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From algorithms to crypto mining, an insider's guide to China's IT crackdown.

On Monday, one of the world's toughest digital-privacy laws goes into force in China, impacting millions of businesses and changing the internet for roughly 1 billion people. The Personal Information Protection Law comes as China's government is enforcing a broad array of measures against the country's IT sector.

Since last autumn, China has tightened controls on social media and e-commerce sites, driven bitcoin miners out of the country, imposed new regulations for video game developers, and announced plans to limit how corporations use algorithms. Over the last 12 months, at least 19 important regulatory measures have been taken in the nation, affecting a wide range of businesses from food delivery to online rental platforms.


Here's all you need to know about the new laws and what they signify for China's massive and prominent IT sector.


Dissent and antitrust

Despite the fact that Beijing issued the policies in short succession, analysts believe they are not necessarily guided by a single economic strategy. Instead, the surge of new restrictions simultaneously target a multitude of government interests, from monopolistic conduct to suppressing dissent.


"You can't really say this is 30% control and 70% public policy or vice versa because they're so intimately interwoven," said Martin Chorzempa, a senior scholar at the Peterson Institute for International Economics.


As a result, Samm Sacks, a senior scholar at Yale Law School's Paul Tsai China Center and a cyber policy fellow at New America, a think tank focused on public-policy concerns, advises looking at the legislation through many perspectives. "There isn't a single crackdown," she explained, "but you could place them under a bigger canopy of things like party control over the private sector."


Consumer protection is important.

The new privacy legislation, as well as a related data-security regulation that took effect in September, are most likely genuine attempts to strengthen consumer rights. They were created in part to address similar concerns about corporate spying that have been voiced in the United States and elsewhere.


However, some rules, according to Sacks, might allow the government to compel corporations to pass over user data. Firms have previously resisted data requests by contesting their legality, but authorities may now refer to the new legislation and claim national security or other considerations, according to her.


Algorithms for constraint

Apart from the privacy legislation, the most notable rules are those relating to data security and algorithms. "Those are the new ground principles for the whole digital economy," Chorzempa explained.


A campaign launched last month by China's Cyberspace Administration to prevent the abuse of algorithms is one of the steps. Online platforms must allow consumers to turn off automatic suggestions, and corporations must not utilize algorithms for things like pricing discrimination, according to draft rules announced in August.


Despite the fact that many scholars and activists in the West have raised concerns about predatory and biased algorithms, China is the first government to take action. This is partly due to the fact that it operates under an authoritarian system, in which democracy and deliberation take time, according to Shazeda Ahmed, a visiting researcher at the AI Now Institute and a doctoral student at the University of California, Berkeley, who is researching China's internet policy.


According to Ahmed, China's algorithm regulations are an experiment that authorities all over the globe will now be able to examine. "If any of these issues persist, we will have additional proof that regulating algorithms is insufficient," she added.


Predatory lending is a term that refers to lending that is

Many of the rules took years to put together, despite the fact that they appeared to be abrupt or extreme at times. According to Ahmed, the Chinese government is now addressing long-standing issues in some circumstances. She stated that Chinese IT businesses "were able to get away with a lot for a very long period." "This has been going on for a while, and the government waited until there was enough proof to take action."


Ahmed also mentioned the predatory loan business, which has led to the financial devastation of many Chinese residents. In November 2020, Chinese financial officials implemented new lending guidelines and halted the fintech giant Ant Group's highly anticipated initial public offering, making the industry an early casualty of the crackdowns.


"Those who have been following this business attentively over the previous several years would have predicted this time," said Xiaomeng Lu, an emerging technologies, geopolitics, and markets director at Eurasia Group. "However, weighing in around the Ant IPO was rather spectacular."


Putting a stop to a tech bubble

When the government announced one crackdown after another in the middle of the summer, "a lot of investors freaked out," Lu said, adding that it had become hard to hold many Chinese tech companies due to the high degree of uncertainty. "Then some of them came back swiftly," Lu added, adding that this only lasted about a month.


Experts told Insider that the Chinese government is almost probably not attempting to destroy the country's digital behemoths, but rather to mitigate the worst impacts while maintaining stability. "They aim to weed out the irrational capital investment," Lu explained. "They want to do rid of that kind of tech bubble," says one source.


Overall, Chorzempa believes that many of China's new tech restrictions "would appear very nice to many Americans." In July, for example, the Chinese government published rules requiring delivery workers to be paid more than the minimum wage, mimicking similar legislation in locations like New York.


At the same time, he added, the crackdowns typically offer the Chinese Communist Party more influence over society and create "more severe policies" to ensure the party's tight grip on power.

By Flexi Team


*DISCLAIMER: This article and its publication are intended to provide a brief introduction and act as a general guide. This is provided for information purposes only and cannot be utilized as a substitute for professional advice. This document does not represent a legal opinion and one must not rely on it without receiving independent advice based on the particular facts of its own case. No responsibility is accepted by the author or the publishers for any loss suffered from acting or refraining from acting based on the contents of this publication.

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