China’s model (Part 2: Digital China and the information society)
Phuah Eng Chye (8 April 2023)
In the 1990s, China appeared a stumbling giant and deemed unlikely to mount an economic threat to the dominant West. Yet, China’s approach of tapping a mix of state owned and private enterprises to fuse state intervention with market competition was successful in generating high growth rates that propelled the country to become the second largest economy in the world. Following the export-led industrialisation path, China leaped above formidable hurdles to build a significant global production base and achieve technology and global leadership across industries with the result that its ecosystem now rivals the US-dominated global network. China is moving on to the next level with Digital China as its core strategy.
From modernisation to Digital China
Several prominent individuals guided China’s journey from modernisation to digitalisation. In 1977, Deng Xiaoping adopted the Four Modernizations in his bid to restore the primacy of scientific research and technology as a means of rejuvenating China’s economy in the aftermath of the Cultural Revolution disasters. Wang Huning is largely credited with deepening the ideological framework for modernisation. In his 1991 book America against America, Wang Huning argued China should learn from US’s rapid technological and material success. He asked “how can China’s economic modernization be achieved? The fundamental question is whether the process of economic modernization can be completed under public ownership. Most of the developed countries in the world today are not under public ownership. This reality is the biggest challenge to people’s thinking…One argument is that economic modernization cannot be achieved without political democracy; one thing that counters this is that Hong Kong, Taiwan, Singapore, and South Korea did not have political democracy during their economic take-off stage; Hong Kong was under colonial rule, Taiwan was under one-party dictatorship, and South Korea was under military intervention. Another argument is that when the economy developed, conditions for political democracy became available, examples being the democratization movements in newly industrialized regions and countries; the counter-argument is also strong: the developed Western countries were not really economically developed after the bourgeois revolution, far from the economic strength of some developing countries today, but the institutions of a democratic republic were basically established”.
Wang Huning was concerned by the contradictions inherent in technology-driven development. He argued “history has shown that societies that have embarked on this path by institutional design have often had political and administrative systems that do not address many of the basic needs of society very well, and have accumulated piles of problems. Striving to give the various spheres of social life their own organization and dynamics to meet the needs of society on their own, so that the political or administrative system plays only an indirect regulatory role, is an effective way to win in this area. A prerequisite for the realization of this structure is to enable the various spheres of social life to form a self-organizing system that decouples these specific and complex spheres of activity from political activity. Commodification is the catalyst for this transformation process. The problems of housing, food, transportation, employment, and education are the basic dilemmas that plague every society. Many governments are plagued by these problems and cannot get out of them. The desire to retreat is not an option, and the desire to advance is not an option. The high degree of commodification has created a more particular structure in American society in these areas. We can look at how commoditization has made these fields self-organizing systems and how they function. Housing is a headache in many developing countries. The governments of some developing countries have worked hard to make home ownership a reality…transportation is a challenge that modern society is bound to face. In modern society, human development, economic development, cultural development, and social development all mean increased mobility. If this mobility is not opened up, society will face an untold pressure, and the political, economic and cultural development of society will be hindered. The problem of transportation is precisely what many countries find difficult. Transportation means are mostly commoditized”.
Wang Huning reasons “the development of the commodity economy has led to a dual structure of governance in society: the social self-organized system is responsible for all kinds of specific matters, and the political system is responsible for coordinating the various self-organized systems. This is a major characteristic of macro-management in this society…It simply means that commodification offers the possibility of making government lighter. It is impossible for government to function efficiently if it is involved in a thousand and one things in society. But after government is lightly loaded, it still has to regulate activities in various fields, only now it has changed from direct to indirect…Commodification, in many ways, corrupts society and leads to a number of serious social problems. These problems, in turn, can increase the pressure on the political and administrative system. Therefore, commodification can reduce the burden of the political and administrative system, but there is an important premise, which is that the political and administrative system must regulate commodification…When many basic areas of society have become self-organizing systems, the political and administrative systems will have the conditions to separate from them, to move from direct to indirect management. The process of commodification is the process of these spheres becoming self-organized systems. This process does not take shape in a short time, and even after a considerable period of development, contradictions, conflicts, obstacles and confusion are still inevitable. However, the political and administrative system will be more powerful and effective than managing dozens of large self-organized systems than managing thousands of specific activities”.
John Robb explains Wang Huning’s “goal is to define a control system (social decision-making system) that will allow China to modernize and accommodate rapid advancement…Key features of this system: To preserve social stability during a period of rapid change; To allow unfettered technological and material innovation (open-ended prosperity) without fear of instability; and to build a dynamic system that can rapidly adapt to changes, even when the challenges are highly complex”.
One of the earliest proponents of Digital China was Xi Jinping. David Dorman and John Hemmings notes “Digital China grew out of transformative efforts early in Xi Jinping’s career to improve local governance and increase economic performance through the application of new information technologies, in essence China’s earliest experiments in e-government…Xi’s first informatized effort was Digital Fujian, launched in 2000 when he was governor and deputy party secretary of that province. This is why Fujian is often described by state-run media as the ideological origin and practical starting point of Digital China. Xi’s second effort, his far-sighted strategic plan to launch Digital Zhejiang in 2003 when he was party secretary of that province, is now used to support Zhejiang’s claim that it is the home of Beijing’s earliest practical efforts at informatized industrialization, now a national level priority…It was Xi Jinping’s profound insight, keen judgement and theoretical creativity as a Marxist politician, thinker, and strategist that allowed him to see the opportunity presented by the global technological revolution and draw the grand blueprint of Digital China. Just as important, Xi’s experiences in Fujian and Zhejiang showed him that building Digital China also presented a parallel opportunity to uphold and strengthen the party’s overall leadership in the digital age”. This evolved into “the party’s vision for a fully informatized Digital China: a sharp weapon that empowers the nation (i.e., increased core competitiveness through accelerated innovation in science and technology) and a spring rain that benefits the people (i.e., increased societal efficiency and social equity through digital transformation). Far more than a commercial or industrial strategy, Digital China is an all-of-nation effort to digitally transform China’s path to national rejuvenation as a Modernized Socialist Great Power. The Digital China strategy is rooted in Marxism, the theoretical framework that justifies one of its greatest internal successes to date: Combining Xi Jinping’s personal visions for national informatization and for socialist modernization”. “This is not simply technology-enabled development or technology-enabled reform, but the digital transformation of the party’s long-held theoretical paths for reform and development”.
David Dorman and John Hemmings explain “a Modernized Socialist Great Power rises from a digitally transformed and sinicized model of Marxism, not simply from new digital technologies…Borrowing the party’s current discourse on historical materialism, the productive impact of data intelligence on human development is reconstructing the Marxist forces of production (combined human productive powers). This theoretical and predictive framing underlies the party’s current efforts to institutionalize and popularize socialist modernization (including labelling it Chinese-Style Modernization), both domestically and internationally…This process of data-driven socialist modernization began to surface publicly following the 19th Party Congress in 2017. Practically, data was incorporated as a new factor of production and designated the key factor over labor in a digital economy, effectively overwriting Marx’s labor theory of value. Politically, the party’s historical dependence on control of media, the military, and personnel for its own survival and the continuity of the authoritarian regime it leads also underwent a digital transformation about the same time, with the control of data added as a fourth essential principle of party control…essential role that Xi’s Digital China, the overall strategy for national informatized development in the new era, has been assigned to support the party’s quest to basically achieve…by 2035 as a modernized socialist country, and then rejuvenation by 2049 as a modernized socialist great power. In February 2014…Xi Jinping himself crystallized his theoretical insight with a single phrase: …without informatization, there will be no modernization”.
David Dorman and John Hemmings point out in 2017, the connection was made between Digital China and the party’s Five-Sphere Integrated Plan. “The Central Committee with Xi Jinping as the core, coordinates the overall layout of the Five-Sphere Integrated Plan as an organic whole, integrating economic construction, political construction, cultural construction, social construction, and ecological construction. In the new digital age, construction of Digital China must also focus on and serve the Five-Sphere Integrated Plan, building China into a Modernized Socialist Great Power by coordinating and advancing digital economy, digital society, digital government, digital culture, and digital ecology. “The concept of Digital China was expanded…to encompass multiple categories of national informatization ranging from national-level technology efforts like Broadband China, Internet Plus, Big Data, Cloud Computing, and Artificial Intelligence to national-level societal and economic efforts like Digital Economy, e-Commerce, Smart Cities, and Digital Villages”.
David Dorman and John Hemmings notes Beijing’s future success “is seen as dependent on the comprehensive integration of big data, computing power, and artificial intelligence (through algorithms and application software) as well as constructing the digital infrastructure and governance systems needed to manage it. This key state-level requirement for digital infrastructure drives Beijing’s New Type Infrastructure campaign…The key state-level requirement for governance systems falls to the party’s Cyber Great Power strategy…In Beijing’s view, although the global competition over technology is fundamentally about ideology, in concrete terms the competition itself will be increasingly focused on big data. As the newest and most important factor of production in the digital age, data is comprehensively reconstructing global production, distribution, and consumption and becoming the high ground in the competition between major countries. Data has become so critical to the party’s forward thinking on socialist modernization that the theoretical construct for technology-driven modernization has been revised, for both the civilian and military spheres. Once described only in terms of informatization (applying information technology), a new and perhaps more critical lane has now been added: digitalization (applying value to data)…We must…give full play to the driving and leading role of informatization and digitalization in Chinese-Style Modernization. In the party’s view, the West focuses haphazardly on the competition over individual digital technologies. Beijing focuses long term on the competition over big data, and developing the complex digital ecosystems that will enable its intelligent application”.
