Unless your pandemic lockdown has meant you’ve been completely cut off from the world, you’ve noticed that China has become much more authoritarian over the past several years. As a single-party state, party priorities (e.g., staying in power) are state priorities. One of those priorities is winning the war for big data. As I discussed in a previous article, China is already making moves to dominate the blockchain arena.[1] In that article, I quoted Peter Navarro, Former Trump administration Trade and Manufacturing Policy assistant, who insists China is trying “to dominate blockchain.”[2] He states, “China probably already knows how to crack, decrypt bitcoin so it can be disrupted. … So if it controls the digital universe there and also has the ability to basically hack that system, it controls everything.” Although Navarro only addressed concerns about the cryptocurrency arena, China’s ambitions are much broader.

Former Trump administration officials, Matt Pottinger and David Feith, warn, “Beijing is already beating the United States and its allies in one crucial domain: data.”[3] Pottinger was a senior Asia adviser in the National Security Council and later a deputy national security adviser and Feith was a U.S. deputy assistant secretary of state for East Asian and Pacific affairs. During an interview with Pottinger on CBS’ “60 Minutes,” host Leslie Stahl noted that Pottinger asserts China’s big data ambitions are all about control — that is, who is going to know the most “about China’s citizens: the companies or the Communist Party.”[4] She said that during the interview, Pottinger pointed “to a law that took effect last month giving officials deeper control over private personal information.” Pottinger told Stahl, “The party has taken a machete and sort of whacked its way toward the headquarters and C-suites of all of these big tech firms and said, ‘Your data is now our data.’ … The Chinese government has said that data is like the new oil of this century and that — that where the data flows, power will flow.”

China’s Big Data Plan

In late November, China’s Ministry of Industry and Information Technology (MIIT) issued a plan that “called for improved cross-border security management of big data. … The plan, which builds off of China’s 14th Five-Year Plan published earlier this year, comes as the country has pushed forward its regulatory framework for data and technology. It re-affirms data as a ‘factor of production’ and a ‘national strategic resource’.”[5] Journalist Josh Horwitz reports, “Beijing implemented two key laws this year — the Personal Information Protection Law and the Data Security Law, which govern how companies and organizations may store and move data.”[6] Speaking about the new privacy law, Pottinger told Stahl, “If you are an American company operating in China, you are required to hand over your encryption keys to the Chinese government. What these new rules say is that they by law now also have control of your data.”

Analysts from the RAND Corporation note, “China is aggressively working toward becoming a global leader in big data analytics as part of its plan to achieve great power status; indeed, President Xi Jinping has articulated that China should become the global center for AI by 2030. Beijing’s efforts are guided by a national big data strategy, an effort that encompasses economic, military, police, and intelligence functions. … Beijing is already using big data analytics to survey the country’s domestic population and enhance its military capabilities. Improvements in big data analytics have supported Beijing’s monitoring and control of its citizens — including ethnic minorities.”[7] Lindsay Gorman (@LindsayPGorman), an analyst with the Alliance for Securing Democracy, adds, “China seeks to become the global leader in technologies emerging from advancements in artificial intelligence and data analytics. This strategy has the dual objectives of accelerating the transformation of China’s own economy and building the nation into a cyber power. To achieve these goals, the country has combined national policy planning and aggressive data-retention policies with an outgoing effort to export data-based technologies.”[8]

According to Pottinger and Feith, “Through a latticework of recent laws and regulations, Mr. Xi has been hard at work making the Chinese Communist Party the world’s most powerful data broker. How does Beijing do that? By walling Chinese data off from the world, exerting new extraterritorial power over global data flows and putting foreign companies operating in China in a legal bind — all while absorbing other countries’ data by means licit and illicit.”

Why Does It Matter?

Gorman explains that China’s big data ambitions started over six years ago. In 2015, she reports, the Chinese government adopted an “Action Plan on Promoting Big Data Development.” Gorman explains, “[This Action Plan] called for the creation of databases on China’s population, corporations, natural resources, and geography and integrated data systems for transportation and tourism, medical information, and education management. At the subnational level, the action plan called on city-level governments and above to implement government affairs and public services applications, track economic data, examine agricultural trends, and utilize smart cities to collect citizen data for services and control.” The first casualty of these laws was Didi, a Chinese ride-sharing company. Didi is also a big data firm.

