China’s first comprehensive digital privacy legislation seeks to keep Big Tech in check

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Personal Information Protection Law (PIPL) – China’s first comprehensive digital privacy legislation seeks to keep Big Tech in check

China's first comprehensive digital privacy legislation

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China is trying to tighten regulations on how personal data on Chinese citizens is collected as part of a larger effort to limit the power of Big Tech companies like Tencent and Alibaba.

A strong data protection framework can assist countries in defining how the next-generation internet will look like and could become a political issue as China is competing with the US in the technology sector.

However, the move has sparked controversy about whether the same rules will extend to the government, which some would argue is the country’s largest data processor.

Last year, Beijing released a draft version of the Personal Information Protection Law (PIPL), which, for the first time, laid out a comprehensive set of regulations concerning data collection and protection.

Over the past few years, Chinese tech giants were able to grow unhindered and collect vast data sets, which they used to train algorithms and build products.

As the use of technology increases, there has been a global push for more stringent regulations that protect consumer data and privacy.

In 2018 we saw the European Union put its landmark General Data Protection Regulation (GDPR) into effect. The GDPR gives EU citizens more control over their data and gives authorities the power to sanction businesses that break the rules. In contrast to Europe, the United States has yet to pass comprehensive data protection legislation.

Now China is attempting to introduce regulatory changes similar to those implemented in the European Union.

For years, Chinese tech companies have profited from the Chinese public’s lack of awareness concerning digital privacy. There are numerous articles on the internet warning people from other countries about the risks of using Chinese software, especially this one about Chinese VPNs keeping logs of user data.

But these days, Chinese people have become more knowledgeable, and they’re frustrated with companies exploiting their personal information.

In February, China amended antitrust regulations for platform economy companies which refers to internet companies that provide services such as food delivery and e-commerce. Data protection and antitrust regulations are part of the Chinese government’s efforts to reel in some of the power large tech companies have accumulated.

What is PIPL and what does it mean for Big Tech?

The Personal Information Protection Law (PIPL) applies to China’s citizens as well as the individuals and companies processing their data.

The following are the key PIPL provisions:

  • Individuals or companies that wish to collect data from users must first obtain consent from them, and the users have the right to revoke that consent.
  • Individuals or companies that wish to collect data from users may not refuse to provide services to users who don’t agree to their data being collected unless that data is required for the service to be provided.
  • Users can request their data from data processors.
  • Strict regulations regarding the transfer of Chinese citizens’ data outside of China, including obtaining permission from the government.
  • Any individual or company found in violation of PIPL may be fined up to 50 million yuan ($7.6 million), or 5% of their annual turnover. They may also be compelled to shut down some of their operations.

In short, the PIPL means that China’s internet giants will face more scrutiny, and their business models will have to adjust. Whether domestic or international, the period of “exponential growth in the wilderness” is over for Chinese technology companies.

The PIPL is just one part of Beijing’s push to regulate the country’s major tech companies, which gained traction after Ant Group’s record $34.5 billion IPO was suspended in November.

The Chinese billionaire Jack Ma’s business empire has been in the news a lot lately, with Alibaba receiving a fine of 18.23 billion yuan ($2.8 billion) from China’s State Administration for Market Regulation.

The fine is a result of an anti-monopoly investigation into the company’s practices launched in December. Regulators found that Alibaba’s practices allowed it to gain an unfair competitive advantage.

Pony Ma, the founder of gaming giant Tencent which owns WeChat, a very popular social networking app in China, has also met with officials to discuss his company’s compliance with regulations.

Political motivations

China’s efforts to regulate its tech sector are partly motivated by its ambition to become a leader in the industry. Whichever country wins the race in terms of legislative breakthrough and development models will shape the internet of the future generation.

Countries with strong data regulations will have greater power if there is a version of WTO rules for the digital economy. The World Trade Organization (WTO) is a 164-member organization aiming to establish rules on global trade.

While the United States has yet to adopt comprehensive national data security legislation, China’s ambitions to dominate the tech industry are growing. Last month, it laid out seven technology areas it plans to focus on in terms of research and development.

These areas are:

  • Artificial intelligence
  • Quantum information
  • Integrated circuits or semiconductors
  • Brain science
  • Genomics and biotechnology
  • Clinical medicine and health
  • Deep space, deep earth, deep sea, and polar research

China is also currently working on a project called “China Standards 2035,” which has the goal to increase the country’s future role in the standards-setting process for technology.

Will PIPL extend to the government?

PIPL does have a section that deals with how the Chinese citizens’ data is processed by state agencies, and in theory, they should follow similar rules to private companies. There is, however, some debate in the Chinese legal and academic communities over whether or not this will actually happen.

What’s noteworthy is that this push to reign in the power of tech giants in China has started a national debate over what the governments should and shouldn’t be allowed to do with citizen data.

PIPL gives Chinese citizens the right to give informed consent to their data being collected, but what will happen when this right interferes with police investigations, for instance?

The impact of PIPL has mostly been discussed in terms of how it will affect large tech companies like Tencent and Alibaba, but let’s not forget that Chinese state agencies also collect vast amounts of data and have virtually unrestricted access to Chinese citizens’ personal information.


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