This has led, as Dylan Levi King notes, “Tu Zipei, the former Alibaba executive and theorist of social governance, has called the proposed Chinese model single-particle governance. The model integrates data from government and commercial sources into individual master files that become the elementary particle. This idea doesn’t come from Maoist egalitarian politics or Dengist market horizontality, but from online shopping and social media platforms. Fittingly, it will run on software developed by commercial digital technology firms, like Huawei, Tencent, and Alibaba…Such a system would fundamentally change the political culture. Horizontality requires not just individual autonomy, but also a sense that local communities or interests can be organized and exercise some kind of collective agency…Xi’s verticality only requires a population that can be effectively managed. The state can fulfill the interests and express the will of a broad population of abstracted social individuals without having to rely too much on the human judgments of local cadres at all. Despite the party’s centralism, it has always operated through a huge matrix of institutions: schools, planning committees, workers’ organizations, cultural groups, trade boards, and many others. A person’s political identity was linked in part to the collective bodies in which they participated. But with an urbanizing population that is increasingly integrated into service economies instead of life-long economic or social roles, the bases for these collective expressions of political identity are disappearing…As the population atomizes, the government seems intent on creating a stronger civic Chinese identity and wants its citizens to politically relate primarily to the national government. Their aggressive cultural assimilation policy in Xinjiang is one example of this. But so is the new rhetoric about data-driven governance: it presumes a population where the individual is a data-generating automaton whose activities are input for the state to work with, with few or no intervening social structures. The logic of big data governance at its highest scale appears horizontal in flattening the inputs into decision making. It de-emphasizes the importance of political, economic, and intellectual elites but also of local government. It also increasingly removes the possibility of a cadre-managed collective autonomy in goals and decisions”.
Dylan Levi King adds “Xi’s invocation of the fourth industrial revolution puts him in a path of explicit convergence with the surveillance individualism that has come to characterize Western liberal democracies. The causes and rhetoric differ, but the result seems remarkably similar: an increasingly powerful national state, ideologically and structurally centralized around the national elite, governing an increasingly atomized population. In this new ideal of digital governance, the individualized population is rendered into legible, data-generating citizens strictly governed by a single centralized discourse of possibility…What is in danger under centralization of power with these technologies is the radical heterogeneity made possible by horizontality. Save for the direct intervention of the party, a local cadre could act in the best interests of the local authority and its citizens; the decisions a local cadre made did not have to take a strict interpretation of official ideological orthodoxy. Vertical management can only act in the interests of and by the logic of its central management; the consumer desires of its elementary particles are researched, quantified, and then minimally satisfied. The key difference is that the centralized model has much less room for handling the complexity of local collective problems. Everything is done through the lens of the center. What the party stands to lose is the collective temperament and culture of a cadre base inculcated in the pragmatic, experimental, and innovative environments of the last few decades. This was the environment that reared up a generation of Chinese leaders, including Xi himself”.
Progress, so far
According to China’s State Council Information Office, “by 2021, the value of the digital economy had reached 45.5 trillion yuan, accounting for 39.8 percent of GDP and becoming a major growth engine…By June 2022, there were 1.05 billion internet users in China, and the internet penetration rate had reached 74.4 percent. A total of 1.85 million 5G cell towers had been built with 455 million 5G cell phone subscribers…updated the Internet Protocol Version 6 (IPv6) on its backbone networks, metropolitan area networks, and LTE networks, and increased the IPv6 support of main internet websites and applications. By July 2022, China had 697 million active IPv6 users…In 2021 China’s satellite navigation and positioning services generated 469 billion yuan of industrial output. By year end there were more than one billion terminal products with BeiDou positioning functions in use, and more than 7.9 million automobiles and 100,000 automatic driving farming vehicles had installed the BeiDou system. Moreover, medical and health devices, remote monitoring, online services and other downstream service sectors reported nearly 200 billion yuan of output value…In 2021 large internet companies and related service businesses generated 1.55 trillion yuan of revenue, up 21.2 percent year on year. The fields such as smart industry, smart transport, intelligent health, and smart energy have become areas of rapid growth in the number of industrial IoT connections…The industrial internet has grown rapidly…By February 2022, 55.3 percent of the key processes of large industrial enterprises had become digitally controlled, and the application of digital R&D tools was as high as 74.7 percent…The digital transformation of agriculture is making steady progress. 5G, the IoT, big data and AI have been applied in agricultural production and management, and key technological development and innovative application research for intelligent agriculture and farming machinery have been strengthened…E-commerce is flourishing. In 2021, China’s online retail sales stood at 10.8 trillion yuan, up 12 percent year-on-year and accounting for 24.5 percent of the total retail sales of consumer goods. The turnover in China’s cross-border e-commerce reached 1.92 trillion yuan, up 18.6 percent year-on-year…New methods have been introduced to upgrade commercial models of the service industry, and internet-based medical services, online education, and remote working have accelerated the digitalization of the service industry…In 2021, China’s trade in digitally deliverable services reached 2.33 trillion yuan, up 14.4 percent year-on-year”.
The State Council Information Office reported progress in implementing the Action Plan for Internet-Aided Poverty Alleviation; the national education digitalization initiative; the comprehensive formulation of its cyber law framework (including the Electronic Commerce Law, Electronic Signature Law, Cybersecurity Law, Data Security Law, and Personal Information Protection Law); enhancing cyber enforcement (cracking down on fraud and other crimes, and enforcing personal information protection laws, managing online information and content, and safeguarding cybersecurity); and enhancing cyber judiciary.
China’s Central Commission for Cybersecurity and Informatization assessed “several prominent shortcomings still exist…primarily: the issue of unbalanced and incomplete informatization development is still comparatively obvious; the lag in rural informatization development level remains relatively large; structural and mechanistic obstacles to further unleash digitized productivity persist; shortcomings in crucial and core technologies are prominent; international competitiveness of the industrial ecology is lacking; the digital economy is insufficiently deeply merged with the real economy and its role in leading high-quality development awaits further elaboration; weak segments exist in the informatization building of social governance; grass-roots governance capabilities await upgrading; the construction of the national data resource system lags behind; the value potential of data factors has not yet been effectively activated; government service innovation and social public service digitization supply capabilities are insufficient; the masses’ individualized and universalized demands cannot yet be satisfied; China’s plan for international cooperation in the digital area has not yet been perfected; and digitized development governance systems urgently need to be completed”.
The Central Committee of the Communist Party of China and State Council recently released its Overall layout plan for the construction of Digital China. It announced the intention to consolidate the foundation by first accelerating the construction of 5G networks and Gigabit optical networks, the large-scale deployment and application of IPv6, the mobile Internet of Things and Beidou. Computing power infrastructure will be strengthened by optimising the layout of general data centers, supercomputing centers, intelligent computing centers, and edge data centers; improving the application infrastructure; and strengthening the digitalization and intelligent transformation of traditional infrastructure. The second is to harness data resources by building the national data management system and mechanism, promoting aggregation and utilization of public data, building national data resource banks in public health, science and technology, and education, establishing a data property rights system, exploring data asset valuation and mechanisms for distribution of value contributions. It envisages establishing a nationwide system to achieve Digital China goals by 2025 and for China to be among the world’s top countries in terms of digitalization level by 2035.
Scott Foster notes there are more than 40 data exchanges operating or planned in China”. “The idea behind a data exchange is to create a commodity market similar to physical commodities markets through which corporate and other institutional data, heretofore largely confined to its creators, can be shared with and transferred to buyers who can put it to profitable use, increasing economic efficiency and accelerating economic development”. “It is reported that many companies that want to use the data exchanges hesitate to do so because data ownership criteria are not sufficiently clear, trading and legal frameworks immature, and the products available of poor quality”. “The first to be established, in April 2015, is located in Guiyang…The Shanghai Data Exchange, which opened in November 2021, was the first to provide open public data from the municipal government. That same month, the Beijing International Big Data Exchange, which was established in April 2021, launched a trading contract utilizing blockchain technology. The Guangzhou Data Exchange was established in June this year. It is part of the Nansha International Data Free Trade Port established in Guangzhou in June to regulate international data transfers via a data center and undersea cables”. “Official trading on the Shenzhen Data Exchange began on November 15 with nearly 100 data providers, 100 brokers and 300 buyers registered…The exchange issues data-provider, exchange-trading and cross-border trading certificates and provides data registration, security compliance and technical support, rules and standards, supply/demand connection and data circulation elements…amassed more than 600 data products from 55 different data sources including government departments, electric-power and other public utilities, finance, industry, trade and information gleaned from media reports. Several overseas asset-management companies have already purchased data on the exchange. Data products – for example electricity consumption data – can be used to assess creditworthiness and detect fraud. Unstructured data are transformed into data elements tradable on the exchange”.
Global Times adds “the measures also called for the building of a mechanism for data security compliance and orderly cross-border circulation, which supports international exchanges and cooperation in data and calls for exploring safe and standardized cross-border data flow…national security reviews should be conducted on data processing, data cross-border transmission, and foreign mergers and acquisitions that affect or may affect national security…China opposes hegemony and protectionism in the data industry and will effectively counter long-arm jurisdiction”. This is consistent with China’s Global Initiative on Data Security in which China commits to “actively participate in the development of international rules and digital technology standards for data flow, data security and digital currency”.
Jeff Pao reports a major restructuring of agencies was announced at the recent National People’s Congress. The National Data Bureau is to be established to oversee implementation of Digital China. “It will replace the Cyberspace Administration of China to implement Beijing’s long-term digitization plan and encourage the development of so-called smart cities…also take up some of the State Council’s responsibilities, such as the planning of China’s Big Data strategy and digital infrastructure”. Pan Helin notes “there are a lot of unresolved systemic problems that hinder the data flow…For example, government departments do not have the mandate to share their databases while there is not enough infrastructure to support the development of the data sector.” Pan believes the collection and categorization of data will create new demand for China’s Big Data, AI and cloud companies and data center operators, as well as chip and IT equipment makers. Zhang Ying said the new bureau will enable smooth data flows across China’s borders…as there is no standardized platform for mainland-based and overseas companies to exchange their data, the transferred data is usually fragmented and unusable…if foreign firms are allowed to export their mainland units’ data, they will be more interested in investing and developing their businesses in China”.