Journalists Yoko Kubota (@Kubota_Yoko) and Liza Lin (@lizalinwsj) report, back in July before the Chinese government acted against Didi, the company had “377 million annual active users and 13 million annual active drivers in China.”[9] But, according to Kubota and Lin, what the Chinese government wanted was the companies data. They explain, “Users turn over their cellphone numbers, which in China are linked to their real names and identifications. They also often voluntarily share photos, frequent destinations such as home and office, their gender, age, occupation and companies. To use other Didi services such as carpooling or bike sharing, customers might also have to share other personal information including facial-recognition data. Drivers must give Didi their real names, vehicle information, criminal records, and credit- and bank-card information.”

Just weeks after Didi launched an IPO on the New York Stock exchange, the company was raided by the Ministry of State Security and its ride-hailing app was suspended — virtually shutting the company down. Arthur Herman (@ArthurLHerman), a Senior Fellow at the Hudson Institute, writes, “Beijing’s claim that it was only trying to protect the privacy and security of Didi’s users, however, is patently false. The real issue is that Chinese Communists worry that Americans might be doing with Chinese data what Beijing is doing with American data, i.e., using it to advance their intelligence goals.”[10] Didi is now delisting the company from the New York Stock Exchange so it can relist on the Hong Kong stock exchange, comply with China mandates, and relaunch its service. Most analysts see Chinese efforts as a warning to companies wishing to operate inside China. Pottinger and Feith explain:

“Beijing has quietly enacted a new set of laws — first the Data Security Law in September, followed in November by the Personal Information Protection Law — that go even further by demanding not just access to private data but also effective control over it. This has a huge impact on foreign firms operating in China. Not only must their Chinese data stay in China and be accessible by the state, but Beijing now demands control over whether they can send it to their own headquarters; to a corporate lab in, say, California; or to a foreign government that has made a law enforcement or regulatory request. Beijing’s new laws may make it criminal to comply with foreign sanctions against China that involve data — like shutting off banking or cloud services to a Chinese entity linked to human rights atrocities. In these cases, foreign firms can comply with U.S. law, or they can comply with Chinese law, but not both.”

Gorman concludes, “Democracies and autocracies are in persistent competition over the information environment. This information contest spans the intersecting domains of content, data, and information architecture. At the core of this competition is a values-based distinction between the way democracies view information and the way authoritarian states do. Democracies see open and verifiable information as essential to public discourse for the selection of political leaders and a free press as a check on abuses of power. By contrast, autocracies see information as a tool to be weaponized to entrench their control, and they fear open access to information as a threat to regime survival.”

As the world’s second largest economy, what happens in China does not stay in China — it impacts the entire globe. By controlling and siloing data within its borders, China is on a course to establish an isolated economic system that will impact the global economy for generations. Even so, Weijian Shan, CEO of the Hong Kong-based private equity firm PAG, told Stahl, he didn’t think China would revert to the kind of state-controlled economy it suffered through under Mao Zedong. Despite current Chinese policies, Shan concluded, “People know that democracy has outperformed autocracy for the last three centuries. So, we’ve got to not, you know, lose faith in ourselves.” Nevertheless, Pottinger and Feith conclude, “For upward of a generation, Beijing has been coldly effective in designing a strategy of global data mercantilism: data hoarding for me, data relinquishing for thee. If Washington and its allies don’t organize a strong response, Mr. Xi will succeed in commanding the heights of future global power.”

Footnotes
[1] Stephen DeAngelis, “Has the West Ceded Blockchain Dominance to China?” Enterra Insights, 4 June 2021.
[2] Talia Kaplan, “China is trying ‘to dominate blockchain,’ Navarro warns,” Fox News, 14 April 2021.
[3] Matt Pottinger and David Feith, “The Most Powerful Data Broker in the World Is Winning the War Against the U.S.,” The New York Times, 30 November 2021.
[4] Leslie Stahl, “The rollback of free market policies in China,” 60 Minutes, 5 December 2021.
[5] Josh Horwitz, “China seeks better cross-border control of big data with new plan,” Reuters, 30 November 2021.
[6] Ibid.
[7] Derek Grossman, Christian Curriden, Logan Ma, Lindsey Polley, J.D. Williams, and Cortez A. Cooper III, “Chinese Views of Big Data Analytics,” RAND Corporation, 2020.
[8] Lindsay Gorman, “China’s Data Ambitions,” The National Bureau of Asian Research, 14 August 2021.
[9] Yoko Kubota and Liza Lin, “In the New China, Didi’s Data Becomes a Problem,” The Wall Street Journal, 18 July 2021.
[10] Arthur Herman, “DiDi, China, And The Data War,” Forbes, 29 July 2021.