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Tag: Big Tech

Enabling, Coordinating, Waiving Responsibility? AI Regulation with Chinese Characteristics

3. February 2024
A new paper by Angela Huyue Zhang
In addressing artificial intelligence, the Chinese government has multiple roles: it simultaneously acts as a policymaker, an investor, a supplier, a customer, and a regulator.

In recent years, China has emerged as a pioneer in formulating some of the earliest and most comprehensive legislations regulating recommendation algorithms, deepfakes, and generative AI services. This has left the impression that China has stood at the forefront as a global leader in regulating AI. Matt Sheehan, a highly-regarded expert in Chinese AI policy suggests that the U.S. can gain valuable insights from China’s approach to AI governance. Industry observers therefore view Beijing’s regulatory approach as a potential obstacle to Chinese innovation. Such concerns are not unwarranted. In 2020-2022, China undertook a sweeping crackdown on its tech firms. The erratic nature of Chinese tech policy has unnerved investors, precipitating severe and unintended consequences of deterring investment and entry into the consumer tech business.

However, this perception that China has stood at the forefront in regulating AI fails to account for the intricate dynamics of the Chinese political economy. Authoritarian states face a dual-challenge with emerging technologies, as these technologies can empower civil society on one hand, while enhancing government surveillance capabilities and strengthening social stability on the other. Furthermore, technological advancements are crucial for economic growth and national competitiveness. To balance the need for stability and the desire to foster innovation, China has adopted a bifurcated approach to AI regulation: strict information control juxtaposed with industry-friendly regulation. This approach keenly reflects the complex utility function of the Chinese Communist Party, who seeks legitimacy through multiple sources including growth, stability, and nationalism.

Yet striking a balance between regulation and innovation is far from easy. The Chinese government assumes multiple roles in the AI ecosystem as a policymaker, an investor, a supplier, a customer, and a regulator. Given the government’s extensive involvement, it lacks a strong commitment to regulate the industry. Moreover, although AI can pose many social harms, they have not yet evolved into immediate threats to social and political stability. AI safety risks remain speculative, despite warnings from experts. The Chinese government also recognizes the economic benefits AI promises, amidst the intense Sino-US tech rivalry. The tightening of US export restrictions, which hinder Chinese AI firms’ access to advanced chips, have only intensified this competitive pressure, thereby diminishing the government’s incentive for strict regulation.

The Chinese government also faces significant constraints in imposing strict regulation on AI. China’s tech crackdown in 2020-2022 has demonstrated that harsh regulatory measures can generate strong repercussion in the market. Since early 2023, the Chinese economy has entered into a slump. The government’s focus has thus shifted towards revitalizing the economy and boosting market confidence. Consequently, despite appearances of proactive intervention, Chinese regulators have focused on fostering AI growth. The regulatory rules being adopted have sent strong pro-growth signals while attempting to facilitate stakeholder coordination to advance AI development. This close integration of industrial policy and law is a defining feature of Chinese AI regulation.

Understanding the nuances of China’s AI regulatory strategy is crucial not only for predicting the trajectory of its technological development but also for assessing its implications on the global tech rivalry. Major jurisdictions including both the U.S. and the EU are actively exploring the establishment of a comprehensive AI regulatory framework, as exemplified by the AI Act and Biden’s executive order. Leading US AI firms are involved in various litigations and face mounting pressure to negotiate licenses with media for the use of their content as training data. In contrast, China’s relatively more relaxed regulatory environment may offer its AI firms a short-term competitive advantage over their EU and U.S. counterparts.

Meanwhile, China’s approach could give rise to serious regulatory lag. This situation is aggravated by China’s weak market conditions, poor legal institutions, and the tightly coupled political system, potentially leading to latent risks that could escalate into AI-related crises. For example, the Chinese government is invigorating a “whole of society” approach to push forward AI development without necessarily taking effective precautionary measures. Under such a command-and-control strategy, by the time the full impact of AI harms become apparent to top policymakers, it could be too late for effective reversal or mitigation. This dynamic complexity of China’s AI regulation therefore underscores the urgent need for increased international dialogue and collaboration with the country to tackle the safety challenges in AI regulation.

The paper ‘The Promise and Perils of China’s Regulation of Artificial Intelligence’ is available on SSRN. Angela Huyue Zhang, an Associate Professor of Law at The University of Hong Kong and Director of the Phillip K. H. Wong Center for Chinese Law, is widely recognized as a leading authority on Chinese tech regulation. She is the author of Chinese Antitrust Exceptionalism: How the Rise of China Challenges Global Regulation (Oxford, 2021), named one of the Best Political Economy Books of 2021 by ProMarket, and High Wire: How China Regulates Big Tech and Governs Its Economy (Oxford, 2024). In fall 2024, Zhang will join the University of Southern California as a Professor of Law. Follow her on Twitter @AngelaZhangHK.

