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Protocol | China
The people, power and politics of Chinese tech, every Wednesday.

How Chinese companies push back on Beijing

Xi Jinping

Good morning from surprisingly deep into 2021! (Yes, we are now over one-sixth of the way through.) This week in Protocol | China: a struggle over privacy data tumbles into public view, mutual funds officially become cool and China inches closer to quantum supremacy.

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The Big Story

Some Chinese companies really do try to refuse Beijing's demands

The Financial Times reported Monday on one major frustration China's regulators have with the not-yet-IPO'd Ant Group: It doesn't share enough data with the government. The People's Bank of China wants to build a database on Ant's 500 million customers, but complains Ant either shares data in insufficient detail or dumps data on PBOC that its staff isn't equipped to handle.

Ant reportedly balked at a government request to make data-sharing with the authorities part of its user agreement. The company is said to have cited "fear of scaring off customers" as a reason to not comply, according to sources that spoke to the FT.

  • The article is a case study in how powerful Chinese companies can and do push back on Beijing. Baidu, ByteDance and many others insist they resist government requests for private user info, but those statements are hard to verify and Westerners rarely believe them.
  • China's Cybersecurity Law, enforced in 2017, infamously requires companies operating in China to submit to government checks.
  • But that doesn't mean China's government always gets what it wants. Private organizations still have a say, and Beijing issues rules such as the Cybersecurity Law because companies don't always comply, not because they do.

Remember: Chinese users do care about privacy. In a November 2019 lawsuit, for example, a Chinese law professor sued a wildlife park for requiring facial recognition scans to enter. In November 2020, he won.

  • China has strict data protection laws in draft form, and they'll stringently regulate companies' treatment of private data — but not the government's.
  • Beijing will always have the final say, but big companies still have the power to slow-foot any request.

One big problem here is transparency. In the latest annual Ranking Digital Rights index, produced by think tank New America, Alibaba, Baidu and Tencent got scores of zero when it comes to publishing data about government demands for user information. Even if they're trying their best to say "no," and sometimes succeeding, it's a struggle behind closed doors, and users can't count on well-meaning companies being successful.

On Protocol | China

  • A weird, fascinating tradition at some big Chinese tech firms: funky nicknames. From "Yogurt" to "Genghis Khan," employees at Alibaba, Pinduoduo and NetEase each have to choose a unique identifier when they join, or huaming (花名). It's intended to flatten hierarchies, although it also makes it harder for workers to know each other's identities. Zeyi Yang unpacks this strange practice.
  • Misogyny on Bilibili is out of control. The streaming platform that now aims to become China's YouTube (and a force in gaming) used to be a cool, niche place for mostly male anime fans. As it's gotten more lucrative and more mainstream, female users who've joined have found themselves gobsmacked by the level of vitriol directed at them — particularly when they try to talk about feminism. Bilibili has let the misogyny slide, but it's nearing a decision point if it wants to keep growing, Shen Lu reports.

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Read more.

Big Brother Beijing

  • Inner Mongolia says bayartai (goodbye) to crypto mining. It's home to one of the world's largest Bitcoin mines, but not for much longer. A new five-year plan issued by the Inner Mongolian regional government pledges to kick out crypto mining by May 2021, citing energy conservation concerns. Crypto enthusiasts have been building up large mining farms in China's energy-rich regions to take advantage of the low costs, but they'll need to find somewhere else to go. More broadly, the government says it plans to control the number of data centers being built in the region.
  • Want to stay on Beijing's good side? Repeat after me: You're fighting poverty. On Feb. 25, Xi Jinping was at a national ceremony, giving out awards to individuals and organizations that had made significant contributions in helping the CCP meet its 2020 goal to "eradicate extreme poverty." Didi's CEO Cheng Wei snagged a Model Poverty Alleviation Individual award, while Alibaba, Pinduoduo and Meituan were feted for creating job opportunities and spurring ecommerce in rural China.
  • Regulators are proactively testing for privacy compliance. Independent financial media outlet Caixin reported Monday that the minister of industry and information technology, Xiao Yaqing, revealed that in 2020 his ministry conducted tests of 520,000 mobile apps to see whether they met China's increasingly stringent personal information protection standards. 1,571 apps were told to "rectify" themselves.

Straight From China's Web

China's KOLs key on mutual funds. Chinese social media is now overrun by opinion leaders who specialize in explaining mutual funds and sharing investment suggestions, Chinese media outlet Jiemian reported last week. It's a good thing that users are passionate about learning how to be smarter with their finances, especially those on popular platforms whose users skew younger like Bilibili and Xiaohongshu. (Bilibili says finance-themed videos witnessed a 464% increase in viewership in 2020.) One catch: Telling followers what funds to invest in without possessing the right certifications is illegal in China.

On Our Radar

A domestic semiconductor design startup rakes in cash. It was founded in June 2020, but Chinese semiconductor design startup AkroStar has already raised $62 million in a pre-A founding round, KrAsia reported last week. Backers include Hillhouse Capital, Sequoia China, V Fund and Gaorong Capital. AkroStar aims to provide intellectual property to chipmakers, a function currently dominated by foreign players such as Arm. China is working overtime to become self-reliant on core technologies like chips, so the company will have the wind at its back.

One Company You Should Know

Yuanfudao wants to tutor China's rural kids

One of the leading online education platforms in China is seeking new funding at a valuation above $20 billion just six months after its last round, which valued it at $15.5 billion, Bloomberg reported last week. The Tencent-backed company is one of two frontrunners in China's largest-in-the-world ed tech industry, rivaling the Alibaba- and Baidu-backed Zuoyebang (whose founder Protocol | China profiled here). Both firms are making a big play for rural China, where families are underserved by the existing system and willing to spend an arm and a leg to give their children an early boost. Yuanfudao could go public as early as 2022.

China Goes Global

  • "The mutual dependence of U.S. and Chinese technology industries will continue." That's the conclusion of a Feb. 25 Brookings report that polled 158 execs at cross-border tech companies. They see a "global duopoly" emerging within 10 years, with U.S. and Chinese companies competing in third-party countries. The execs expect third-country firms to play the U.S. and China off one another, forcing them to customize their offerings to each market — with the companies never choosing just one nation.
  • China's photonic quantum moment. In collaboration with researchers from other Chinese and foreign institutions, a team at the National University of Defense Technology in Beijing has developed a new programmable optical quantum computing chip. The findings were published last week in the peer-review journal Science Advances, and they build on advancements in photonic quantum computing made by a team of Chinese scientists just three months ago. The new programmable chip is a huge step forward in making photonic quantum computing usable for solving practical problems, and it could help the tech leap-frog other approaches to quantum computing as China chases quantum supremacy.

One More Thing

A WeChat emoji quits smoking

China-based English language outlet Sixth Tone reported Monday that a widely-used WeChat emoji wearing a green army helmet and chomping a cigar is going cold turkey. Anti-smoking activists have reportedly been lobbying cyberspace regulators for years to crack down on smoking emojis. Social network Weibo and chat platform QQ long ago complied, but WeChat had kept puffing along, until this week.

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