China’s Control Over ‘Algorithms’

Commentary Cue references of a “Matrix”-like dystopian future where Chinese citizens are trapped in a simulated reality managed by state-controlled computer algorithms. It’s not too far-fetched to imagine. The Cyberspace Administration of China (CAC), the country’s cyberspace watchdog, announced recently that it would set up governance and rules to tighten its grip on algorithms companies use to interact with its users. Algorithms are widely deployed, used by companies to interact with users on a daily basis. Think of it as the engine that drives our internet search results, restaurant recommendations based on our location and taste preferences, show and movie recommendations based on our viewing history, the route our GPS app takes us on based on traffic and other patterns, etc. We depend on various algorithms whether we realize it or not. And today—when every company needs to be a technology company—investments in algorithms, artificial intelligence, and machine learning are increasingly mandatory. For Chinese consumers, that all translates to what videos they see on Douyin (China’s version of TikTok), what recommendations they see on Alibaba’s Taobao shopping platform, dispatch decisions on platforms such as logistics apps Didi and Meituan, and the topics trending on Weibo (China’s Twitter-like application), for example. It’s unclear how the Chinese Communist Party (CCP) intends to regulate algorithms underpinning such technologies. But a few general guidelines have been laid out. “A multi-pronged regulatory approach should be established to monitor algorithm safety, archive, and illegal behavior,” according to the CAC statement in Chinese, while emphasizing that technology innovation should be preserved. The announcement, which said the guidance would take around three years to roll out, comes a month after the CAC released a set of draft guidelines on how algorithms should behave. Some of this may stem from legitimate concerns around certain tech companies using algorithms to manipulate results or rankings, and fabricate the popularity of certain topics over others, or make them more addictive to users. The CAC is careful to state that such regulations would “benefit consumers and online users.” One particular provision will be far-reaching in its impact. It says technology algorithms must promote mainstream values (read: CCP-approved), and requires that algorithmic models demote (read: eliminate) content that may upset the economic or social order. Similar to rules placed on China’s populace, its technology algorithms must also be censored, loyal to the CCP, must abide by the all-important “Xi Jinping Thought on Socialism with Chinese Characteristics.” If this seems like an excessive overreach, then one hasn’t been paying attention. In recent months, Chinese leader Xi Jinping has launched campaigns to remold Chinese society and its future development, in everything from childhood education to video games to worker rights. And regulations to control how computer algorithms interact with human users necessarily need to be part of that effort. We know Xi has ambitions to control or influence the global internet given its strategic importance in shaping social and political discourse. And it’s easy to see how this recent development fits within that framework. Computer code becomes a form of costless labor force multiplier in the CCP’s quest to influence and police one’s thoughts. From an economic perspective, especially for U.S. investors who hold positions in Chinese technology companies increasingly subject to these state control mechanisms, the calculus gets even more convoluted. Companies such as Didi and Alibaba are listed on the U.S. stock market, and millions of Americans hold their shares either directly or indirectly via mutual funds or ETFs. U.S. pensions—through venture capital and private equity—are also shareholders in firms such as TikTok’s parent company ByteDance. In addition to perusing earnings reports and keeping up with the income statement and balance sheets of these companies, shareholders also must be aware of governance issues and increasing CCP control over corporate management. Shareholders must necessarily accept that the companies they “own” will be subject to follow Xi’s future agenda. The question then becomes, should U.S. investors be complicit in this? Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times. Follow Fan Yu is an expert in finance and economics and has contributed analyses on China's economy since 2015.

China’s Control Over ‘Algorithms’

Commentary

Cue references of a “Matrix”-like dystopian future where Chinese citizens are trapped in a simulated reality managed by state-controlled computer algorithms.

It’s not too far-fetched to imagine.

The Cyberspace Administration of China (CAC), the country’s cyberspace watchdog, announced recently that it would set up governance and rules to tighten its grip on algorithms companies use to interact with its users.

Algorithms are widely deployed, used by companies to interact with users on a daily basis. Think of it as the engine that drives our internet search results, restaurant recommendations based on our location and taste preferences, show and movie recommendations based on our viewing history, the route our GPS app takes us on based on traffic and other patterns, etc. We depend on various algorithms whether we realize it or not. And today—when every company needs to be a technology company—investments in algorithms, artificial intelligence, and machine learning are increasingly mandatory.

For Chinese consumers, that all translates to what videos they see on Douyin (China’s version of TikTok), what recommendations they see on Alibaba’s Taobao shopping platform, dispatch decisions on platforms such as logistics apps Didi and Meituan, and the topics trending on Weibo (China’s Twitter-like application), for example.

It’s unclear how the Chinese Communist Party (CCP) intends to regulate algorithms underpinning such technologies. But a few general guidelines have been laid out.

“A multi-pronged regulatory approach should be established to monitor algorithm safety, archive, and illegal behavior,” according to the CAC statement in Chinese, while emphasizing that technology innovation should be preserved.

The announcement, which said the guidance would take around three years to roll out, comes a month after the CAC released a set of draft guidelines on how algorithms should behave.

Some of this may stem from legitimate concerns around certain tech companies using algorithms to manipulate results or rankings, and fabricate the popularity of certain topics over others, or make them more addictive to users. The CAC is careful to state that such regulations would “benefit consumers and online users.”

One particular provision will be far-reaching in its impact. It says technology algorithms must promote mainstream values (read: CCP-approved), and requires that algorithmic models demote (read: eliminate) content that may upset the economic or social order.

Similar to rules placed on China’s populace, its technology algorithms must also be censored, loyal to the CCP, must abide by the all-important “Xi Jinping Thought on Socialism with Chinese Characteristics.”

If this seems like an excessive overreach, then one hasn’t been paying attention. In recent months, Chinese leader Xi Jinping has launched campaigns to remold Chinese society and its future development, in everything from childhood education to video games to worker rights. And regulations to control how computer algorithms interact with human users necessarily need to be part of that effort.

We know Xi has ambitions to control or influence the global internet given its strategic importance in shaping social and political discourse. And it’s easy to see how this recent development fits within that framework. Computer code becomes a form of costless labor force multiplier in the CCP’s quest to influence and police one’s thoughts.

From an economic perspective, especially for U.S. investors who hold positions in Chinese technology companies increasingly subject to these state control mechanisms, the calculus gets even more convoluted. Companies such as Didi and Alibaba are listed on the U.S. stock market, and millions of Americans hold their shares either directly or indirectly via mutual funds or ETFs. U.S. pensions—through venture capital and private equity—are also shareholders in firms such as TikTok’s parent company ByteDance.

In addition to perusing earnings reports and keeping up with the income statement and balance sheets of these companies, shareholders also must be aware of governance issues and increasing CCP control over corporate management. Shareholders must necessarily accept that the companies they “own” will be subject to follow Xi’s future agenda.

The question then becomes, should U.S. investors be complicit in this?

Views expressed in this article are the opinions of the author and do not necessarily reflect the views of The Epoch Times.


Follow

Fan Yu is an expert in finance and economics and has contributed analyses on China's economy since 2015.