China’s tech regulation is part of a larger push to become a ‘superpower’

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Chinese President Xi Jinping
Fred Dufour | AFP | Getty Images
GUANGZHOU, China – Recent moves by China to regulate the big tech giants are part of its broader drive to become a “tech superpower,” an expert told CNBC.
Like the United States and the European Union, China is seeking to regulate the tech industry in many areas, from data protection to antitrust law. Chinese technology companies have grown, unimpeded by regulation, and have become some of the largest in the world.

And there are a number of regulations that have come into force or are under development.

In November, the Chinese central bank and regulators released draft rules on so-called microcredit, which included provisions such as capital requirements for tech companies offering loans.

China’s State Administration for Market Regulation (SAMR) has also released draft rules aimed at ending the monopoly practices of Internet platforms. It’s one of the most comprehensive proposals in China to regulate big tech companies.

SAMR said last month it launched an investigation into Alibaba into monopoly practices.

And in October, China released a personal data protection bill aimed at regulating how companies handle user data.

All of these regulations are part of China’s larger efforts to become a major global tech power, according to Kendra Schaefer, partner of Trivium China, a Beijing-based research company.

“Underneath it all, I think China understands that if it is to become a tech superpower… then it has to lay a solid regulatory foundation,” Schaefer told CNBC’s “Beyond the Valley” podcast.

“It needs to lay that foundation in the way it regulates business operations, but it also needs to lay that foundation in terms of data. In fact, data might be the most important regulations to establish. ”

“All of these things are fundamental and it’s really just about creating a framework, a springboard from which China can develop and move faster. ”

Beijing appears to have recently taken a tougher stance against the country’s tech companies. In November, regulators forced Ant Group, Alibaba’s financial arm, to suspend plans for what would have been the world’s largest initial public offering (IPO), while the company handled regulatory changes. Last month, Alibaba and two other companies were fined for failing to make appropriate statements to authorities about past acquisitions.

But that doesn’t mean Beijing is working against its tech champions, according to Emily de La Bruyere, co-founder of consultancy firm Horizon Advisory.

“These multinational technology companies are definitely the catalysts of force that China is using to expand its information and standardization strategy globally. It will not change. We’re not going to see Beijing activate its Big Tech like Washington seems to be, ”Bruyere told CNBC via email.

“But, Beijing will make sure that its Big Tech acts according to its rules and regulations, connects to its platforms and serves its strategies. ”

American and European technology regulations

It’s not just China that is making sweeping changes in technology regulation. The European Union has perhaps been the most aggressive region in the world on this issue. Its General Data Protection Regulation, approved in 2016, aimed to introduce rules on how user data was processed.

And in December, the EU introduced the Digital Markets Law and the Digital Services Law, which aim to tighten checks on the behavior of tech giants in a number of areas.

But the United States has yet to take a similar approach with sweeping legislation in areas such as data.

“We don’t have good data regulation in the US yet,” said Schaefer of Trivium China. “So we don’t have this foundation, these kinds of basic fundamentals upon which we can regulate, not only our domestic companies, but also incoming foreign companies. ”

“I think we don’t have this fundamental data policy is one of the reasons we’re taking this weird, scattered approach to trying to control inbound Chinese apps like TikTok, targeting specific Chinese companies because we don’t no universal regulation. ”

Schaefer was referring to the ongoing Washington saga of trying to convince Chinese company ByteDance to sell TikTok’s US operations.

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