China has become a digital regulation laboratory

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WITH FOREIGN Stranded competitors such as Facebook and Google, national tech giants have dominated the Chinese market for two decades. The Communist Party has kept a firm grip on politics, but tech companies have had considerable leeway in their business operations. “It was a Wild West in an authoritarian system,” says Martin Chorzempa of the Peterson Institute, an American think tank.

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Now the Communist Party is reminding Internet billionaires who’s boss. President Xi Jinping authorized an extraordinary crackdown. Last year the project Initial Public Offering Ant Group, a giant internet finance company, was arrested at the last moment. In July, two days after Didi, a rideshare company, went public in New York City, China’s internet regulator ordered it to stop registering new users and forced its apps out of mobile stores. The city of Beijing on September 6 denied reports that it was considering putting Didi under state control.

Video game companies are being pushed to scan their users’ faces to help enforce a ban on children playing online games for more than three hours a week. The crackdown has tipped the scales, says Chorzempa. Now “technocrats, frustrated for years that companies ignore proper and sensible regulations, are empowered. “

The party is pushing for more than superficial changes. It uses a series of new laws and regulations to force tech companies to change both their behavior and their products. The goal is to control what the Chinese see and do online. The new rules will force tech companies to write code for their platforms to promote content the government likes and prevent what it doesn’t like. This is likely to be more effective than the wacky approach of enforcing the party’s will on a case-by-case basis, and plausible on a scale than the labor-intensive approach of trying to directly control technological systems would not.

In the last month alone, Chinese lawmakers finalized at least four new laws and regulations that, when they come into force in the next three months, will have the potential to reshape the Chinese internet. Technological regulations in other countries and regions, such as the European General Data Protection Regulation (GDPR), mainly require companies to obtain the consent of their customers for the specific processing of their data. The new Chinese rules are much stricter and more extensive. Tech companies will need to protect national security and public order, said Nicolas Bahmanyar, data privacy consultant at Leaf, a Beijing law firm. “A small banner is not going to cut it,” he adds.

A law on the protection of personal information (Pipl), China’s first privacy law, comes into effect on November 1. Years of preparation, it is much shorter and less detailed than GDPR, which inspired it, setting out principles that are both broad and deliberately vague. Details and future reinterpretations will be dealt with by regulations specific to certain industries or technologies. This, says Bahmanyar, allows regulation to keep pace with rapidly changing technology. It also gives the government leeway to apply vague rules as it sees fit. Didi has been affected by the rules put in place to govern companies whose digital services are considered critical infrastructure. These were rewritten to cover foreign quotes just as the company was trying to go public.

Not all the new laws will worry investors as much as those that used to crush Didi. Some also deal with issues that affect the West. A set of regulations to be released in the draft on August 27 by the Cyberspace Administration of China (CAC) seeks to lay down the rules for the use of recommendation algorithms. It’s the kind of software that companies like Amazon and Alibaba use to recommend products based on a customer’s purchase history, or that short video apps like TikTok use to figure out what viewers like. in order to give them more.

The draft regulation requires, for example, that companies expose the keywords with which they have tagged their users and allow users to remove them. This basically means that Chinese internet users will no longer be harassed by refrigerator ads that a recommendation algorithm has decided they would like to buy. Writing algorithms that lead users to “addiction or high value-added consumption” would also be prohibited. Algorithms that allocate workers, such as Didi’s driver management system, must “ensure the rights and interests of workers”. The regulations are read as an attempt to address the issues complained about by consumers around the world.

They are also asking companies that deploy recommendation algorithms to “stand up for dominant values” and “vigorously disseminate positive energy”. Such algorithms should not be used to “engage in activities undermining national security” or to disrupt economic or social order. As such, their goal seems to be to withhold algorithmic juice from any content that doesn’t make the government look good.

Kendra Schaefer of Trivium, a consultancy in Beijing, wrote that the release of these new algorithm regulations marks the time when Chinese technology laws overtook those of Europe (in America, only California has such rules. ).

Data protection experts say many of these changes will be beneficial. Chinese internet users are constantly bombarded with spam emails and phone calls. An app developed by the Ministry of Public Security, which promises to filter fraudulent calls and messages, has become one of the most downloaded in China since its release in March. The Chinese press is full of stories about the theft of personal data. In 2016, Xu Yuyu, a potential student, died of a heart attack after transferring her savings to fraudsters who used personal data bought on the black market to make her believe they represented her university.

Protecting people from such predations will strengthen the party’s reputation for standing up for the little guy. The new rules give citizens more rights against businesses than citizens of any other country. But they do not give Chinese Internet users any right to privacy enforceable against the State. Indeed, according to Sajai Singh of J. Sagar Associates, a Bangalore law firm, creating a single common standard for data processing in China will make it easier for the state to spy on citizens. Mr Chorzempa says rewriting the law to force companies to rewrite software is a radical change. Once they start to feel that they can intervene “at this level and at this granularity, what else will they do?” ” he asks.

This article appeared in the China section of the print edition under the headline “Codified Repression”


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