China’s altering digital regulation panorama
Publisher’s Note: Daryl Guppy is an international expert in technical financial analysis. He has been doing weekly Shanghai index reviews for mainland China media for more than a decade. Guppy appears regularly on CNBC Asia and is known as “The Chart Man”. He is a national board member of the Australia China Business Council. The article reflects the views of the author and not necessarily the views of CGTN.
The chaotic US elections in 2020 seem like an odd place to start a discussion of China’s recent regulatory changes to its thriving digital industry. Yet it is observations of what happens when big data is left in the hands of a plutocracy of private corporations that has fueled China’s recent moves.
Certainly it has a philosophical basis in relation to the way capitalism uses resources with the aim of exploitation and with little regard for social responsibility. That was one of the critical core statements of Marx’s “Das Kapital” and laid the foundation for social democratic movements. The core concept is that unrestrained capitalism exploits workers regardless of the social or environmental impact of their actions.
The role of government is to contain capitalism and make it socially responsible and socially responsive. It is a philosophical position that contradicts the American approach, where unbridled capitalism is celebrated.
But even that can go too far, and in the US there are increasing concerns about how to deal with the sometimes corrupting influence of big data in private hands. Cambridge Analytica’s use of “deleted” data to influence elections has raised initial concerns. The destructive role of social media has raised concerns about the lack of social responsibility among media giants like Facebook.
The United States is amused and largely complacent about that influence, despite the role secret social media platforms played in the failed coup in January 2020.
China, a keen observer of US activity, has growing concerns. Investors in China need to assess the basis of these concerns so they can better understand why regulations are changing.
To reflect this wait-and-see approach, SoftBank CEO Masayoshi Son’s Vision Fund is reducing new investments in China. The $ 100 billion Vision Fund is one of the world’s best-known donors of Chinese start-ups. The Japanese billionaire said he will proceed cautiously until the effects of the new regulations are clear.
China launched a series of investigations to assess the need for action to break down the growing big data monopoly. This included antitrust investigations against Jack Ma’s Ant Group and DiDi Global, especially for western investors.
Although delayed, these measures reflect growing concerns about the negative effects of the monopoly behavior of unbridled capitalism. These are effects most clearly seen in the American environment, and the Chinese authorities are determined to avoid the same corrupting influence from social media giants and others who control large collections of data.
Chinese regulators have updated cybersecurity review measures. These changes made it mandatory for operators processing the data of more than 1 million users to register with the cyberspace regulator for security-related reviews before listing them overseas.
National security is a growing problem when you consider the behavior of domestic and foreign companies when exchanging data across borders.
Masayoshi Son, Chairman and Chief Executive Officer of SoftBank Group Corp, will announce the company’s financial results for the first quarter of the year ended March 10, 2022 in Tokyo, Japan on August 10, 2021. / CFP
Masayoshi Son, Chairman and Chief Executive Officer of SoftBank Group Corp, will announce the company’s financial results for the first quarter of the year ended March 10, 2022 in Tokyo, Japan on August 10, 2021. / CFP
Some Western analysts see this as a step for China to tighten its control over the tech giants. However, the common theme is the accumulation of user data on super platforms and the desire to ensure that this data is used in a socially responsible manner. The regulatory changes are designed to deter technology companies from illegally collecting and using data. Since May, companies have been prohibited from collecting user data beyond clearly defined basic personal data without consent.
This is in stark contrast to the laissez-faire approach in the United States, where social media companies and other large data collectors are increasingly piling up intrusive and detailed personal data, often without clear consent mechanisms. This creeping identity theft has worried EU regulators and they are taking some action against the social media companies.
The new China regulations make it clear to large companies that they need to be more careful with monopoly practices. It’s not unique to China. The monopoly telephone company AT&T in America was terminated in 1984 and then forcibly split into the so-called Baby Bells.
Chinese companies and overseas corporations like SoftBank now know they need to focus more on data governance and privacy. The unrestricted collection of ever more detailed private information has been restricted.
Some consider it ironic that China’s data protection and anti-monopoly stance are stronger than many measures taken in the privacy-conscious western environment. However, China’s approach is in line with its philosophical foundations, which do not glorify unrestrained commercial exploitation and encourage socially responsible business practices.
It is more effective for investors to understand why new regulations are being introduced. Companies that operate within the regulatory framework continue to offer good investment opportunities.
(If you’d like to contribute and have specific expertise, please contact us at [email protected].)
Comments are closed.