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Is Data the Medicine for an Ailing Economy? China is Betting on It

Xiao Liu China Fellow
A sign reading 5G on a street in Congqing China.
Sign for the launch of China Telecom 5G in Jiefangbei street Chongqing China.

As the global economy suffers from the Covid-19 pandemic and faces its worst recession since the Great Depression of the 1930s, leaders and governments around the world are looking for the right medicine for their ailing economies. China has suffered its first-ever quarterly economic contraction since the Reform and Opening Up period began in the 1970s, and its central leadership is betting on data to be the driver of its economic revitalization. In March, the Chinese Communist Party (CCP) pushed for accelerated advancements in “new infrastructure” with a focus on digital facilities, such as the 5G network, data centers, and smart cities. Recently, the State Council issued guidelines for accelerating the development of a data market that foregrounds the strategic role of data in the national economy. This response aims to incentivize data flows in order to fully unleash the power of data to revive the economy.

This move is hardly surprising given that amid the Covid-19 pandemic an unprecedentedly large scale of activities have migrated online, ranging from education to business and entertainment. Despite the economic contraction, the telecommunications, software, and information services sectors grew by 3.8% in China during the first two months of 2020. With the pandemic forcing the global economy to a stop and the unpredictability of the Covid-19 situation in the coming months, more businesses and human activities will be going online. Discovering ways to productively utilize the unprecedented amount of data generated from these online activities appears to be the key to boosting the ailing economy.

Data is the foremost driving-force for innovation and economic growth in the Fourth Industrial Revolution

Data is the foremost driving-force for innovation and economic growth in the Fourth Industrial Revolution and has been widely recognized as such by global leaders and entrepreneurs. Beyond China, the European Commission rolled out a European Strategy for Data in February with the aim of creating a single market for data. This will allow data to flow freely within the EU and across sectors to encourage data-driven innovations in business and public services, as well as to support European companies in the face of competition from U.S. and Chinese tech giants.  Experts and entrepreneurs such as Kai-fu Lee have identified the gigantic volume of data held by China—which is estimated to take up 20% of the global data by 2020—as a unique advantage for its data-thirsty AI sector and the overall digital economy. However, most of this data is siloed and remains underused. In a sign of change, the CCP leadership in 2019 for the first time ever listed data as one of the “factors of production” along with land, labor, capital, and technology. This means that data can now be directly leveraged by data-owners and data-controllers for economic profits, a crucial policy foundation for data marketization.

The recent CCP policy of accelerating data market development is consistent with its overall strategy of datafication and facilitating the usage of its vast troves of data to better deal with the current economic stress. Three key aspects to China’s data strategy can be identified within the recently released Chinese guidelines:

  • Further the advancement of open government data. Public bodies produce and control huge quantities of data and information due to their administration of governmental and public affairs. “Open government data” has increasingly become a set of policies and common practices in many countries—such as the United States, Mexico, Denmark, and Singapore—where governments promote business innovations and efficient citizen services through the use and reuse of open datasets made available to the public. Similarly, open government data emerged in China over the past decade as a way to build up digital infrastructure for facilitating business development and enhancing governmental management. Local governments were encouraged to share their data across government sectors and to open up non-sensitive public datasets—such as weather and transportation data—to businesses, societal entities, and individuals. From 2012 to 2018, more than 50 open data platforms were established by ministries, departments, and local governments with datasets ranging from education, medicine, employment, traffic, the environment, and many other areas. The Lab for Digital & Mobile Governance at Shanghai Fudan University has been running a yearly report since 2017 ranking the achievements and progress of local governments in open data. Of course, one key practical question for China’s leaders—as it is for leaders of other countries—is what data can be open without affecting government security. As such, an important piece on the agenda of data governance in China is the classification of data, which turns out much more complicated than it would initially appear to be, particularly within a big data environment.
  • Explore the model of data trade. Although there are already two or three dozen data trade platforms in existence in China—the most well-known of which is the Global Big Data Exchange in Guiyang—models for transaction and security mechanisms are still immature. The lack of effective governance protocols and technological support for data transactions raise serious questions about trust, security, privacy, and sustainability of this trade.
  • Enhance data governance and data protection. This effort includes building the legal infrastructure to define data rights and protect data privacy. Chinese government has moved quickly in the past few years to set up more than 200 laws and rules for data security and protection, among which include a national standard on personal information security released in 2018. It was announced that the making of Personal Information Protection law is high on the legislative agenda of 2020, and a draft is expected to be submitted soon to the National People's Congress (NPC) Standing Committee for review.

