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China has become a laboratory for the regulation of digital technology

W.ITH FOREIGN Competitors like Facebook and Google blocked, and domestic tech giants dominated the Chinese market for two decades. The Communist Party has a firm grip on politics, but tech firms have had considerable leeway in their business activities. “It was a Wild West within 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 is boss. President Xi Jinping has authorized an extraordinary raid. The planned one last year initial public offering Ant Group, a giant internet finance company, was stopped at the last moment. In July, two days after Didi, a driver service company, went public in New York City, China’s Internet regulator ordered new user registrations to stop and forced its apps out of mobile stores. The city of Beijing denied reports on September 6 that it was considering bringing Didi under state control.

Video game companies are being urged to scan their users’ faces to enforce a ban on children playing online games for more than three hours a week. The crackdown has shifted the balance, says Chorzempa. Now it is “empowering technocrats who have been frustrated for years that companies are ignoring sensible, sensible regulations”.

The party is pushing for more than superficial changes. It uses a number of new laws and regulations to force technology companies to change both their behavior and their products. The aim is to control what Chinese people see and do online. The new rules will require tech companies to write code for their platforms to promote content the government likes and prevent what the government likes. This is likely more efficient than the blanket approach of enforcing the party’s will on a case-by-case basis, and plausible to an extent that the labor-intensive approach of directly controlling technological systems would not.

In the past month alone, Chinese lawmakers passed at least four new laws and regulations that, when they come into effect over the next three months, have the potential to reshape the Chinese Internet. Technology regulations in other countries and regions, such as the European General Data Protection Regulation (GDPR) usually require companies to obtain the consent of their customers for the specific processing of their data. China’s new rules are much stricter and more far-reaching. Technology firms are expected to protect national security and public order, says Nicolas Bahmanyar, a privacy advisor at Leaf, a law firm in Beijing. “A small banner is not enough,” he adds.

A law on the protection of personal data (PIPL), China’s first data protection law, goes into effect on November 1st. Years in the making, it’s much shorter and less detailed than GDPRthat inspired him and lays down principles that are both broad and intentionally vague. Details and future reinterpretations are to be taken into account through industry or technology-specific regulations. This, Mr. Bahmanyar said, will allow regulation to keep up with rapidly changing technology. It also gives the government leeway to enforce vague rules at its own discretion. Didi was hit by rules put in place for companies whose digital services are seen as critical infrastructure. These were rewritten to cover foreign listings just as the company was trying to go public.

Not all new laws will worry investors as much as the ones that beat Didi with. Some also deal with problems that also affect the West. A set of rules in preparation that was published in draft form by the Cyberspace Administration of China on August 27 (CAC) tries to define the rules for the use of recommendation algorithms. This is the type of software that companies like Amazon and Alibaba use to recommend products based on a customer’s purchasing history, or that use short video apps like TikTok to find out what viewers like so they can get more of it.

The draft regulations require, for example, that companies disclose the keywords with which they have marked their users and allow users to delete them. This basically means that internet users in China will no longer be haunted by advertisements for the refrigerator that a recommendation algorithm decided to buy. Writing algorithms that lead users to “addiction or high-value consumption” would also be forbidden. Algorithms that dispatch workers, such as Didi’s driver management system, must “guarantee the rights and interests of workers”. The regulations read like an attempt to solve the problems complained about by consumers everywhere.

They also require companies to use recommendation algorithms to “uphold mainstream values” and “vigorously spread positive energy.” Such algorithms must not be used to “engage in activities that damage national security” or to disrupt the 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 consulting firm in Beijing, wrote that the release of these new algorithm rules marks the moment when Chinese technology laws go beyond those in Europe (in America, such rules only exist in California).

Privacy experts say many of these changes will be beneficial. Chinese internet users are constantly being attacked by spam messages and phone calls. An app developed by the Ministry of Public Safety that promises to check fraudulent calls and messages has been one of the most downloaded apps in China since it was released in March. The Chinese press is full of stories of theft of people’s personal information. In 2016, Xu Yuyu, an aspiring college student, died of a heart attack after transferring her savings to scammers who used personal information purchased on the black market to trick them into believing they represented their university.

Protecting people from such raids will boost the party’s reputation for advocating for the little guy. The new rules give citizens more rights vis-à-vis companies than people in any other country. But they do not give Chinese Internet users any data protection rights that can be enforced against the state. Indeed, said Sajai Singh of J. Sagar Associates, a Bangalore law firm, establishing a single common standard for data handling in China will make it easier for the state to spy on citizens. Mr. Chorzempa says the rewrite of the law to get companies to rewrite software is a fundamental change. Once they feel they can intervene at this level and granularity, what else are they going to do? he asks.

This article appeared in the China section of the print edition under the heading “Codified Procedure”

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