January 23, 2022

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China’s Rules on Algorithms are Promising

China just completed its draft of new rules to regulate how companies use algorithms, which will take effect on March 1.

This new law makes it possible for the Chinese government to investigate and change the algorithms of Big Tech companies. The regulation will target how companies/algorithms recommend things to consumers, but not every single algorithm. The rules are broad, and are likely to include news, products, relationships, services, recommendations, etc., it doesn’t seem to include algorithms that power certain technology or the core services of every tech company.

The intent is to limit the negative effects caused by, among other things, social media and disinformation. The text of the regulation contains some provisions that none in western countries could argue are not legitimate concerns. For instance, article 18 of the regulation says, per an unofficial translation, “Algorithm recommendation service providers shall not push information to minors that may cause minors to imitate unsafe behaviors and violate social morality, induce minors’ bad hobbies, etc., which may affect the physical and mental health of minors, and shall not use algorithm recommendation services to induce minors to addict to the Internet.”

The regulation also wants to limit the dissemination of fake news. Article 13 establishes, “If an algorithm recommendation service provider provides Internet news and information services, […] shall not generate synthetic false news information,” per an unofficial translation.

Similar provisions can be found to protect elderly population, or consumers. These objectives are not only legitimate, but also desirable. Western policymakers are still deciding how to protect the same interests without being too intrusive in the way businesses operate.

But not everything in the law is positive. While these intentions are good, the definitions of what is fair, unfair, affects consumers, is bad behavior, etc., is totally at the discretion of the government. And here, the first line of the first article in the regulation leaves no doubt about how far this interpretation can go. It recommends that algorithms should “carry forward socialist core values, safeguard national security and social public interests, protect the legitimate rights and interests of citizens, legal persons and other organizations, and promote the healthy and orderly development of Internet information services, in accordance with the Cyber Security Law of the People’s Republic of China.” The law goes on and on with the protection of ethics, fairness, honesty and other concepts of difficult interpretation.

Then, the main risk of this regulation for companies is its enforcement. It is unclear what access the government can demand, how deep can go when inspecting the algorithms and what changes will be necessary for a company to comply with the law.

The fines that companies can face are relatively insignificant, from 10,000 yuan to 100,000 yuan (between about $1,570 and $15,740), but the enforcement powers can escalate to even ordering to close a website if a company repeatedly fails to comply with the provision of the regulation.

See also: China Fines Tencent, Alibaba For Failing to Report Deals

One thing is clear, the Chinese government wants to continue its crackdown on tech companies and it doesn´t want to leave any area unregulated. While this new regulation may not significantly affect the core businesses of Alibaba, Tencent and companies alike, time will tell, it is another step in making sure that big online companies conduct business in accordance with the existing social values in China as the government has established them.



About:More than half of U.S. consumers think biometric authentication methods are faster, more convenient and more trustworthy than passwords or PINs — so why are less than 10% using them? PYMNTS, in collaboration with Mitek, surveyed more than 2,200 consumers to better define this perception versus use gap and identify ways businesses can boost usage.

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