Weblog with daily updates of the news on a frugal, fair and beautiful China, from the perspective of internet entrepreneur, new media advisor and president of the China Speakers Bureau Fons Tuinstra
China’s tech firms have faced US listing limitations on both US and China regulations. China lawyer Mark Schaub look at the new issues tech firm face on data, privacy, VIE’s, and other regulations for listing in the US at the vlog of his law firm KWM.
China is gettings its digital agenda for its legislation in order, especially the protection of users’ privacy, writes China-lawyer Mark Schaubon the China Law Insight. He looks at the call for comments on the Interim Provisions on the Administration of Personal Information Protection of Mobile Internet Apps.
Mark Schaub:
The mobile phone is likely to be the greatest point of vulnerability for Chinese consumers. Apps collect (often surreptitiously) massive amounts of data with the Chinese consumer having little inkling as to the purpose or extent to which their data is being processed and shared.
The Provisions signal a very welcome recognition that privacy on devices is important to safeguard privacy rights in real life. The Provisions recognize that standardization of measures and regulations are important so that there is a unified approach by the authorities.
The Provisions set common sense safeguards for personal information and, more importantly, also set out real life means by which to take action against errant Apps.
Although, the Provisions are being circulated for public comment it is unlikely that this will lead to any provisions being watered down. More likely, in the near future, the implementation of the Provisions, accompanied by the introduction of the Personal Information Protection Law, will provide a multi-layered legal system with sufficient teeth to protect personal information in China.
China is following the European Union’s GDPR in trying to regulate the unruly data industry, says Winston Ma, Winston Ma, adjunct professor at the New York University School of Law at CNBC. China’s internet companies based for years their business models on consumers’ lack of awareness of privacy, he adds, but those days are over.
“After years of Chinese internet companies building business models around Chinese people’s lack of awareness about privacy, users are becoming more knowledgeable, and they are becoming angry with companies abusing their personal information,” Winston Ma, adjunct professor at the New York University School of Law, told CNBC via email.
Privacy concerns, marketing and local regulations on data security are just a few of the barriers China’s tech companies face when they want to go global, says seasoned VC William Bao Bean at the China Technode Emerge 2020 conference in Shanghai last week. Geopolitical tension are way overrated as possible hurdles, he adds, according to Technode.
Technode:
2020 has been a tough year for Chinese tech companies selling to overseas markets. In India, local authorities banned a total of 177 Chinese apps in June and September following border clashes between the two countries. In the US, the Trump administration announced impending bans on short video app Tiktok and instant-messaging app Wechat, which are among the most successful Chinese apps in international markets. Chinese telecommunications equipment maker Huawei is facing increasing restrictions on supplying gear for Western countries’ next-generation 5G networks.
Beyond geopolitical tensions, Chinese tech companies expanding overseas also face obstacles in the form of privacy regulations, marketing, and localization, William Bao Bean, general partner at investment firm SOSV, said during the opening panel at the Shanghai event.
“The challenge for entrepreneurs going across the border is actually trying to understand what you can do and what you cannot do,” Bean said.
The lack of regard for privacy has led to some of the problems Chinese tech companies face in markets like Europe and the US because of stricter local regulations on data security, Bean explained.
“You have to adapt to the local market. You have to follow the local law. And half the time, people [startups] don’t even know that they’re breaking the law when they go across the border,” he said…
Chinese venture capital (VC) funds may find it difficult to raise money from US pension funds, said Bean. But he believes that the hurdles faced by VCs are not affecting Chinese startups. “That’s a money problem, not a startup problem,” he said.
“China has got the number-two largest VC industry in the world in terms of the amount of funds put in startups and it’s actually easier for Chinese companies to raise money from China,” he said.
Bean said that Chinese tech companies should see Southeast Asia as their next destination in their global expansion plans to avoid regulatory uncertainties in Europe and India.
“Southeast Asia has a lot of the same challenges, problems, or opportunities that China had 10 years ago. It’s a mobile-first market. So people’s first or only experience with the internet is on a smartphone, which is very similar to China,” he said.
Bean said he couldn’t be sure whether or not there will be more Chinese tech companies facing global regulatory backlash like Huawei and Tiktok, but he is optimistic that this would not stop Chinese startups from going overseas.
Everyone is talking about data and how it is like oil. The above quote has been repeated by the Economist, newspapers, titans of industry and world leaders.
However, data really is not like oil.
Oil is ultimately a finite and diminishing resource. Its value is linked to scarcity. Oil has one basic use. Data has none of these attributes. Data and its uses expand exponentially. Indeed it is forecast that in the next two years, 40 zettabytes of data will be created – this is data equivalent to 4 million years of HD video. [1] Most crucially consumers of oil do not generally take matters personally. Data on the other hand, inflames consumers’ passion-how do I maintain privacy? Who has access to my data? How will the data be used?
Big data is a focus area for many industries and the auto industry is no exception. However, with the advent of self-driving cars the auto industry will not only be a consumer of data but also a major generator of data. A single self-driving car could generate as much as 100GB of data every second. [2]
Given that China has 217 million cars and the number increases by nearly 11% each year [3] this means the potential amount of data produced yearly would be far greater than the data held by Google.[4]
Self-driving cars may not need oil to function (as most will be electric) but they will need data to be on the roads. Self-driving cars will rely on a massive amount of data to flow via various sensors integrated into the vehicles. The vehicle will need to know its precise location, its destination and also be able to keep track of everything while it is on the road.[5] Self-driving cars will also need to learn about their environment and the consumers who use them. The “smarter” self-driving cars can become, the greater the convenience for the users. However, the cars will need increasing amounts of personal data to become smarter and also to incorporate data results into the services.[6]
Unlike oil the data generated by self-driving cars will not be a simple commodity that will be used for one purpose and consumed. The data generated will have great value to carmakers, mobile operators, insurance companies, restaurants, hotels and any other innumerable numbers of service or product providers that hope to interact with a self-driving car or its user. Google has built a $400 billion business on its knowledge of over one billion[7] users’ internet habits using their search engine for 1.2 trillion searches per year. [8] Imagine how valuable similar insights that are generated by observing billions of consumers’ behavior in cars for extending periods of time every day. The potential for monetization will be almost limitless.[9]
Data – great for companies, great for convenience, great for consumer experiences – but not so great for privacy. Privacy concerns on the part of consumer have greatly increased in recent years with the growth of social media, internet and data hacks. Self-driving cars will amplify concerns and consumers and regulators realize how much data and personal information these vehicles will generate, use and record about users and the surrounding environment. Self-driving cars will be a veritable fleet of data factories. Such mobile surveillance will mean that privacy will be compromised … everywhere.
As millions of self-driving cars are expected to be on the road within the next few years the issue of balancing the modern concern of privacy and the pressure to not hinder the next great industrial revolution will be increasingly pressing. A balanced regulatory scheme will need to be established to protect privacy on the one hand while still allowing the technology to develop unheeded by excessive government intervention.