In this regard, Kai von Carnap notes “new requirements regarding data transfer, localization and security have made the cross-border exchange of digital strings of information more difficult than perhaps in any other country in the world…Chinese policymakers have recognized the challenges its new data regime poses to digital economies, not least its own. One possible solution are so-called data ports: designated areas equipped with information and communications technology (ICT) and experts, and a special legal status, in which the management of cross-border data transfer can be concentrated. Their construction was initiated when China’s Ministry of Commerce in August 2020 issued a plan to upgrade some existing pilot areas with safe and convenient channels for international internet data. By protecting national security interests and users’ privacy, it also ensures that China’s data doesn’t become another countries’ factor of production. Five data ports are currently under construction within existing Free Trade Zones (FTZs). Most of them aim to be operational by 2025 and will focus on different issues of cross-border data flows – ranging from digital trade to protecting security interests and increasing soft-power – and so address different stakeholders and industries. They will make use of the existing infrastructure to provide designated territorial interfaces for cross-border data exchange and establish localized systematic data reviews, security assessment processes and export-certification systems…Data ports will provide Chinese firms with officially supported arrangements to navigate China’s complex cyber laws and to facilitate cross-border data exchange. Whether data ports will enable foreign companies and platforms to maintain or resume their business operations in China is unclear and will depend on a variety of industry-specific factors”. However, Western “recognition of China’s data ports by or convergence on data governance with Western democracies seem unlikely for now” and “Beijing’s attempt to forge data-alliances as part of regional trade agreements, such as Digital Economy Partnership Agreement (DEPA), seems unlikely – in no small part precisely because of China’s restrictive data laws”.
Global Times also reports the Science and Technology Ministry will be restructured “to better allocate resources to overcome challenges in cutting-edge technologies, with the goal of moving faster toward greater self-reliance in science and technology…The overhaul, the second restructuring of the ministry in five years, may mark a start of the deepening reforms of China’s technological innovation system, at a time when Chinese industries, especially the semiconductor sector, face heightened US technological containment”. Its functions were streamlined to expand its “role in science and technology-related strategic planning, institutional reforms, allocation of resources, comprehensive coordination, formulating policies and regulations, and supervision and inspection”.
Global Times explain “in the past, China has been used to introducing a variety of industrial strategic planning to guide the development of specific industries, which are mainly involved playing catch-up with global rivals in the technology areas. While it may have precipitated rapid development in terms of industrial capacity and scale, there have been some examples of repeated and inefficient high-tech investments as well as overcapacity in recent years. Increasingly, the lack of top-level design and coordination of technological innovation system is hindering China’s efforts to break the stranglehold in high-tech development, making it difficult to realize an overtake on the bend in technology. Therefore, the restructuring this time is expected to address the problem so that China can better coordinate its scientific and technological forces to overcome difficulties in key and core technologies, such as basic research and original innovation, in the hope of cultivating a driving force for economic and social development amid the severe challenges posed by increasingly fierce international technological competition and external containment pressure. Now that changes in the international geopolitical landscape have brought about changes in the requirements for scientific and technological innovation system, the traditional model where companies rely on the introduction and absorption of advanced technologies to achieve technological breakthroughs and economic development no longer suits China’s needs in the high-quality development stage, and becomes increasingly unsustainable amid the US tech curbs…room for input in basic research, given that companies’ basic research expenditure accounts for a small part of the national basic research expenditure, with the proportion only at 6.52 percent in 2020…Overall, the improvement of China’s technological innovation capability will not happen in the short term, which requires taking full advantage of the Chinese government’s strong executive capacity to focus on the breakthrough, and long-term coordinated efforts of the government and market forces in the right direction”.
Opinions diverge on whether China can expand beyond its success in consumer internet. Jeff Pao notes “some commentators say China’s industrial internet development was still in an exploration phase in the past five years and will continue to face challenges in the years ahead. Lu Chuncong, head of the CAII, said it is not easy for manufacturers to go digital if their machines do not provide and share digital data. He said technology companies will also have to create more tailor-made applications for different industries. Chen Zhilie, founder of Evoc Intelligent Technology Co Ltd, said…China’s major industrial internet platforms are mainly using foreign systems and do not own many core technologies…the country’s development in the area has so far remained in an early stage due to the lack of an ecosystem. A Chinese columnist wrote…that an industrial internet ecosystem will be formed only if all parties in the supply chain can agree to a profitable and sustainable commercial model. He said that once more successful cases are seen more Chinese companies in traditional sectors will recognize the value and take the initiative to go digital”. An example is the transformation of the Port of Tianjin into the world’s first zero-carbon port terminal.
China is rapidly building up various components of its information ecosystem. For example, Timmy Shen and Tom Zuo notes a national blockchain technology research center is being established in Beijing, which has already built a blockchain-based data directory for over 80 city departments. “China considers blockchain technology key to its digital infrastructure, with a growing number of Chinese local governments showing interest in Web3 development. At least a dozen Chinese cities and provinces have issued plans or policies to boost the growth of the Web3 and metaverse industries, including Shanghai, the country’s financial center. Shanghai released a policy paper in July last year to build out metaverse-related industries worth about US$52 billion by the end of 2025”. Hong Kong is also positioning itself to become a Web3 industry hub. Legislation is also pending to regulate virtual property protection. In tandem with blockchain technology and smart contracts, this will pave the way to establish institutions dedicated to virtual property custody and verification. Lily Z. King notes the China Digital Asset Exchange, a platform backed by China Technology Exchange, China Cultural Heritage Exchange Center, and Huaban Digital Copyrights Center, was launched in January to become “the first compliant platform that supports second-hand trading of digital collectibles…The China Digital Asset Exchange also claims that it will launch its own blockchain to register and verify ownership and copyright”.
Jennifer Conrad and Will Knight reported in March 2022, the Cyberspace Administration of China introduced the Internet Information Service Algorithmic Recommendation Management Provisions. “Under the rules, companies will be prohibited from using personal information to offer users different prices for a product or service. The sweeping rules cover algorithms that set prices, control search results, recommend videos, and filter content. They will impose new curbs on major ride-hailing, ecommerce, streaming, and social media companies…Among other things, they prohibit fake accounts, manipulating traffic numbers, and promoting addictive content. They also provide protections for delivery workers, ride-hail drivers, and other gig workers. Some provisions aim to address complaints about online services. Under the rules, for instance, companies will be prohibited from using personal characteristics to offer users different prices for a product; they also will be required to notify users, and allow them to opt out, when algorithms are used to make recommendations. Companies that violate the rules could face fines, be barred from enrolling new users, have their business licenses pulled, or see their websites or apps shut down”. “A separate, but related, proposal aims to address synthetic content, an umbrella term encompassing fake news, synthetic audio, and deepfake images and videos, in which a person’s face is stitched onto someone else using AI. Among the provisions, makers of deepfake software would be required to verify the real names of creators and “conspicuously label” any deepfaked content. Deepfake apps, popular in China, have stirred public debate over privacy and ownership of personal data”. They note the EU had earlier proposed rules to restrict use of facial recognition, prohibit algorithmic manipulation, and regulate AI-enabled products like chatbots and computer games. However, the European legislative process tends to be slow. The regulatory approach also differs in that “European lawmakers tend to think in terms of fostering markets and individuals’ rights; in China, by contrast, there’s an emphasis on societal wellbeing. Authorities see these issues as collective issues” related to morality and mainstream values.
Matt Sheehan and Sharon Du adds an algorithm registry has been created. “China’s algorithm regulation has largely focused on the role recommendation algorithms play in disseminating information, requiring providers to ensure that they don’t endanger national security or the social public interest and to give an explanation when they harm the legitimate interests of users. Other provisions sought to address monopolistic behavior by platforms and hot-button social issues, such as the role that dispatching algorithms play in creating dangerous labor conditions for Chinese delivery drivers. The regulation also requires recommendation algorithms with public opinion characteristics and social mobilization capabilities to complete a filing with the mysteriously named Internet Information Service Algorithm Filing System…publicly available filings usually consisted of a single page with six different short-response categories, including Algorithm Fundamentals and Algorithm Operating Mechanism…only a portion of the information filed in the registry has been revealed. The most detailed requirements for disclosure…Detailed Algorithm Attribute Information…asks that algorithm providers list the name of each open-source and self-built data set that was used to train the model, as well as the specific source of that data. In addition, it requires the provider to state whether algorithm inputs involve biometric or other personal information…By providing a skeletal understanding of influential algorithms in the country, the registry can alert the CAC to where it might lack useful information and provides scaffolding for it to make further demands on companies for disclosure. In that sense, the current push to build tools to regulate algorithms echoes China’s early attempts to control internet access and freewheeling social media platforms. In both cases, the government’s efforts appeared ham-fisted and were often described as futile. But by slowly building its understanding of the technology and the industry, the government was able to tighten screws until it reached an equilibrium that served its ends. Now we will see if it can pull off the same trick with algorithms”.
Geopolitics and technology decoupling
In the 1990s, Wang Huning wrote “there is political competition behind technological competition, and political competition needs technological competition and technological competition supports political competition. An important direction for humanity in the twentieth century is the high integration of politics and technology. Politics without technology cannot be a strong politics, and of course, technology without politics cannot be a strong technology. As a result of this combination of technology and politics, technology itself has been alienated. This phenomenon is particularly stark in the United States. Sometimes it is not the people who master the technology, but the technology that masters the people. If you want to overwhelm the Americans, you must do one thing: surpass them in science and technology. For many peoples it is different; having technology does not work; there must also be cultural, psychological and sociological conditions. Americans have been in a privileged position for a long time, almost since World War I, when its privileged position was formed. In seventy years, the United States has had several generations, and those born after World War II are now in their forties. This generation of Americans is in the atmosphere of America First, and a psychological stereotype has been formed. As a result, the United States is also a nation that cannot afford to lose. Technological superiority has gradually developed into national superiority, and they cannot imagine that any nation can surpass them”.
David Dorman and John Hemmings observed “mostly unknown in the West, Digital China has profound implications for China’s developmental path, great power competition, and for the norms that will undergird the international system for decades to come. Beijing hopes to leverage a latecomer’s advantage to win what it sees as the new focal point of great power competition in the digital age: the race to design and build the world’s first nationally integrated system of rules, institutions, and technology to comprehensively manage big data and its intelligent application. This expresses itself in the Digital China strategy’s intense focus on the governance and control of data, a process Beijing calls the new stage in national informatization. Equally important, the Communist Party also now considers the control of data to be essential to its own survival, on par with the control of media, the military, and personnel. Rooted in Marxist theory, the Digital China strategy is both deeply transformative and deeply competitive. In effect, it is the world’s first digital grand strategy. Internally, the party’s deft control of data will create the world’s first Smart Society, demonstrating to China’s citizens and the world that capitalism has nothing to offer over socialism. Externally, a successful Digital China strategy will usher in an era of Chinese innovation that brings with it great power status across multiple strategic domains, civilian and military. Although a self described monumental task, party leaders believe that Digital China is the strategy that will enable China to win the digital age”. The 2016 Outline of the National Informatization Development Strategy states: With further developments in world multipolarization, economic globalization, cultural diversification, and social informatization; and profound change in the global governance system; whoever occupies the high ground of informatization will be able to seize the first opportunity, win the advantage, win security, and win the future.”
