“Data is extremely complicated,” said Ma. “There is a fine line between ensuring user privacy and opening up the data to exchange.”
One of the main hurdles to such a joint venture would be the existing data protection regulations, which give individuals the right to choose how their information is used, said one respondent. In order to put consumer data under the supervision of a company or the government, changes would have to be made to the law, the person said.
It is still unclear what the overall scope of the new entity would look like, what types of data it would manage and from what sources. Part of the proposal is that eventually strategic alliances will be forged with government-backed institutions to facilitate data sharing, one respondent said without giving any further details.
The Communist Party recently announced its intention to increase its impact on the internet, e-commerce and digital finance after decades of adopting a relatively straightforward approach that gave birth to a generation of billionaires.
With the development of big data analytics and artificial intelligence, the way that big tech collects and uses data has become a sensitive issue for the party.
Much like Facebook Inc. or Google, the vast amounts of information China’s internet giants gather in real time are key to their bottom line, as well as their ability to innovate and expand. However, Beijing is increasingly concerned about the power of companies like Alibaba and Tencent and their potential to influence public opinion.
President Xi Jinping warned this month that his government will seek so-called “platform” companies, which have amassed increasing power through the data and patronage of hundreds of millions of consumers. The bold comments signaled that China plans to step up a campaign to curb the influence of its most powerful private companies, which so far has mainly focused on Jack Ma’s Alibaba and its subsidiary Ant Group Co.
Xi’s comments were the first time he had specifically delved into platform economies, although he previously stressed the importance of preventing monopolies.
China’s efforts to regulate its internet giants coincide with growing global control over the industry as governments from the US to the European Union to Australia clash with companies like Twitter Inc. and Facebook. This is proof of how important the industry has become to basic infrastructure and national security.