2021 has been a year of Beijing delivering full-on strikes against China’s tech industry. From antitrust to data security, online lending to crypto mining and online gaming to online learning, regulators have hit it all, and next year we can expect another parade of moves against China’s tech giants. But China’s tech entrepreneurs are resilient and (still) innovative. They will break new ground while staying in line with Beijing’s policy priorities.
Protocol asked experts what tech innovations and policy trends they are excited about in 2022. Here are seven that have global implications.
China can lead the metaverse game
In 2021, the metaverse is as hot in China as it is globally, if not more so. The metaverse (元宇宙) is not just one of the most popular internet slang phrases in China, but it’s actually one of the areas where China has an awful lot of advantages.
Lisa Cosmas Hanson, founder and president of Niko Partners, a market research and consulting firm covering the Asia games market, believes Chinese gaming companies are positioning themselves to take a leading role in building the metaverse. “Live service video games have been building towards this metaverse concept for a number of years, and companies with experience in both video game development and social media will have an advantage when entering this space,” Hanson told Protocol. “Companies like Tencent have in essence been building towards the metaverse for a long time.”
However, Hanson cautioned, the metaverse may evolve differently in China because regulators might drop the hammer on video game content. “The greatest opportunity for metaverses in China will come from interoperability across gaming ecosystems and collaborative events with brands and IP holders,” Hanson concluded.
Climate tech can soar
Back to the real world: Rui Ma, a China tech investor and analyst who hosts the podcast Tech Buzz China, told Protocol she’s excited about the Chinese climate tech sector as China’s government has prioritized policies to increase renewable energy and other decarbonization efforts.
Beijing in October pledged to take actions to bring carbon emissions to a peak before 2030 and to achieve carbon neutrality by 2060. That gives China eight years to find its peak point for carbon emissions, and after that, it gives itself only 30 years to hit carbon neutrality. Ma believes the steep drop presents “an immense opportunity” for companies in the climate tech sector. That includes new energy vehicle makers and their battery suppliers.
“[New energy vehicles] are the near-term prize, with China accounting for 61% of the market in October and probably the top market for the foreseeable future," Ma said. “Chinese companies such as CATL, BYD and Svolt are making waves for their world-class battery technologies … For the sake of the world and all of humankind, I'd love to see more 'green' billionaires in general, but China is off to an impressive start.”
A possible open-source tech boom
Kevin Xu — tech executive, investor and author of the Interconnected newsletter — predicts a banner year for open-source technology creation from China because China’s Ministry of Industry and Information Technology (MIIT) has expressed top-level high expectations for the sector.
In early December, MIIT issued guidance on advancing and modernizing China’s industrial technology infrastructure, in which the major tech regulator voiced its desire to see a thriving open-source ecosystem develop in the next four years. Specifically, by 2025, Beijing wants to have two to three open-source communities that have global influence.
“With the second-largest developer population in the world,” Xu told Protocol, “China's open-source community will be eager to answer that call-to-action from the top.”
A pivotal year for eCNY
Local and central governments rolled out multiple pilot programs throughout 2021 to bring the Chinese central bank digital currency closer to full adoption. Next year, the People’s Bank of China will soft-launch its digital currency globally during the Beijing Winter Olympics.
“2022 is the year where we should see how well the eCNY will hold up both as a product and a piece of infrastructural financial technology,” Xu said. “Its level of maturity — or lack thereof — will signal to other countries experimenting with their own [central bank digital currencies] whether the eCNY is a model worth emulating, which also implicates China's global influence overall.”
Regulations get more granular
Throughout 2021, we witnessed Chinese regulators slap a spate of mega and micro antitrust fines on China’s tech giants, including Alibaba, Meituan, Tencent and ByteDance. Toward the end of the year, ride-sharing company DiDi’s de-listing from the U.S. marked the beginning of its potential downfall and an era of a tougher security oversight regime that could shape how Chinese tech giants conduct their businesses.
But to Michael Norris, head of China Consumer & Tech Research at AgencyChina, these big regulatory moves are just “low-hanging fruit.”
“Next year, I anticipate regulators will contend with more technical issues, such as progressing algorithmic regulation [and] ironing out interoperability standards, in addition to investigating limits on platform subsidies and take rates,” Norris told Protocol. “In addition to being more technical, these domains also have a greater impact on how China's internet giants conduct their business activities.”
Algorithm rules can set a global norm
Speaking of technical regulations, Xiaomeng Lu, a director in Eurasia Group's geo-technology practice, told Protocol that she’s excited to watch China's evolving effort to shape up the global algorithm regulatory landscape in 2022.
In late August, China’s powerful internet regulator, the Cyberspace Administration of China, proposed a set of algorithm rules designed to restrict tech companies' usage of algorithmic recommendations and to offer transparency to users. Lu said these rules drew inspiration from the EU AI Act, and that liberal-minded scholars at the prestigious Tsinghua University and Nankai University were involved in advising senior Chinese leaders to be open-minded about emerging AI technology.
CAC is expected to release finalized algorithm rules in 2022. “Whether it will follow EU's AI regulatory pattern to impose a conformity assessment regime to ensure algorithm compliance or pivot to the data innovation narrative and focus legal reform efforts on exploring the rights to use, control and profit from data,” Lu said, “this policy area will become the next battleground for the pull and push between Big Tech and big government in China.”
AI governance becomes actionable
While we are on AI, Matt Sheehan, who researches global technology issues with a focus on China as a fellow at the Carnegie Endowment for International Peace, said China’s government is entering “a fascinating new phase” in how it regulates and governs artificial intelligence.
“AI governance” and “ethical AI” have become two buzzwords that frequently appear in government policy papers and corporate documents, Sheehan said, because Beijing has pushed hard to apply AI across China’s economy and society. As a result, some applications of machine-learning techniques have gone awry. But this will start changing soon, Sheehan thinks.
Over the past six months, Chinese sectoral regulars have released a host of proposals, including the set of algorithm rules Lu mentioned above, that will begin to turn AI governance into some concrete action from just lip service. These draft rules, in tandem with the newly passed Data Security Law and the Personal Information Protection Law, will have major implications for AI companies, Sheehan said.
“This raft of regulations won’t rein in human rights abuses or widespread AI-powered surveillance, '' Sheehan said. “But they will have major impacts on how Chinese society engages with AI, with implications around the globe.”
“Policymakers should watch closely as China runs some of the earliest experiments in mandating algorithmic explainability,” Sheehan added, “and technologists could gain from examining how Chinese companies develop new tests for AI robustness and safety.”