Edward Tse explains the “failure to understand Chinese modernisation outside China is tied to the West’s belief that the country owes its competitiveness in global markets to unfair means, including infringement of intellectual property rights and use of government subsidies. Some Western critics believe China’s massive population and domestic market have facilitated huge – but largely by way of brute force – manufacturing capacities. Some say the Chinese have an ability to take a long-term view but can’t explain why, and some believe that while China is efficient, it lacks ingenuity”. He highlights “President Xi Jinping told…China would continue to pursue Chinese modernisation, as a path distinct from Westernisation…In recent decades, China’s ability to coordinate large-scale economic activity has steadily increased. State-owned and private enterprises coexist in a mostly complementary manner, with state-owned enterprises delivering public goods for the benefit of society. Central government policies are woven into the programmes of provincial governments, and local governments often provide support to businesses to facilitate growth…China has veered between opening up and clamping down, between experimenting with change and resisting it, always pulling back before going too far in either direction for fear of running aground…China’s immense ability to experiment, learn and adapt since its reform and opening up, and to embrace seemingly opposing concepts simultaneously, has enabled it to achieve rapid economic transformation. While entrepreneurial individuals have taken giant leaps in business, among the masses there is a collective desire to re-establish China as one of the world’s most influential nations – a position the Chinese believe they deserve”.
David Dorman and John Hemmings notes Digital China contained terms such as new type infrastructure (NTI); the significance of which is easy to miss because “there is no standardized English language translation…One might see it in English as simply new infrastructure, or new kinds of infrastructure, and a few other variations. NTI is reported so often in Chinese media that there are now specialized terms for the campaign, like information aorta, coined by Xi Jinping himself in 2016. While few outside China recognize these terms, party cadre and Chinese citizens know exactly what they mean because they have been subjected to constant party-led planning, meetings, and education campaigns across the country”. NTI “describes a centrally defined list of digital technologies, numbering in the low dozens, targeted for rapid development and nationwide installation….5G, 6G, or blockchain…a satellite internet of things, a nationally integrated network of big data centers, or an industrial internet with global reach…This recent acceleration is likely to be on top of an estimated 17.5 trillion yuan (nearly $2.7 trillion) over five years, already budgeted”. They explained Xi Jinping first accelerated construction of NTI…to jump-start a stalled economy under Covid-19 through an immense digital infrastructure campaign…By building NTI in advance of users, applications, or even the data it will carry, China will, so the strategy argues, take the lead in growing markets, writing standards, and developing governance mechanisms – a sort of build it and they will come field of digital dreams. Digital China executes national projects through bundles of multiple technologies connected together in technology ecosystems. The development of China’s industrial internet, for example, requires 5G, gigabit optical, cloud computing, blockchain, and data centers…The project is executed as a coordinated whole, with the involvement of multiple state agencies, provincial-level authorities, and telecommunications vendors, both foreign and domestic. To use Beijing’s terminology, the program is executed from the center based on a top-level design…Major Chinese digital projects, made up of multiple technology ecosystems, can be huge both in geographic scope and global implications”. Examples include Digital Beibu Gulf (linking Southwest China to ASEAN) and Huawei’s Smart Ports. “This is in advance NTI construction, and the United States and its allies should see it for what it is: another round in the coming global competition over data”. The “elevation of the nation’s Information Technology Industrial Ecosystem…will provide the traction for national informatization, parallels Xi’s drive to increase China’s innovative capabilities, and overlaps with two key focus areas, mastering core technologies and collecting cyber talent”. This is supported by the ”development of a Data Element Resource System, a system described as core to the nation’s informatization effort and the focal point for the party’s overwhelming interest in data governance and control. Together, these three missions will supply the technical and systemic means, however difficult to achieve, that have been deemed necessary to realize Xi’s digital vision for the nation”.
David Dorman thinks the West should “try to model the downstream implications for liberal democracies that would flow from a fully successful Digital China. By party definition, Digital China will increasingly drive Beijing’s competitive strategy against the United States and its partners. The across-the-board transformation of Beijing’s manufacturing industries, its society, governance model, and innovation are couched in terms of domestic and geopolitical outcomes. The United States and its partners – though weary of decoupling from what might become the world’s largest economy – must weigh the interests from a democratic and geopolitical perspective. One clear challenge even now is how new disruptive technologies – like artificial intelligence and informatized societies – are empowering innovative attempts at authoritarianism. While Digital China includes industrial goals, there is also clear party direction to transform society and the ways that Chinese citizens are governed by the party. This is not simply perfecting tools that already exist. Instead, this is developing innovative new tools that will be tested as pilot projects in localities across China. While not all the ideas will be bad, it is clear that all of them will be executed through the lens of an authoritarian system”. “In coming decades, democratic nations are confronted by the possibility of the world’s first authoritarian hegemonic power. Technologies associated with Digital China, their manufacture and standards, and how they integrate data into forms of control, should be of immense concern to those states that continue to prize political and individual rights. Digital China’s technology projects are highly integrated at both the national and the global level, and Beijing intends to export its technical standards, its network architecture, and the governance model implicit in those. As an early indicator, Beijing has already expressed interest in the gradual deployment of data centers in support of Digital China’s industrial internet to countries participating in the Belt and Road Initiative. As mentioned earlier, the Communist Party’s approach to data is both Marxist and authoritarian in nature and exerts a sort of totality of control over individuals that could ultimately impact nations enticed by Digital China’s New Type Infrastructure”.
China and US policies are increasingly confrontational and this is deepening technology decoupling. David P Goldman notes Huawei is leading China’s charge into 5G networks and IOT. “According to Huawei estimates, more than 10,000 Chinese businesses have built dedicated, or private, 5G networks, including more than 6,000 manufacturing firms. That compares to a total of 171 private 5G networks outside of China, of which fewer than 20 are factories”. Despite being limited to legacy chips, Huawei has been able to display a variety of broadband and AI applications for a wide range of businesses, including manufacturing, mining, warehouses, rail, road management, health care, education, and government operations. China has “true 5G in most cities with 300 megabyte-per-second download speeds” and “industrial applications of 5G had generated so much upload traffic that the new network soon would become obsolete”. In contrast, “the rollout of the new technology in the US and Europe has been partial and misrepresented to customers. The 5G user experience isn’t sufficient to justify the additional infrastructure cost, and the major European telecoms have trouble earning sufficient revenue to justify the 60 billion euro infrastructure cost…a few content providers – Google, Netflix, Facebook and Amazon among others – account for most mobile Internet traffic. Consumers aren’t willing to pay up for the required infrastructure, squeezing European telecom companies’ margins, and giving the content providers a free ride. The European telecoms are caught between rising infrastructure costs and a limited consumer wallet”. “Huawei is ready to roll out what it calls 5.5G…faster, more automated, and more intelligent than 5G, and support more frequency bands. 5.5G will deliver 10 times greater network capabilities, which will translate into 100 times more opportunities. Free-viewpoint video, enterprise cloudification, mobile private networks, passive IoT, and integrated sensing and communication will all develop rapidly thanks to these advances in 5G.”
Peter Raymond believes “China’s powerful and innovative platforms – with their all-encompassing user experiences, data aggregation, and algorithmic manipulations -are also critical to the country’s domestic surveillance and control systems…Today, China’s leading platforms are essential to the nation’s increasingly authoritarian surveillance and control architecture. While a host of technology firms are involved (from facial recognition software developers to broadband providers), platform companies such as Alibaba, Tencent, and Baidu – through which citizens interface with technology – all play critical and instrumental roles as partners to the Chinese Communist Party (CCP) in blocking unwanted content, promoting government narratives, prompting appropriate behaviors, and reporting on users”.
Peter Raymond thinks “China’s investments in the BRI and DSR, the expansion of Chinese technology firms, and China’s efforts to influence global standards setting are just some of the ways it is seeking to create a more China-centric world…While Western platforms are creative and nimble, there is a strong chance that China’s innovative and immersive platforms – boosted by the country’s broader digital expansion and its alternative vision of the internet – will become preeminent in numerous emerging economies…there is a clear risk that U.S./Western business, power, and influence would be impacted. What might that look like? Platform influence could shape what consumers buy; how supply chains do (or do not) operate; election outcomes; public sentiment on domestic and international issues; and a nation’s political, economic, and technological dependence on China. From a social media standpoint, preeminent Chinese platforms would be able to favor and promote messaging preferential to Beijing’s interests – potentially swaying everything from opinions to elections to social harmony…In e-commerce, slight algorithmic changes can also shift buying behavior and realign supply chains. What happens when the market for products and services favors Chinese providers over Western ones? Furthermore, to the extent companies in these nations rely on China’s internet infrastructure (some of it managed by Chinese platform firms), is it possible to slow order fulfillment from one source and accelerate it from another? When linked with China’s dominant LOGINK logistics platform, could customs clearances and port processing be affected as well? In search functions, what might happen when access to a broad range of information sources is curtailed? Manipulation of search results has been shown to affect voter preferences, consumer behavior, and social discord. What about linkages to satellite mapping as China rolls out Beidou, its alternative to the Global Positioning System (GPS), and this becomes the default map software for apps? How might traffic flows, shopping, and investment be adjusted to favor one group over another?”
Peter Raymond points out the US is hampered by perceptions of “the absence of a strong U.S. role in internet governance and standards-setting organizations. In addition, the United States is largely unable to provide internet tech stack technologies and services at competitive prices equivalent to those offered by the Chinese. China often bundles its technologies into integrated packages that are difficult to compete against. Therefore, even if an emerging economy prefers U.S. technology, from a cost and performance standpoint it is likely to choose Chinese products”. If Chinese platforms prevail, “we can expect a shift in structural power from the West to the East, potentially helping realize Xi Jinping’s prediction that the countries that take command of the internet will win the world.”
