China has high ambitions for the development of the country’s digital economy
- China’s State Council published the 14th Five-Year Plan for the Digital Economy in December 2021, expressing high expectations for a thriving digital economy to help boost the real economy.
- Economic policy advisor Liu Shijin highlights the importance of digitization of production in a recent essay. He argues that the future of the digital economy lies heavily in AI, which is only possible through the efficient use of data.
Cyber and data security is required to allow China’s digital economy to grow
- Utilizing data as vital assets will be necessary for China’s digital economy to thrive and mature. This requires a robust data security and management framework, which China has been developing since 2017 with the Cybersecurity Law and which has seen rapid development in the last two years.
- Policymakers have argued that the point of important data and data categorization is to “protect the data that should be protected, and let other data circulate and trade fully”. Securitization and management of data is likely to see increased enforcement at the local level.
- In 2022, international businesses may increasingly move into the limelight of cybersecurity enforcement. In a recent high-profile case, Walmart China received a warning from the Futian Public Security Bureau for 19 violations in their online network portal, and their failure to respond to the violations in reasonable time.
- As data is the foundational “factor of production” for the digital economy, policies in 2022 and beyond are likely to focus on exploring how the state can marketize data, including pilots on data ownership, data rights, and data valuation.
Focus for companies in 2022 will be to reassess IT and data strategies
- In the short term, the Chinese government will continue to launch tough regulatory moves on data and cybersecurity. Foreign companies in China should reassess their IT and data strategies as well as compliance mechanisms, especially those processing more than 1mn personal information threads or so-called “important data”.
- However, in the long term, a growing digital economy may bring benefits for foreign businesses, especially in key technology areas. Companies should consider strategies to contribute to development targets, as well as begin to set up structures for strategic use of data, such as trading and monetization.