A look at the direction of China’s data governance – and, by extension, the future of its digital economy.
Data will define China. Ever since the State Council enshrined data as a factor of production alongside land, labor, capital, and technology in 2020, the importance of regulating digital information has only continued to grow. Three big ideas have emerged in recent years: First, how China intends to leverage data to drive its economy. Second, the nuances behind increasingly intense data protection enforcement and an accountability blind spot in favor of public bodies, including questions over the Cyberspace Administration of China’s mandate. Finally, the potential influence Chinese data governance ideals have on foreign governments that have become increasingly reliant on the former.
China’s 14th Five-Year Plan for National Informatization (the 14th FYP), likely the world’s first industrial policy for the digital era, endeavors to “activate the factor value of data” to “shape a strong domestic market that is innovation-driven [and] high-quality.” This should be read together with top leader Xi Jinping’s directives on economic development, which espoused the need to “regulate amidst development and develop amidst regulation.” Accordingly, China’s digital economy will rely on data not as a raw resource to be exploited by the free market, but as a regulated commodity subject to close government oversight.
There is an underlying belief that data should be directed to economic agents who can maximize the productivity of data. For one, the proactive disclosure of government data for commercial/public use has been gaining traction. China revised its Open Government Information Regulations in 2019 to maximize “the role of government information in… the people’s production and… economic and social activities.”
At the provincial level, the Guangdong government has prohibited its offices from preventing the open utilization of public data and instituted the first-of-its-kind Chief Data Officer system to oversee such initiatives.
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But data sharing is a challenging proposition for widespread practice. Data has been likened to a semi-public good – non-rivalrous in that multiple actors can “consume” data without affecting its stores, but excludable in that some parties, such as incumbent firms with large data reserves, would have limited incentives to share them with competitors.
State intervention could be a catalyst in the early stages. One notable effort toward commoditizing and sharing data was the establishment of the Shanghai Data Exchange (SDE) in November 2021. This quasi-government corporation positions itself as China’s largest platform for businesses to buy and sell data with one another.
Government influence similarly cannot be understated for private firms. Ant, which is enroute to becoming a People’s Bank of China-supervised financial holding company, has promised to share all its Huabei consumer credit data with the PBOC, notwithstanding that Ant’s billion-user database has been a “key competitive advantage for the company.”
Legal instruments are also important in providing clarity around the implications of data sharing. Whereas the SDE was wary of challenges surrounding the standardization of data formats and data protection compliance (among others), the Shanghai Data Regulation was passed to provide legal basis and clarity for the SDE’s operations. More fundamental regulations were released later – such as the draft National Information Security Technology Network Data Classification and Grading Requirements of September 2022 – to facilitate the standardization of data classification and grading rules across the industry.