As differences between the China and US ecosystems become more evident, technology bifurcation becomes a reality. Jeroen Groenewegen-Lau thinks a likely “scenario will see two blocks forming – a Western one around US leadership and another one following China’s lead. Chinese commentators already see the race for 6G developing along these lines, with the US undermining China’s hard-earned lead in internet equipment. They point to the US-led Next G Alliance, which is open to European but not Chinese vendors (Huawei’s US subsidiary Futurewei is the exception). It has signed MOUs with European, Japanese and South-Korean counterparts”. However, “it was still unclear whether there would be a single global standard for 6G and collaborations with Europe, Japan and South Korea continued with an open attitude. China’s IMT-2030 (6G) group last year signed an MOU with Europe’s 6G-IA industry alliance. Should these options fail, China has a large enough market to go it alone – and sufficient experience. The Beijing has a track record for pushing homegrown standards incompatible with international ones, such as TD-SCDMA for 3G, which proved to be a competitive liability for China Mobile, and LTE for 4G, which was adopted early and shaped after a happier pick by the company. But there is still a fair chance that a single 6G standard can be reached. China prefers a global standard that would allow its firms to continue competing globally”.
Jeroen Groenewegen-Lau adds “the US has banned its high-tech firms from exporting 5G technology to Huawei and recently broadened the restriction to include most other technologies as well. Pressure on Europe to clarify its position will intensify as the proposed deadline for 6G standards approaches, around 2025. Failure to agree on a joint standard would bring internet decoupling to a new phase. Global markets for digital hardware have already fragmented, with China and the West creating de facto barriers for each other’s vendors in their home markets. National security concerns for governments have grown with the increasing ubiquity of the mobile internet and the China-US tech rivalry. Markets look set to become even more divided – between those dominated by Huawei and those in which Chinese vendors will not be considered for core functions. In such an increasingly fragmented commercial world, the incentives to find agreement on joint standards will gradually fade. At worst, consumers might ultimately need different smartphones for different parts of the world – and companies’ different devices for the nascent internet of things (IOT). None of the IOT-devices designed for use in the US or the EU would work if plugged into a similar network that follows, say, a Chinese standard. The result would be the costly purchase of new devices or tricky modifications and workarounds”.
Kevin Kohler points out “the political future of the Internet is often discussed in terms of three archetypes: 1) a single global Internet, 2) a bifurcated Internet, split into a Chinese-led and an US-led Internet, and 3) a fragmented Internet, split into many national segments”. The major “drivers of bifurcation are the Digital Silk Road on the Chinese side and the Clean Network initiative on the US side”. There is a distinction between fragmentation and bifurcation “because the incentives behind these trends are not the same. The long-standing approach of the US in global Internet governance has been to reduce barriers to local market entry (fragmentation). With the rise of the Chinese near-peer ICT-ecosystem the focus has shifted towards leveraging network effects of the US ICT-ecosystem to limit the global market access of specific companies (bifurcation)”. “Fragmentation mostly happens at the content and logic layers; bifurcation focuses more on logic and infrastructure. Concrete areas of bifurcation include future Internet architectures, 5G/6G standards, and chips”. More components of the global internet infrastructure would be affected if decoupling continues.
Antonia Hmaidi and Kai von Carnap notes “having failed in 2019 and 2020 to persuade other governments in the UN’s International Telecommunications Union (ITU) to make New internet protocol (IP) a standard, China is now offering IPv6+ at home and abroad…Domestically, the Chinese government is looking to launch 90 IPv6+ pilot projects this year, adding to the 84 IPv6+ networks, including a communications network for the 2022 Winter Olympics and high-precision medical robots in a Shanghai Hospital…Beyond China’s borders, subsidized technology and China’s state-private nexus – Huawei’s willingness to provide technology and Beijing’s ability to provide financing at attractive rates – is helping to establish IPv6+ even without the ITU’s approval. One focus of the international marketing campaign are African countries…Rollouts of IPv6+ are planned in Rwanda, Uganda, and South Africa…13 IPv6+ networks had already been rolled out in the Middle East/Africa, four in the Asia-Pacific region – and five even in Europe and the US”.
Kai von Carnap points out “international users of Chinese web platforms are finding these internet services ever less accessible. Contrary to the global convention to link user accounts to e-mail addresses, Chinese platforms are asking users to sign up with their mobile phone numbers. Partly the consequence of China’s internet use having been driven by mobile devices, this practice allows platforms to filter access by ostensible nationality. Would-be users can often only sign up using selected phone-number prefixes – and sometimes only with Chinese numbers. International users are also finding it harder to call up some Chinese websites…there is a growing amount of anecdotal evidence that Chinese websites, both commercial and governmental, have started geo-blocking foreign access to strategic and political online resources – possibly not only by detecting the device’s so-called IP-addresses, but also its encryption system…foreign users…must go through complex registration processes and are often required to provide their real names and information relating to their identity or that of others…Chinese regulators appear to have expanded their campaign of obligatory real name registration, but voluntary username to global users – with the aim of holding all users of its clean and healthy cyberspace accountable. China’s internet platforms are helping to turn China’s Great Firewall from a barrier to internet content outside the country to one that can also stop outsiders getting in…Ironically, while China is driving fragmentation beyond its Great Firewall, it is becoming wary of fragmentation within it…The traditional multi-function so-called super-apps have established strong lock-in mechanisms like payments features and closed communication channels. Beijing has taken steps to ensure more interoperability, like making messaging between platforms easier…Even though China is deterring foreign users and suffers technical fragmentation at home, the State Council emphasized recently that the country wants to promote openness and cooperation and create open, fair and non-discriminatory ecosystems. The future of the internet and China’s role in shaping it remain uncertain. Crucial will be how it balances its need for control and interest in openness”.
The future is cloudy as China and US increasingly take actions against each other. For example, will China technology firms be allowed to compete in the West and vice-versa? What would happen to infrastructure connectivity, data transfers and intellectual property protection? Would technology bifurcation extend downstream to consumer products? Would there be room for firms and countries to straddle both sides? Digital China is giving China a headstart and it seems to be gaining momentum in the Global South. But it is too early to anticipate outcomes as the West is still in the midst of revitalising their models; particularly in reorganising their supply chains to reduce dependency on China.
Will Digital China lead to an Orwellian dystopia?
There has constantly been fears about the dark side of technological progress. These concerns are being heightened by the expansion of platforms, surveillance and tracing tools, digital IDs and currencies and increasing use of AI prediction algorithms. These developments generate comprehensive electronic trails across multiple data silos that can be processed for nefarious commercial and political purposes to tighten control over social behaviours and supress citizen rights. At the outset, it needs to be clarified that risks associated with information power abuses apply equally to authoritarian regimes as well as democratic societies.
As an example, many countries have deployed heath and travel tracing apps in response to Covid-19 and most discarded the apps and databases due to largely negative public perceptions. Wilfred Yang Wang notes while China terminated the itinerary codes used to track movements in high-risk areas, it announced plans to further digitize the national health system and associated services. “Data synthesis is the centerpiece…a specific plan to link residents’ national ID (shenfen zheng) numbers and other forms of identification with their health information. This is to create what the government calls one code for all…Linking health service platforms with their users’ personal information has already been trialed in China during the Covid-19 pandemic. The itinerary code and health code linked Chinese residents’ personal information, travel details and even biometrics in order to pre-determine their health status…This plan to data-fy health information connects with other techno-social developments in China – including the embrace of cashless transactions, the digitization of utilities and government service provision and the increasing reliance on apps and algorithms to promote social morality and nationalism”.
Wilfred Yang Wang explained the government’s “repeated assertion of the need to centralize data is an admission of the tensions that exist between the central government and local authorities over data governance and health management, which is neither new nor exclusive to the Covid-19 pandemic. Although China’s three major telecom companies jointly provided the itinerary code, the health code has many local versions and local authorities administer the data that is collected. Many local health codes are not compatible with each other and are not recognized outside of their local jurisdictions. Local variations have undermined the central government’s objective of accurate pandemic prevention and control and have created confusion, chaos and led to unrest. It could be argued that Covid-19 tracking codes achieved little in protecting China’s health system and its population during the pandemic. But these failures might have strengthened the central government’s desire to pursue administrative centralization. The ambition to build a national health platform shows the central government has convinced itself that political centralization can only be achieved through the centralization of the flow of data”.
Hence, there are huge disparities between the on-the-ground realities of data-sharing and Orwellian fears. We should view Digital China as a bold experiment and attempt to separate the facts from the myths of digital systems.
- Social credit system (SCS)
Several aspects require clarification. First, Zeyi Yang points out “when the Chinese government talks about social credit, the term covers two different things: traditional financial creditworthiness and social creditworthiness…The latter – social creditworthiness – is what raises more eyebrows. Basically, the Chinese government is saying there needs to be a higher level of trust in society, and to nurture that trust, the government is fighting corruption, telecom scams, tax evasion, false advertising, academic plagiarism, product counterfeiting, pollution…almost everything. And not only will individuals and companies be held accountable, but legal institutions and government agencies will as well…As a result, so-called social credit scoring is often lumped together with financial credit scoring in policy discussions”.
Second, SCS concerns centers on blacklists. Shazeda Ahmed explains “the social credit system is often compared to the dang’an system, a set of government dossiers on Chinese citizens recording the minutiae of their lives, from expressions of political thought to their performance at school, compiled from accounts by peers and local authorities. But a closer point of comparison is the government blacklisting that predates the development of the social credit system. The social credit system is meant to give blacklists teeth. How? One way is by encouraging and enabling different government agencies to pool information. Under the social credit system, several government bureaus have not only developed their own blacklists, but to date have signed forty memoranda of understanding that enable them to share information with one another to ensure that blacklisted individuals are duly punished. Another way that the social credit system strengthens blacklists is by fostering closer communication not just within government but between government and industry – in particular, with China’s biggest technology firms. Previously, people who could not purchase airline tickets through official channels if they were blacklisted might have still managed to use websites like CTrip.com or the in-app travel booking feature of the mobile wallet service Alipay to circumvent these restrictions. That is no longer possible under agreements that these companies and several dozen others have signed with China’s National Development and Reform Commission (NDRC), the powerful government body that has spearheaded the social credit system’s development…By forging partnerships with Chinese technology companies, the state ensures that blacklisted people can’t avoid punishment. These partnerships make it harder for individuals to evade restrictions in the non-state economy, which is otherwise farther outside of the government’s sphere of control. But they also open the door to the possibility of a much more expansive social credit system, since technology companies have a wealth of information about Chinese citizens. Still, it remains unclear when and how companies might share their data with the state – although it would be difficult for them to avoid doing so if asked”.
