China’s technological regulation is part of a greater effort to become a “superpower”

GUANGZHOU, China – China’s recent moves to regulate high-tech giants are part of its broader effort to become a technology “superpower,” an expert told CNBC.

Like the United States and the European Union, China is working to regulate the technology sector in many areas, from data protection to antitrust. Chinese technology companies have grown, largely unprinted by regulations, and have become among the largest in the world.

And there are a number of regulations that have come into force or are in the works.

In November, China’s central bank and regulators launched draft rules on so-called microcredit, which included provisions such as capital requirements for technology companies offering loans.

China’s State Administration for Market Regulation (MRSA) has also published draft rules aimed at stopping monopoly practices by Internet platforms. It is one of China’s most extensive proposals to regulate large technology companies.

Last month, SAMR said it had begun an investigation into Alibaba’s monopolistic practices.

And in October, China launched a draft law on the protection of personal data, which aims to regulate the way companies process users’ data.

All of these regulations are part of China’s greater effort to become a major global technological power, according to Kendra Schaefer, a partner at Trivium China, a Beijing-based research firm.

“Underneath all this, I think China understands that if it becomes a technological superpower … then it needs to lay a solid regulatory foundation,” Schaefer told CNBC’s “Beyond the Valley” podcast.

“They have to lay that foundation in the way they regulate the company’s operations, but they also have to lay that foundation in terms of data. In fact, data could be the most important regulations that they have to establish.”

“All of this is fundamental, and it’s really a way to set a framework, a springboard from which China can grow and move faster.”

Beijing seems to have recently taken a tougher stance against the country’s technology companies. 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), 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 in opposition to its technology champions, according to Emily de La Bruyere, co-founder of Horizon Advisory.

“These multinational technology companies are decisively the facilitating forces that China is using to expand its information and standards strategy globally. That will not change. We will not see that Beijing will activate its Big Tech as it seems. Washington, “Bruyere told CNBC in an email.

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

Not only China is bringing radical changes to technology regulation. The European Union was probably the most aggressive region in the world in this regard. Its general data protection regulation, approved 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 aims to provide stricter controls on the behavior of technology giants in a number of areas.

But the US has not yet taken a similar approach, with broad legislation in areas such as data.

“We still don’t have good data regulation in the United States,” Schaefer of Trivium China said. “So we don’t have that foundation, that kind of basic fundamentals, that we can regulate not only our domestic companies, but also foreign entry companies.”

“I think that we don’t have that fundamental data policy is one of the reasons we take this bizarre, scattershot approach to try to control Chinese input applications like TikTok, which targets certain Chinese companies because we don’t have a regulation. universal. “

Schaefer was referring to Washington’s ongoing saga, trying to get Chinese company ByteDance to sell TikTok’s US operations.