Chinese President Xi Jinping
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GUANGZHOU, China – China’s recent steps to regulate major technology giants are part of its broader push to become a technological ‘superpower’, an expert told CNBC.
Like the US and the European Union, China is figuring out how to regulate the technology sector in many areas, from data protection to antitrust. China’s technology enterprises have grown, largely unhindered by regulation, and are becoming one of the largest in the world.
And there are a number of regulations that are in effect or that are currently underway.
In November, China’s central bank and regulators announced draft rules on so-called microloans, which include provisions such as capital requirements for technology companies that offer loans.
China’s state administration for market regulation (SAMR) has also published draft rules to stop monopolistic practices through internet platforms. This is one of the most comprehensive proposals in China to regulate large technology companies.
SAMR said last month it had launched an investigation into Alibaba over monopolistic practices.
And in October, China unveiled a draft law on the protection of personal data aimed at regulating how enterprises process user data.
According to Kendra Schaefer, a partner of Trivium China, a research firm in Beijing, all of these regulations are part of China’s larger effort to become a major global technological power.
“Among all these things, I think China understands that if it’s going to be a technological superpower … then it has to lay a good foundation,” Schaefer told CNBC’s podcast “Beyond the Valley.”
“It must lay the foundation in the way it regulates the operating activities, but it must also lay the foundation in terms of data. Data may be the most important regulations he has to establish.”
“All of this is fundamental and it’s really just a framework, a springboard from which China can develop faster and move forward.”
It seems that Beijing has recently taken a tougher stance towards the country’s technological enterprises. In November, regulators forced Ant Group, Alibaba’s financial subsidiary, to draw up plans for the largest initial public offering (IPO) in the world, while the company handled regulatory changes. Last month, Alibaba and two other businesses were fined for failing to make proper statements to authorities about previous acquisitions.
However, according to Emily de La Bruyere, co-founder of the Horizon Advisory Advisory Board, Beijing is not working in opposition to its technology champions.
“These multinational technology companies are certainly the authorization system that China is using to expand its information and standards strategy worldwide. It’s not going to change. We are not going to see Beijing turn on its Big Tech as Washington appears to be,” Bruyere per email told CNBC.
“But Beijing will ensure that Big Tech acts in accordance with its rules and regulations, is connected to its platforms and serves its strategies.”
US, EU technology regulation
It is not just China that is bringing about drastic changes in technological regulation. The European Union was perhaps the most aggressive region in the world on the issue. The distinctive General Data Protection Regulation adopted in 2016 sought to introduce rules on how user data was processed.
And in December, the EU introduced the Digital Markets Act and the Digital Services Act, which aim to tighten the behavior of technology giants in a number of areas.
But the US still has to follow a similar approach with wide legislation around areas like data.
“We do not yet have good data regulation in the US,” said Schaefer of Trivium China. “So we do not have the foundation, the kind of basic principles on which we can regulate, not only our domestic companies, but also foreign incoming companies.”
“I think we do not have the fundamental data policy, is one of the reasons why we follow this bizarre, bad approach to try to control incoming Chinese applications like TikTok, and target specific Chinese companies because we do not have a universal regulation. “
Schaefer refers to the ongoing saga of Washington trying to get the Chinese company ByteDance to sell the American operations of TikTok.