China wants to regulate Internet companies more closely

Following the increasingly harsh crackdown on the country’s largest Internet companies in recent months, China now wants to officially regulate them more closely. Data protection reasons are cited for this.

Harsh crackdown on digital groups

In the recent past, China has taken stronger action against the country’s largest digital groups. The IPO of Ant Inc, for example, was prevented after Jack Ma, the company’s chief executive, voiced criticism of the country’s financial authorities. As a result, the entrepreneur disappeared from the public eye for several weeks for unexplained reasons, only to declare that he would devote himself primarily to charitable projects in the future. Other actions hit Didi Chuxing, whose app was banned from Chinese app stores, and Alibaba, which is also owned by Jack Ma and had to pay a billion-dollar fine. The one-party state’s increasingly tough approach represents an about-face, given that in the past tech companies were seen primarily as drivers of economic growth. Today, the party leadership views them more as a threat to the stability of the state system.

Privacy as a Reason for Regulation

Proposals now put forward by market regulator SAMR for officially stronger regulation aim to largely ban China-based companies from processing customer data. Targeted product advertising based on the analysis and dissemination of collected data, for example, is to be prohibited. Advertising with false ratings is also to be prevented. These measures are justified on data protection grounds – which seems rather bigoted in view of the ubiquitous state surveillance practice in China.

Share prices plummet

Meanwhile, the consequences of the proposal are already being felt: the share prices of leading digital companies plummeted. Among those affected are Alibaba and Tencent. The proposed regulations are scheduled to come into force on September 15, 2021 at the earliest. Significant opposition or possibilities of prevention are not to be expected in the Chinese one-party state. The reactions of the affected companies remain to be seen.