In effect, the social credit system strengthens the use of blacklists to enhance “trustworthiness” to influence good behaviour and discourage bad behaviour. Shazeda Ahmed explains “the use of blacklists to promote trust is by no means confined to China. It is also pervasive in the United States, although it takes a different form…Private firms develop lists of people who have committed minor transgressions, and generally sell these in their capacity as data brokers in a relatively under-regulated market”. Though the “Fair Credit Reporting Act (FCRA) of 1970 reined in many types of invasive data collection that could be used as informal credit ratings. But plenty of other kinds have slipped through the cracks or are FCRA-compliant, creating hidden yet technically legal data judgments that affect the lives of millions of Americans”. Examples of blacklists include: retail employees accused (not convicted) of shoplifting (barring their recruitment in sales), customers potentially committing return fraud (restricted from returning goods at certain stores for a period) and tenants involved in disputes (influencing landlord tenancy decisions). “The repackaging of blacklist data can amplify and distort their significance, yet they will persist as long as they profit data brokers, and in part for a failure to imagine viable alternatives”.
Shazeda Ahmed argues “in both the US and China, blacklisting systems enforce broad punishments that are disproportionate to the transgressions that land people on blacklists. Likewise, the burden falls on the blacklisted individual to discover they are being systematically prevented from taking certain actions and to figure out how to remedy their situation. Demanding greater transparency and accountability from both systems has been a challenge, although US efforts have been more successful. In the US, activists have successfully pushed back against certain forms of blacklisting for violating the Fair Credit Reporting Act. Civil society and legal aid organizations have also spent years monitoring, and attempting to curb, various practices embedded in using ambiguous personal data for blacklisting. In China, by contrast, there is less room for such activity. For one, it’s unclear how credit legislation could be used to mount comparable efforts. And, although a few Chinese consumer protection organizations have become attuned to the ways that tech firms’ use of customer data can lead to privacy abuses, they have not taken up the issue of blacklists because the practice is treated as socially acceptable in China. Some avenues for contesting cases where people believe they are wrongfully blacklisted do exist, but they are unlikely to be widely known. In places like Shanghai and Hubei, local social credit regulations lay out steps for filing objection applications where individuals have found credit information to be incorrect or omitted. Yet, given the scope of what counts as credit information, it may be difficult for non-experts to understand and make a case for why their records should be modified. Moreover, it’s unclear if the punishments for being blacklisted leave individuals enough room to redeem themselves, or if the constraints are so stringent that they create insurmountable obstacles to clearing one’s name. The current state of the social credit system is far less sophisticated than its portrayal in the foreign press. But if the scope of what can count as blacklist data widens, and if the tech sector takes an even more pervasive searchlight approach to seamlessly melding these data into their core offerings, the system could move much closer to the dystopian picture that appears in the media. In particular, if China embraces the marketization of blacklist data – so that data is bought and sold, like in the US – information about individuals would become even harder to track and contest”.
Third, Shazeda Ahmed points out “foreign media has distorted the social credit system into a technological dystopia far removed from what is actually happening in China. Common mistakes include the assumption that all surveillance technology in China feeds into a centralized database, that every recordable action is assigned a point value and deducted from a comprehensive score, and that everyone in China receives such a score”.
The reality is, as Vincent Brussee explains, “fragmentation is a persistent and debilitating feature of the tech landscape. In the same way, the SCS remains a key part of Xi’s vision for data-driven governance and is meant to break down information barriers, while remaining encumbered by innumerable data islands six years after its construction formally began. Similarly, digital initiatives for grassroots governance still require intensive manual labor for inputting and managing information. Even the ubiquitous Health Code system for Covid-19 prevention – a contact tracing system that uses cellular data to track citizens’ exposure risk – was initially marred by regional differences and fragmentation…much of these cities’ day-to-day use of the SCS is banal thanks to the system’s fragmentation and inflation of results”. “Hard-wired performance assessments give local cadres many incentives to distort data. They get rewarded for presenting a rosy picture to outsiders – including foreign observers – while the real picture is more gloomy. For example, cities that serve as models for the application of social credit claim to have collected billions of data pieces, but most of it is of low quality or irrelevant. Many government departments lack the funds to tackle ambitious digitalization plans and mainly employ low-skilled staff who rely on hand-scribbled notes and messaging app WeChat to pass around information. Government cadres also recognize that digitalization does not always serve their interests. Local governments in the past used information asymmetries to strengthen their own position in dealings with Beijing. But digitalization strengthens central authorities by allowing access to source data – and even enables surveillance of local bodies”. “Inflation of data and accompanying propaganda are meant to make the system look more effective than it really is. Chinese authorities regularly flaunt their success in implementing the SCS. For instance, by mid-2020, the 28 cities claimed to have collected a combined 10 billion pieces of data, more than 70 data points per capita. Anqing has reported almost 400 departments are feeding data into the system, and the Supreme People’s Court reckons the SCS has helped recover 17.08 billion ($2.66 billion) in funds from judgment defaulters. Local authorities have many incentives to inflate data, making the value of their figures questionable. Eye-catching numbers reflect favorably on those in charge and can usher in the next promotion. But there is no discernible relationship between data gathered and SCS implementation; in fact, the more data a city gathers, the less it appears to blacklist…Fragmentation and inflation may seem innocent but have far-reaching consequences. Interpretative leeway means local cadres can misuse the system. One city blacklisted a citizen over online comments that supposedly caused a panic about a local COVID-19 outbreak. In a county in Inner Mongolia, parents were threatened with blacklisting for protesting against the enforcement of Mandarin-language curricula at local schools. And there is still little to prevent local officials from ignoring offenses by state-owned enterprises. Ultimately, these challenges encumber the SCS with many of the challenges it sought to tackle in the first place. Rather than streamlining China’s bureaucracy into one comprehensive system, it remains split into thousands of local data islands. Rather than standardizing the enforcement of market regulations, many officials can still do as they please. Beijing is aware of these problems and has issued directives addressing them since 2019. But solving them will not be quick…digitalization initiatives regularly fail to live up to their buzzwords. The proverb the mountains are high, and the emperor is far away aptly captures one of the reasons for this. China has a huge and complex bureaucracy, with many parts that are used to doing things their own way”.
Fourth, the significance of corporate surveillance. Vincent Brussee notes “contrary to common belief, the cities mainly target companies, not individuals. Nonetheless, legal representatives of a violating company are also included in the blacklists to prevent reoffending elsewhere or under a different company. Nationally, about 75 percent of entities targeted by the system end up on blacklists because of court orders they have ignored – the so-called judgment defaulters. The remaining companies are typically collared for severe marketplace violations – for instance, for food safety infringements, environmental damage, or wage arrears”. “In the coming three years, the State Administration for Market Regulation will start to classify companies on a scale from A to D nationwide. Companies in Zhejiang can already look up their overall credit score. However, these scores are not used to blacklist companies. Rather, they serve as an indicator of risk and are used to determine the intensity of supervision. In any case, an over-engineered score that encompassed all one’s subjective actions would be so opaque as to be utterly worthless in practice. This is already visible today. Alibaba has the highest possible credit score in Zhejiang, in spite of its monopolistic behavior and scrutiny during the tech-crackdown”.
Jodi Xu Klein points out SCS could be used “to keep local governments, businesses and people in compliance with national directives. For international businesses, the programme will look at a host of data including business contracts, social responsibility, regulatory compliance and how many Communist Party members they employ. Through a centralised platform using artificial intelligence, the system will rate firms for credibility or sincerity. Blacklisted companies could face punishments that include being denied access to cheap loans, higher import and export taxes and key personnel being prohibited from leaving China. Foreign companies will be required to hand over to Beijing more data for scrutiny. And the government’s possession of larger amounts of proprietary data and its authority to mete out punishment will give it an even stronger hand in keeping their behaviour in line”. There are also possibilities that corporate and individual ratings could inter-linked. “For example, if a company was cited for business violations, the credit ratings of its key personnel would also take a hit, and vice versa. Also, companies doing business with poorly rated partners would have their ratings slashed, effectively cutting the low-rated firms out of the supply chain…Since the programme’s technology is still being developed, the system’s full impact on businesses will not be known for years”. However, it is noted that foreign companies in China “already have to deal with onerous and often vague rules and restrictions that constantly change, often with little warning…With geopolitical tensions running high…The centralised database planned by Beijing could give it more fodder to target foreign companies or industries as a retaliatory tool”.
Overall, the SCS is in its formative stages. Shazeda Ahmed observes “taken as a whole, the range of goals that the social credit system aims to address may suggest that the government is itself unsure, and is still in the process of figuring out, what such a system can accomplish”. Vincent Brussee notes “by 2019, China’s central authorities were stating explicitly that they were not happy with the idea. They issued formal clarifications that scores could not be used to penalize citizens and that only formal legal documents could serve as grounds for penalties. Pilot cities quickly followed suit: Wenzhou, having made ambitious plans in 2014, made a full 180 degrees and in 2019 released an encouragement-only scheme instead. Rongcheng issued a revision in 2021 that required voluntary application and could only issue rewards. Many other scoring plans never materialized at all. The personal scoring initiatives that live on today serve only as positive incentives. Lacking teeth, they are essentially loyalty rewards programs like those operated by airlines, and few people make use of them. Further restrictions were formally rolled out in December 2021, curbing the types of behavior that can be included in the system. This is also why it is unlikely that a SCS-superscore is yet to come: the authorities have tried something like it and found out it was not what they were looking for. After all, why would Beijing develop such an all-encompassing system covering the entire population – the vast majority of whom are well-behaved – when they already have a wide array of covert tools with which they can suppress targeted groups of dissidents?”