The final aspect of enhancing data governance and data protections undergirds the other guidelines, as it would be impossible to share and trade data in practice without a clear definition of the boundary between public and personal data, as well as an understanding of the legal rights and obligations of data subjects and data controllers.

This may appear counterintuitive to many Western audiences, as people are more familiar with stories of Chinese government cracking down on dissent and using high-tech surveillance to subdue minorities. During the Covid-19 outbreak, with the expansive enlistment of big data to track the coronavirus in the Western countries, there are rising concerns that the pandemic could make the China model of digital surveillance prevail in democratic countries and threaten the core values of democracy. While such worries show deep-seated suspicions in Western society towards governmental deployment of mass digital surveillance technology, data control and surveillance is only half of the story. It also remains pertinent to the fundamental interests of the Chinese government and the Party to maintain economic growth, especially during the Covid-19 -incurred recession, and, to this end, the development of a robust data-intensive digital economy is crucial. The aforementioned measures and policies of data protection unfurled precisely in this context. After all, this is the legal and policy infrastructure for an increasingly data-reliant economy.

The government’s fostering of the digital economy certainly creates significant tension between the need for data flows to facilitate data-driven innovations and the control of data in the hands of government agencies and a few big companies, as well as between a market mechanism that claims to be built on consumers’ trust and rights and a governmental system that relies on heavy digital surveillance on its citizens. Although Chinese leaders certainly perceive these issues in very different ways than do their democratic counterparts, the need to find a workable balance between security and innovation is hardly unique to China.

The defense of privacy amidst the struggle against the Covid-19 demonstrates a strong voice among Chinese citizens in asserting their data rights.

In recent years, Chinese consumers’ desire for privacy protection has attracted immense attention. The Western world often takes the founder of Baidu Robin Li’s comment that the “Chinese are willing to trade privacy as convenience” as evidence for the lack of privacy consciousness within Chinese society. However, such an analysis is not accurate. From lawsuits initiated by consumer rights groups against tech giants such as Baidu for collecting data without consent to a case where an individual citizen filed against the deployment of facial recognition technology, some Chinese citizens are driving the emergence of a highly active space for advocating for data privacy. Recently, the leaking of people’s personal information with a travel history to Wuhan has generated intense media discussion. The defense of privacy amidst the struggle against the Covid-19 demonstrates a strong voice among Chinese citizens in asserting their data rights.

Despite these efforts, ensuring data privacy and protections remains a difficult task, as it is a thorny issue worldwide to balance data utility with privacy. Every country has struggled to tackle the question with their own approaches and experiments, and no ready answer is yet available. This question has become particularly prominent due to the current pandemic situation not only as a result of of the large-scale adoption of data for the tracking and monitoring of Covid-19—which raises widespread privacy concerns—but also because the economic crisis has pushed the role of the digital economy and data to the foreground. We shall see if data is the right medicine for the ailing economy, but data privacy has never been as important as it is now.   

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The views expressed are the author's alone, and do not represent the views of the U.S. Government or the Wilson Center. Copyright 2020, Asia Program. All rights reserved.

About the Author

Xiao Liu China Fellow

Xiao Liu

Wilson China Fellow;
Assistant Professor at McGill University and Fellow at the Centre for the Fourth Industrial Revolution of the World Economic Forum.
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