Behind China’s push to make data a national asset
Shen Lu here again. David Wertime will be back hosting the Protocol | China newsletter next week.
The Wall Street Journal reported Tuesday that China will keep its borders largely closed until late next year, driven by concerns over COVID-19 variants, the 2022 Winter Olympics and the biggest power transition within the Communist Party in a decade. Meanwhile, many Chinese people who — in normal times — lived and worked abroad are stranded in China, awaiting the easing of travel restrictions so they can return to the U.S. These people have built their lives and businesses on the premise that we could cross borders freely. The prolongation of pandemic-era rules will hit them hard. If you would like to share how travel restrictions have affected or will affect your life or cross-border business, write to us at email@example.com.
In this week's Protocol | China: Beijing can lean on the private sector for data, Kuaishou is winning a battle over short-form shows, and some tech workers actually like working overtime.
(Was this email forwarded to you? Sign up here.)
The Big Story
Data for the nation
Last week, Protocol | China contributor Dave Yin dived deep into Chinese authorities' plans to regulate and use zettabytes of data from the private sector.
Beijing has spelled out its ambitions in policy documents. In China's 14th Five-Year Plan, which was released in March, the central government designated data as one of the national resources that form the backbone of the country's economy.
- The goal is to create digital governance and make everything from factories to cities "smart."
- An illustrative example: raw materials getting shipped and allocated using privately-owned autonomous vehicles connected to government mapping data and IoT devices that monitor supplies at smart manufacturing facilities.
That sounds futuristic and smart — "The Jetsons" meets "Good to Great." The reality is more dystopian: The Chinese government could lean on Chinese tech companies and multinationals alike to share data — not just in response to police requests or national security investigations, but wholesale.
- According to the Wall Street Journal, the Chinese government is now calling on Chinese tech giants like Tencent, Alibaba Group and ByteDance to share their data.
Some see a way to profit off of the data grab. Several local governments have set up "data exchange platforms" to facilitate the extraction and use of private data.
- Some of these centers were built with help from tech companies such as Baidu and subsidiaries of JD.com.
- The notion of using private data may be more of an aspiration at this point. Nearly all data being traded so far appears to come from government departments, not private companies.
- Sources told Protocol that private businesses, including foreign multinationals and chambers of commerce, have been approached by the backers of those data-trading platforms to participate. But so far the response from the private sector has been lukewarm.
Several major regulatory efforts are underway in the push to treat data as a national asset. Already, some companies are seeing the impact.
- One example: Beijing's crackdown on Alibaba on antitrust grounds. Some industry observers have described Beijing as growing weary of the ecommerce giant's refusal to share its vast reams of consumer data with regulators.
- Big foreign firms like Tesla and Apple have taken heed, and are localizing data storage in response to tightened rules around data security.
- The new Data Security Law, which passed on June 10, grants Chinese authorities more power to rein in tech companies and restrict data transfer to foreign countries.
One key aspect of the new data regime to watch: The Data Security Law also allows China to enact "reciprocal" restrictions on data access in response to other countries' moves. The Biden administration just revoked the previous regime's proposed sanctions on TikTok and WeChat. But this won't be the last flashpoint over data.
— Shen Lu
On Protocol | China
A long battle is brewing over short dramas. Quibi was ridiculed for pushing short-form shows designed for mobile phones on the American market. But that same formula is flourishing in China, and Kuaishou is winning in this battleground, owing to its success in seizing the vast rural markets. China's internet giants, including ByteDance and Tencent, are racing to compete with Kuaishou for fragmented attention. Protocol | China contributor Caiwei Chen has more.
A shopping bonanza under the dark cloud of antitrust. China's midyear ecommerce extravaganza, 618, concluded Sunday. Ecommerce giants Alibaba and JD.com alone claimed they'd hauled in an estimated $150 billion in consumer spending. This year's shopping spree was more competitive than ever. Shen Lu explains why.
Big Brother Beijing
A sweeping crackdown on crypto mining. China's Sichuan Province halted more than two dozen crypto-mining operations over the weekend, becoming the latest Chinese crypto hub to clamp down on bitcoin mining. The crackdown on crypto mining has intensified in China in recent months as Beijing seeks to control energy consumption as well as financial risk.