Zeyi Yang notes that “initially, back in 2014, the plan was to have a national system tracking all social credit ready by 2020. Now it’s almost 2023, and the long-anticipated legal framework for the system was just released in the November 2022 draft law…on the Establishment of the Social Credit System, the first attempt to systematically codify past experiments on social credit and, theoretically, guide future implementation. Yet the draft law still left observers with more questions than answers…That said, the government has mostly figured out the financial part. The zhengxin system – first released to the public in 2006 and significantly updated in 2020 – is essentially the Chinese equivalent of American credit bureaus’ scoring and is maintained by the country’s central bank. It records the financial history of 1.14 billion Chinese individuals (and gives them credit scores), as well as almost 100 million companies (though it doesn’t give them scores). On the social side, however, regulations have been patchy and vague. To date, the national government has built only a system focused on companies, not individuals, which aggregates data on corporate regulation compliance from different government agencies…sharing regulatory records across a single platform…The result is openly searchable by any Chinese citizen on a recently built website called Credit China. But there is some data on people and other types of organizations there, too. The same website also serves as a central portal for over three dozen (sometimes very specific) databases, including lists of individuals who have defaulted on a court judgment, Chinese universities that are legitimate, companies that are approved to build robots, and hospitals found to have conducted insurance fraud. Nevertheless, the curation seems so random that it’s hard to see how people could use the portal as a consistent or comprehensive source of data…Contrary to popular belief, there’s no central social credit score for individuals. And frankly, the Chinese central government has never talked about wanting one…Well, since the central government has given little guidance on how to build a social credit system that works in non-financial areas, even in the latest draft law, it has opened the door for cities and even small towns to experiment with their own solutions. As a result, many local governments are introducing pilot programs that seek to define what social credit regulation looks like, and some have become very contentious… that the Chinese central government has actually been pushing back on local governments’ rogue actions when it comes to social credit regulations…There is no known instance in which automated data collection leads to the automated application of sanctions without the intervention of human regulator…Alibaba, for instance, helps the courts deliver judgment decisions through the delivery addresses it collects via its massive e-commerce platform. And Douyin, the Chinese version of TikTok, partnered with a local court in China to publicly shame individuals who defaulted on court judgments. But these tech behemoths aren’t really involved in core functions, like contributing data or compiling credit appraisals. They saw it as almost like a civic responsibility or corporate social responsibility”.
- Central Bank Digital Currency (CBDC)
The extreme view, particularly among cryptocurrency adherents, is that CBDC is the ultimate surveillance tool as it enables central banks to monitor transactions, integrate with other data to facilitate intrusive and automated controls to severely limit individual freedoms. Accompanying this narrative are geopolitical concerns related to China’s lead in electronic payments and CBDCs.
On the ground, progress on CBDCs has been slow. “Xie Ping said that the cumulative number of transactions in the pilot areas [for digital yuan] of 15 provinces and municipalities nationwide was 360 million. The amount involved was 100.4 billion yuan…as of August 31, 2022. PBOC’s payment system report for the second quarter of 2022 shows that about 1 billion people in China currently use third-party payment platforms, and the volume of network payment business (third-party payment platforms) by non-bank payment institutions reached more than 200 billion transactions per day and 1.31 trillion yuan per day. Currently, there are 9.3 billion bank cards in China, and their daily transaction volume is about 500 billion yuan. The comparison shows very few people use the digital yuan in spending, and the adoption is very inactive”. He noted that cash, bank cards and third party platforms are “more than enough for people’s daily payment needs in spending, and it is challenging to change payment habits overnight. Currently, using the digital yuan in different payment scenarios requires people to open various digital wallets and merchant platforms, a disadvantage compared to existing third-party platforms. In this sense, the ecosystem of the digital yuan has not been built. That contributes to an unawareness of the digital yuan and a lack of motivation”.
Xie Ping points out “the issuance and management process of the central bank’s digital yuan is similar to that of technology companies’ products, which requires constant maintenance and operation in the background, innovation, and adaptation to various scenarios – all very costly. In addition, the increase in digital currency’s usage will have to rely not only on the offline promotion of the branches of the central bank at all levels but also on the technical transformation of scenarios where digital money is used. Considering the enormous costs paid by third-party payment platforms in the early days of offline promotion of their apps, the central bank, as a non-profit organization, has certain limitations in human and financial resources for offline promotion. If the digital currency’s usage does not reach a notable scale in the long term, the inability to form economies of scale will cause serious problems”. At the same time, “synergies from the collection, application, and profit of transaction data are significant in third-party payment companies and their related online platforms, like those between Alipay, Taobao, and Ele.me [a platform for takeaway food], building economies of scale and yielding surplus returns. Such financial incentive prompts third-party payment companies to increase investment in technology and continuously create technological improvement, thus expanding their application scenarios and enhancing their services. As the central bank cannot utilize business incentives like Internet companies, the non-fee advantage is negligible…In addition to spending, third-party payment platforms can also embed other financial functions, like buying wealth management products, funds, and insurance, as well as taking consumer loans, etc. That provides a lot of convenience for people’s daily life, but digital currency has little to offer”.
To increase digital yuan usage, Xie Ping recommended expanding the pilot e-CNY programmes to cover “more payment scenarios” including for purchase of financial products to achieve economies of scale. Cooperation with third-party payment platforms should be strengthened. As at December 2022, 92 merchant platforms have been integrated into the latest digital yuan app while the only supported third-party payment platform in the app’s Payment Platform section is Alipay. There is also a need to “accelerate the design of the digital yuan’s wallet design and the improvement of the ecosystem for the digital yuan’s smart contracts. Smart contracts can effectively prevent the misappropriation of funds, achieve transparent management, align with existing business models, protect the interests of all parties, and form an ecosystem for the digital yuan…the central bank should invest more resources, improve the system’s design, including budget and talent, and improve the incentive mechanism to promote the use of the digital yuan by banks, merchants, and consumers”.
In my view, CBDCs are an inevitable progression from e-money. Tobias Adrian and Tommaso Mancini-Griffoli explains that “as a monetary instrument, CBDC provides safety; it alleviates counterparty risks and provides liquidity in payments. But as infrastructure, CBDC could bring interoperability and efficiency among private networks for digital money and even assets…A public platform could allow banks and other regulated financial institutions to trade digital representations of domestic central bank reserves across borders…Participants could trade safe central bank reserves without being formally regulated by each central bank, nor requiring major changes to national payment systems. Again, transactions require more than the movement of funds. Risk-sharing, currency exchange, liquidity management – all are part of the package…Thanks to the single ledger and programmability, currencies could be exchanged simultaneously, so one party does not bear the risk of the other walking away. More generally, risk-sharing contracts can be written, auctions can support thinly traded currency markets, and limits on capital flows (which exist in many countries) can be automated…Importantly, the platform would minimize risks inherent in such contracts. It would ensure that contracts be fully backed with escrowed money, automatically executed to avoid failed trades, and consistent with one another. For instance, a contract to receive a payment tomorrow could be pledged as collateral today, lowering costs of idle funds…Beyond the transfer of value, encryption can help manage the transfer of information. For instance, the platform could check that participants comply with anti-money laundering requirements, but allow them to bid anonymously on the platform for, say, foreign exchange, while still seeing the aggregate balance between bids and asks”. Hence technology can thus support key public policy objectives such as “interoperability among national currencies; safety thanks to escrowed central bank reserves, settlement finality, and automatic contract execution; Efficiency from low transaction costs, open participation, contract consistency, and transparency”.
In my view, CBDC’s potential will be unlocked by the emergence of new uses as CBDCs can re-route transactions and relocate risks to radically improve settlement efficiency and minimise friction costs to transform intermediation. Higher transparency will reduce informal transactions involving money laundering, corruption and tax avoidance. National regulators are currently struggling with issues on managing the information bundle; how comprehensive it should be, and where and who would control the gateways/platforms. These are important issues that have great bearing on the future shape of the intermediation landscape and the balance of power between the public sector (mainly the central bank) and the private sector. It is likely that multiple solutions will emerge.
Cross-border CBDCs have significant geopolitical implications. Robert Greene notes interest in CDBCs “reflect emerging-market policymakers’ desire to build out a technologically sophisticated backbone for new financial market infrastructure that would replace or be integrated with incumbent systems in an effort to make national-level securities markets and large-value payments channels more efficient”. In relation to this, Asian countries “envision wholesale CBDCs potentially underpinning new, more efficient foreign exchange markets and interbank cross-border payments infrastructure” as an alternative to reliance on “local banks’ relationships with larger global banks (correspondent banks) that participate directly in U.S. payments infrastructure”. “This dynamic, underdeveloped intra-regional foreign exchange markets, and limited overlap between the operating hours of some of Asia’s large-value payment systems and the United States’ are all factors motivating Asian central banks to explore how standing up new financial market infrastructure could help lower large-value cross-border financial transaction costs”. Experiments on linking national CBDC systems such as mBridge (involving China, Hong Kong, Thailand, and UAE) are ongoing. However, it is noted that a network of wholesale CBDC–based cross-border payment channels can “act as an efficient alternative to today’s dominant large-value financial channels – which can be shut off by U.S. or European sanctions” and will reduce “the use of the dollar as a vehicle currency”. This would affect intermediation profits and diminish the role of established global intermediaries and centers.
- Smart courts
China is pushing ahead with implementing smart courts. Claire Cousineau notes digitalization of courts cover “low-tech components like electronic case-filing, and more high-tech ones like online trials, a database of publicly accessible cases, like-case recommendation systems that use AI to identify cases with similar characteristics, and block-chain evidence storage platforms”. “Private companies, including iFlytek, Tencent, and Alibaba have been enlisted in the development and implementation of smart court software…the SPC has created a number of large-scale, publicly accessible online platforms in addition to databases for individual local courts…to foster judicial transparency and streamline judicial processes, while their data feeds machine learning and big data analysis…AI from big data can be used to provide statistical and predictive reports, including intelligent like-cases search, similar-cases smart pop-up, litigation evaluation and prediction, and judicial statistics”. “Courts have uploaded over 200 million case details and over 600 million pieces of evidence to national judicial online platforms”.
