Chinese President Xi Jinping
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GUANGZHOU, China – China’s recent moves to regulate major technology giants are part of its broader quest to become a technology “superpower,” an expert told CNBC.
Like the US and the European Union, China is working to regulate the technology sector in many areas, from data protection to antitrust. China’s technology companies have grown, largely unhindered by regulation, and are among the largest in the world.
And there are a number of schemes that have entered into force or are in the works.
In November, China’s central bank and regulators published draft rules on the so-called microlending, which include provisions such as capital requirements for technology companies offering loans.
China’s State Administration for Market Regulation (SAMR) has also published draft rules to stop monopolistic practices of internet platforms. It is one of the most sweeping proposals in China to regulate major technology companies.
Last month, SAMR said it had begun an investigation into Alibaba about monopolistic practices.
And in October, China published a bill on data protection designed to regulate how companies process user data.
According to Kendra Schaefer, a partner at Trivium China, a research firm based in Beijing, all of these rules are part of China’s greater effort to become a major global engineering force.
“Among all these things, I think China understands that if it is to become a technology powerhouse … it must lay a solid regulatory foundation,” Schaefer told CNBC’s “Beyond the Valley” podcast.
“It must lay that foundation in the way it regulates business operations, but it must also lay that foundation in terms of data. In fact, data is perhaps the most important regulation it should set.”
“All of these things are fundamental and it’s really just a kind of framework, a springboard from which China can develop and move forward faster.”
Beijing seems to be taking a tougher stance on the country’s tech companies lately. In November, regulators forced Ant Group, Alibaba’s financial affiliate, to suspend plans for what would have been the world’s largest initial public offering (IPO) as the company faced regulatory changes. Last month, Alibaba and two other companies were fined for failing to make correct statements to authorities about previous acquisitions.
But this doesn’t mean Beijing is at odds with its tech champions, said Emily de La Bruyere, co-founder of Horizon Advisory consultancy.
“These multinational technology companies are definitely the driving force behind China to expand its information and standards strategy globally. That won’t change. We won’t see Beijing deploy its Big Tech as Washington appears to be,” said Bruyere. told CNBC by email.
“But Beijing will make sure its Big Tech adheres to its rules and regulations, connects to its platforms and operates its strategies.”
US, EU technical regulation
It is not only China that is implementing radical changes in technical regulations. The European Union has been perhaps the most aggressive region in the world in this area. The historic General Data Protection Regulation, adopted in 2016, sought to establish rules for how user data was processed.
And in December, the EU introduced the Digital Markets Act and Digital Services Act, which aims to introduce stricter controls on the behavior of technology giants in a number of areas.
But the US has yet to take a similar approach with extensive legislation in areas such as data.
“We don’t have proper data regulation in the US yet,” said Schaefer of Trivium China. “So we don’t have that foundation, those kinds of fundamental fundamental principles on which we can regulate not only our domestic companies but also foreign incoming companies.”
“I think the lack of that fundamental data policy is one of the reasons we are using this bizarre, scattered approach to take control of incoming Chinese apps like TikTok targeting specific Chinese companies because we don’t have universal regulation.”
Schaefer was referring to the ongoing saga of Washington trying to get Chinese company ByteDance to sell TikTok’s US operations.