DiDi is under antitrust investigation. Just a week after China's car-hailing giant DiDi Chuxing filed for a U.S. IPO, the company is reportedly in antitrust trouble. Reuters reported last Thursday that the State Administration for Market Regulation is investigating whether DiDi squeezed out smaller rivals using anticompetitive tactics. DiDi became the latest target in a broad crackdown on Chinese Big Tech, including Alibaba, Tencent and Meituan.
Meet China's new chipmaster. Chinese President Xi Jinping has picked Liu He, Xi's top economic adviser, as his top deputy to lead China's new chipmaking initiative as Beijing ventures further in seeking technological self-reliance, according to Bloomberg. The so-called "third-generation" effort would explore making chips with newer materials where no company or country currently dominates.
China Goes Global
Graphics cards take a hit amid crypto crackdown. Top graphics-card makers Nvidia and Asus saw prices fall by two-thirds since May, the South China Morning Post reported. Demand for the cards has dried up with China cracking down on bitcoin mining. Dedicated graphics cards are integral to the bitcoin-mining process, but they also play an important role in consumer electronics, especially for PC gaming.
China soars into space. On June 17, China sent three astronauts into space on the Shenzhou-12 spacecraft. The astronauts will stay in orbit for three months on the Tianhe module, with the goal of bringing the module into operation as a space station. This is China's first manned mission in almost five years, and it will be China's longest crewed space mission so far.
Straight From China's Web
SenseTime gears up for a dual listing. SenseTime, China's largest artificial intelligence unicorn, could file for an IPO on the Hong Kong Stock Exchange as early as August, followed by a separate listing on China's STAR Market, according to Tencent News. Tencent News had reported earlier that SenseTime had completed a pre-IPO round of fundraising at the end of 2020 with a valuation of $12 billion. Nikkei Asia reported that SenseTime could raise as much as $2 billion in Hong Kong.
Douyin returns to PCs. Douyin, ByteDance's domestic version of TikTok, started out mobile-first, but recently launched a desktop version. Douyin's rival Kuaishou also has a web version available. Chinese tech blog Internet Jianghu interpreted the return to PCs as a response to cutthroat competition for the time and attention of China's netizens. The desktop could also be a way for the short-video services to expand into longer video formats.
Red Vs come after popular science bloggers. At least four popular science and general education bloggers — PaperClip, Songshuhui-Association of Science Communicator, Elephant Group and OX3 TV Production — have recently had their social media accounts suspended or force-deleted after ultranationalist Weibo accounts, a.k.a. Red Vs, launched smear campaigns against them, cobbling together what they felt was evidence of the bloggers' "anti-China" attitude. The Red Vs appear to have been on a quest to threaten voices that don't align with their ideology into silence. They adopted similar strategies to purge feminist activists in April.
One Company to Know
Full Truck Alliance goes public. Full Truck Alliance raised almost $1.6 billion in its IPO this week, putting its valuation at over $24 billion, according to Reuters. The company is backed by Tencent, SoftBank's Vision Fund and Alphabet's CapitalG, among other high-profile investors. The company offers an app that connects truckers with merchants shipping items across China, and bills itself as the "trucking version of Uber." Uber might raise an eyebrow at that: Its Uber Freight subsidiary does exactly that in the U.S.
On Our Radar
A (smaller) Ant IPO. Bloomberg reported last week that financial giant Ant Group could go public by the end of this year, though at a valuation reduced by 60%. The company, backed by Alibaba founder Jack Ma, could be worth about $120 billion upon listing, Bloomberg said, citing analysts at Sanford C. Bernstein & Co. — far below the $320 billion valuation it sought before regulatory pressure caused the company's planned offering to collapse in November.
One More Thing
Some tech workers embrace overtime. Last week, Protocol | China told you that many exhausted tech workers in China are fighting against cutthroat competition and that a game studio under Tencent is piloting rules that mandate employees clock off at 6 p.m. every Wednesday. Shortly afterward, on social media app Maimai, users who claim to be ByteDance workers leaked internal survey results on whether to abolish ByteDance's current big/small policy, where a six-day workweek is followed by a more moderate schedule. The results showed that a third of the surveyed employees were in favor of canceling the policy, but another third would like to continue working six days a week every other week. Several ByteDance workers told me that they didn't receive such a survey but that they would've fallen into the latter group — because working overtime on the weekend means double day rates. "The overtime pay is calculated into our total compensation package. Canceling the big/small policy would basically mean a salary cut," said one ByteDance worker.