General Big Tech, Comparative Law, Regulation of AI

Chinese Antitrust Exceptionalism

21. May 2021
Opinion by Angela Huyue Zhang

In recent months, Chinese antitrust authorities have ramped up their efforts to rein in Big Tech firms such as Alibaba, Ant Group, Meituan and Tencent.  These enforcement actions were all launched after Jack Ma’s controversial speech criticizing Chinese financial regulation last October. Many have therefore speculated that there are political motivations behind China’s crackdown on Big Tech.  While Ma’s speech may have been the tipping point, there have been long-standing economic, social, and industrial policy issues that merit the government’s action. In fact, Beijing’s recent efforts to strengthen antitrust regulation in the tech sector could facilitate a larger goal of the Chinese government: to become a technology superpower and achieve self-sufficiency, removing reliance on the West.

In this regard, how China handles antitrust law offers it a distinct competitive advantage, particularly compared with the U.S., which is also grappling with how to handle tech giants. Even though efforts to rein in companies such as Google and Facebook have gathered momentum, the U.S. government has significantly less leverage than China when it comes to antitrust law. Indeed, any U.S. legislative changes will take years to enact, and existing antitrust cases brought against Big Tech also face uphill battles in U.S. courts.

China shares some of the same concerns as the U.S. over increasing market concentration in the tech sector. However, Chinese big tech companies do not thrive because they develop innovative technologies. Rather, they build smart apps that make it easier for consumers to connect with merchants. Even though China has emerged at the forefront of e-commerce and digital payment, Chinese Big Tech still owes its success, to a large extent, to China’s vast consumer market.  

Despite their sophisticated software development capabilities, companies such as Tencent and Alibaba have yet to develop foundational technologies. China’s fragility in technological innovation was clearly exposed during the Sino-American trade war—the operations of national champions such as ZTE and Huawei could be easily interrupted if the U.S. government withheld the supply of key components such as semiconductors.

China’s weakness in technological innovation explains Beijing’s recent emphasis on achieving technological self-reliance and its desire to push Chinese tech giants in this direction. Since China is the only country apart from the U.S. to have Internet giants, these tech firms are in a good position to develop digital technologies for the country. In some ways, Chinese tech giants have responded to the government’s call. Tencent has promised to invest $70 billion in new digital infrastructure. In 2019, Alibaba unveiled its first chip to power artificial intelligence. Baidu is betting heavily on driverless cars. 

But Beijing wants more. Its intentions were clearly revealed in a recent editorial by the People’s Daily, a Communist Party mouthpiece, which chided tech firms for investing in the “community group-buying” market. The commentator instead urged Chinese Internet giants to forge ahead with higher ambitions, such as advancing technological innovations to clear China’s bottleneck in the intensive Sino-American rivalry, rather than focusing on selling cabbages.

In the meantime, antitrust law enforcement gives Beijing significant regulatory leverage to push its tech firms in the direction it desires. Antitrust law grants the central government strong sanctioning powers, allowing it to impose anything from astronomical monetary fines to severe structural remedies. The Chinese antitrust regulator also possesses vast administrative discretion while being subject to little judicial oversight. Furthermore, Chinese antitrust law enforcement is spearheaded by a central ministry that follows the central government’s directives carefully.   

As Chinese tech giants have amassed significant market power, they have become vulnerable to antitrust regulatory attacks. And just as U.S. and EU regulators are tightening their antitrust scrutiny over Big Tech, the Chinese antitrust authority also has perfectly legitimate reasons to do so. The regulatory vulnerability of Chinese Big Tech, in turn, facilitates their cooperation with Beijing to help the latter achieve its goals, be it in antitrust or other industrial policy matters.  Thus, Chinese Big Tech can and do align their business development strategies with the government’s industrial policy as a form of self-protection.

Indeed, the Chinese government views antitrust law as a powerful multipurpose tool not only for tackling monopolies, but also for achieving a wide variety of policy objectives, such as maintaining price stability, industrial planning, and trade and foreign policy. Thus, the absence of checks and balances in Chinese antitrust enforcement, supposedly an institutional weakness, could actually be a strength for Beijing as it pushes tech giants and the country toward achieving technological self-sufficiency.

Angela Huyue Zhang is the director of the Center for Chinese Law and Associate Professor of Law at the University of Hong Kong. She is the author of Chinese Antitrust Exceptionalism: How the Rise of China Challenges Global Regulation, published by Oxford University Press in March 2021.  This opinion is an abridged version of an opinion that was first published with Fortune: China antitrust: How regulation helps it compete with the U.S. | Fortune.

General Alibaba, Antitrust Law, Big Tech, PBoC, Regulation

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