More regulatory crackdowns are in store for China’s tech leviathans after the last-minute mothballing of Ant Group’s stock market flotation.
Beijing is said to favor taking baby steps towards beefing up its scrutiny of the nation’s freewheeling e-commerce, online payment and credit and loan-issuing sectors.
But Alibaba founder Jack Ma’s criticism of state watchdogs’ “overregulation” at a recent Shanghai forum on the eve of Ant’s IPO apparently galvanized Beijing into tougher action.
In a hint of more monopoly-busting measures against a few “oligarchic firms and their platforms,” the State Council’s State Administration for Market Regulation published on Tuesday a consultation paper on new anti-trust measures and penalties for internet platform operators.
As the Chinese central bank and China Banking and Insurance Regulatory Commission scramble to rein in the lending and interest charges by Alibaba’s Ant and other fintech firms, the draft document from the state market regulator has put the focus on data harvesting and processing, related algorithms as well as the omnichannel tentacles of Alibaba and the like, under a clear anti-monopoly rubric.
An internal memo explaining the consultation paper viewed by Asia Times noted that these Internet companies and their platforms enjoying a stranglehold on the market had shown “obvious inclination” to abuse their dominance over transaction rules, algorithms and data and traffic to curtail deals with certain customers, turf out smaller rivals and newcomers and therefore limit competition.
“The emergence and fast adoption of artificial intelligence, big data technology as well as related algorithms in recent years have all enabled big companies and their platforms to further entrench their lead and even monopoly, to the point that newcomers are simply unable to compete,” read the memo issued to all provincial governments.
To rein in what Xinhua has called “untrammeled and unchecked profit-making” by Alibaba following Ma’s controversial speech in Shanghai, the consultation paper has proposed legislation on digital resources property, stressing that data and traffic generated during online transactions are both proprietary and public.
To level the playing field and protect consumer rights, the state must oversee how data would be harvested, transferred, stored and analyzed, the paper said.
Also, some widespread practices may now run foul of the authorities and may be made punishable, such as discriminating against clients on the basis of their income, preferences and region, all made possible by big data analytics, to charge different prices and fees.
One case in point was a Xinhua revelation about a “popular online shopping platform” raising prices for users of Apple’s gadgets, since iPhone users are thought to have a higher average income. The differential pricing was made possible with the app’s automatic detection of device types and brands and the profile and spending data of individual users.
“Before 2020, Beijing’s hands-off approach nurtured the phenomenal rise of Chinese tech firms and the internet economy, when the overall Chinese economy was booming and regulators were very tolerant of new business models and even malpractices,” Liu Xiaobo, a former Xinhua reporter and a well-known business columnist, told Asia Times.
“But anti-trust has become more pressing as Beijing pivots to unleashing internal demand. Internet monopoly, if uncontrolled, may jam the gears of Xi’s internal circulation drive.”
Former Financial Minister Lou Jiwei warned of big tech monopoly in a speech in September, adding that Internet platforms had increasingly become public goods and public service providers, even though they started as profit-seeking business entities.
“Their market dominance and control of data may raise the suspicion of monopoly. Their business model and dominance must not hinder the internal circulation,” said Lou.
Liu Bo, Alibaba Group’s vice president in charge of the giant’s lucrative online marketplace Tmall, said on the sidelines of the launch of the Singles’ Day shopping festival this Wednesday that the group would welcome new anti-trust policies. He sidestepped questions about Tmall’s differential pricing regime and other clauses for traders and customers perceived as unfair and limiting competition.
Other observers also argue that, on top of fair competition and consumer rights protection to boost internal demand, Beijing’s clampdown on big tech could also give impetus to its digital yuan and digital sovereignty drive.
Hong Kong’s Ming Pao daily notes in an op-ed that in the advent of the digital Chinese yuan, the e-Renminbi, Beijing felt the need to wrest more control over the internet and online transactions from Alibaba and the like, in a bid to facilitate the roll-out of the digital legal tender as well as its monitoring of transactions.
“Alibaba and the like may not be as pliant and cooperative as many have reckoned, when it comes to sharing data with the authorities,” the article said
“In the era of 5G and all the opportunities it may spawn, Beijing is anxious to monopolize and nationalize data under the pretext of promoting the e-Renminbi and defending digital sovereignty.”
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