Claire Cousineau points out “China also faces challenges in smart court implementation. Most notably, researchers have found that incomplete legislation makes it challenging to ensure legal regulation of online trials. For instance, legislation exists on specific logistics of conducting online civil procedure cases, but not on those regarding online criminal procedure cases. Additionally, inconsistent e-filing practices create huge variation in online case availability: some districts have up to 80 percent of their cases online, while others have under 20 percent. Judges have also raised concerns over false litigation, as it can be more challenging to verify user identification and authenticate litigation materials when filing and litigation processes occur entirely online. As such, while there exists a solid foundation, the large-scale implementation of smart courts in China remains incomplete”.
Claire Cousineau argues “first, China’s push for smart courts signals a step toward controlled transparency by the CCP, as court cases and documents are increasingly available to the public. While transparency could decrease corruption, the SPC has ultimate oversight over published material, which allows sensitive information to be carefully filtered. Second, e-courts could create a more accessible judicial system, allowing individuals in rural areas who would otherwise travel hours or days relatively easy access to the system. Additionally, when courts are no longer physically accessible in extenuating circumstances like a pandemic, smart courts would allow judicial activities to continue. However, online courts do not guarantee accessibility to adequate technological equipment or education around the judicial system. Third, e-filing and digitalization offer increased efficiency through reducing judges’ and clerks’ workload, while also notably decreasing individual judges’ oversight. Fourth, like-case recommendation systems offer a more standardized and consistent judicial decision-making process; outlier decisions are flagged for further inspection, which could serve as a tool to increasingly monitor judges…smart courts could also increase the CCP’s control over the judicial system…consolidate the CCP’s political power by moving judicial control away from local authorities and into more centralized ones; the SPC’s heightened scrutiny over case standardization and like-case recommendation systems keep case decisions consistent with the party line, which accordingly decreases individual judges’ discretion. Additionally, legal experts note that this increased, controlled transparency and tightened judicial oversight could loop the judicial system into Xi’s hallmark anti-corruption campaign. As such, the CCP could use smart courts to effectively ensure that judicial outcomes are consistent with and supportive of CCP goals and related policy initiatives. While situated soundly within the CCP’s framework propelling development through technological innovation, Chinese smart courts also signal an increased oversight over the judicial system that could serve as a tool to improve party outcomes. Perhaps more notably, if successfully implemented, Chinese smart courts could set a precedent for the digitalization of courts worldwide”.
Overall, there is a need to shape a perspective on whether digitalisation – as represented by all public and private networks with surveillance capabilities such IDs, census, security, cars, phones, healthcare, and smart cities, institutions and devices – are a forerunner to an Orwellian dystopia. The dangers are there. It should be acknowledged that digitalisation represents a concentration of information power and should an unscrupulous group gain control, this poses a threat to individual liberties. However, mass suppression can occur without digitalisation. Manual (human) forms of surveillance – Russia during 1930-53 under Stalin’s rule and the Cultural Revolution in China during 1966 – 1976 were characterised by the use of secret police and concentration\labour camps. These were not only characterised by attempts to control thought and behaviours but the worst aspect was physical coercion.
Shazeda Ahmed argues “just because the social credit system is less comprehensive than it appears in foreign media reports does not mean that it is incapable of causing harm”. In any case, “the Chinese government maintains a sophisticated and pervasive surveillance apparatus, which it regularly uses to curtail the civil rights of its citizens. It’s not so difficult to imagine how the misguided belief that the social credit system centrally integrates other state-operated surveillance technologies may have originated, given the troubling creation of DNA databases in Xinjiang and police procurement of facial recognition technology across the country”. Zeyi Yang points out that “even if there isn’t a scary algorithm that scores every citizen, the social credit system can still be problematic. The Chinese government did emphasize that all social-credit-related punishment has to adhere to existing laws, but laws themselves can be unjust in the first place…Saying that the system is an extension of the law only means that it is no better or worse than the laws it enforces. As China turns its focus increasingly to people’s social and cultural lives, further regulating the content of entertainment, education, and speech, those rules will also become subject to credit enforcement…When moral issues like honesty are turned into legal issues, the state ends up having the sole authority in deciding who’s trustworthy”.
But there are arguments supporting the case for technological surveillance that should not be overlooked. First, we need to acknowledge the inevitability of trends favouring digitalisation and informationalisation. Second, despite the privacy backlash against surveillance, there seems to be “silent” public support for heightened transparency. We have moved to an era where secrecy and confidentiality (and therefore privacy) is frowned upon. It is being replaced by new social norms based on transparency and authenticity and legal norms based on disclosure. While people generally want exercise a degree of control over their personal information and want privacy, anonymity and confidentiality but at the same time, the “public” is unwilling to accept non-transparency of information. They want information to be disclosed, its authenticity verified. They also want the ability to filter communications from “unknown” sources, read content aligned to their beliefs and willingly actively propagate these views to others.
Third, we can also debate over whether the risks of “information abuse” is really greater in authoritarian or in democratic regimes. In democratic regimes, institutional checks and balances are considerably stronger. But this means information is scattered across silos and information control is fragmented with the result that transparency is limited. The lack of data-sharing and transparency, in turn, reduces data quality and makes it difficult to gate-keep against abuses by private firms or government agencies. Non-transparency and fragmented information controls hinders the ability to regulate and enforce and also to provide adequate recourse (to address incorrect information and grievances). Verification costs are thus relatively higher and there are also significant problem-solving, coordination and efficiency losses from information blind spots.
While authoritarian regimes can more easily centralise control over information, this does not mean that authoritarian regimes are more likely than democratic regimes to turn into Orwellian dystopias. In fact, the converse is more likely to be true because of the incompatibility between an Orwellian dystopia and information transparency. In essence, authoritarian officials can only maintain their grip on power by degrading (sabotaging or manipulating) information quality, drastically reducing information transparency and maintaining high levels of physical coercion. On the other hand, if regimes leverage on their authoritarian power to enhance information quality and transparency, they will have better prospects of curbing abusive behaviours by the public and private sectors, improving recourse processes and reducing incidences of physical coercion.
The use of AI-driven systems to combat crime is generally accepted. Scott Mozur explains AI-driven systems help law enforcement to use “preconditions” to narrow “facial recognition” monitoring to a short blacklist as well as to alert the police to potential public threats. “There’s actually competitions now across China on the local level where police actually compete to come up with clever new ways to detect whether somebody might commit a crime or might protest, something like that”. Hence, a suspect turning off his phone could trigger an alarm. “Police complain about these alarms, because a lot of their sort of – the flexibility they used to have in policing has been now debased to the point of just responding to alarms. And a lot of police assessments that we’ve seen now are based on how well and how quickly they respond to those alarms. So you see that kind of thing kind of creeping in, where the police actually have less flexibility now because the algorithms that are watching people are also, in a way, watching them, because you can see from the center how well they respond to these things”. On balance, “Chinese people can be quite happy with it because it does seem to be effective at stopping crime. The only moment you actually see the political impact of it is when a whole group of people get angry about some injustice, take to the streets, and all of a sudden, it’s effective at going after very specific people, and stopping that protest. So there is this kind of thing where it’s a very pleasant thing, until it’s not…And so I think we’re going to see more of that around the world. And I don’t really, you know, think there’s anything anybody can do to stop it”. “One other thing is surveillance can be very counterproductive. Oftentimes, surveilling everybody also surveilles authoritarian governments’ own abuses, and so that’s something that I think we may see kind of coming to the fore, you know, in the coming years. It may not be so good to have cameras everywhere because that footage can leak out and show abuses and sort of, you know, create new political resonances and new responses from people when they see abuses”.
The current wave of digitalisation is putting a lot of surveillance and data capability, and connectivity in the hands of individuals. Zizheng Yu notes Douyin, the short-video platform, “has the largest number of users in China (over 730 million at the end of 2022). According to Douyin, its users range from teachers based in rural China who record the impoverished living conditions that many local children face, to laid-off Chinese workers making a living live streaming” Short videos have also become a powerful medium to communicate substandard consumer experiences. “Short videos on Douyin are more authentic than plain text and pictures on microblogging sites, and more importantly, they can be used as legal proof. According to China’s supreme people’s court, original unedited electronic files such as videos can serve as evidence”.
Two-way transparency is quite liberating and is perhaps the best tool to empower the masses and the ultimate antidote to state/private suppression and an Orwellian dystopia. This can be achieved so long as state/platform rules are designed to improve transparency and targets are set to achieve public goals including protecting individual choice and rights. Hence, we should not taint digitalisation as authoritarian or as a surveillance tool. Instead, we should give greater thought to evolving digital forms of democracy for an information society. One aspect worth noting is that perhaps a democratic regime may be too weak to instil order in a peer-to-peer network. An authoritarian regime has better prospects of centralising power over data and thus has better prospects of promoting a stable and transparent democracy.
Lastly, digitalisation and AI will bring considerable enforcement and economic benefits. Digitalisation will lead to a sharp increase in information crime at the expense of physical crime and thus digital tools are becoming more critical to combat crime. Law enforcement will need to rely on digitalisation and AI to reduce manpower needs, automate the detection of crimes such as burglaries, fraud and delinquencies, tax evasion, government and corporate abuse, and corruption. There are also significant problem-solving, coordination and efficiency gains due to the reduction in information blind spots and verification costs. Of course, there is a relocation rather than elimination of risks and as demonstrated recently, the reduction in friction costs will tighten system coupling and substantially increase the speed of financial contagion.
What is unique about Digital China and can other countries adopt the model?
Many advanced – notably Japan, Finland, Estonia and Singapore – and emerging economies have launched digital, smart and informationalised policy initiatives as well as a host of related projects. Nevertheless, Digital China has unique features that stands out from other countries.
First, digitalisation and informationalisation sits is at the core of China’s “modernisation” strategy and is fused to its ideological base of modern socialism as an alternative to Western societies and capitalism. The West is technologically advanced but it seems to be pursuing digitalisation and informationalisation in isolation from their ideological base of liberal democracy and capitalism. Hence, China’s government supports disruption of industrial-based models while Western governments are constrained in deploying technology and using information due to heavy resistance from legacy models. China has never wavered from its long-term vision; it continuously refines the model and operationalisation. Digital projects in other countries tend to be ad hoc and momentum tends to fade after launch; hence they lack continuity and start-stop costs are considerable. Legal challenges and foot-dragging prevent other countries from wholeheartedly using information to solve societal problems.
Second, China’s approach is broad – across infrastructure, data, technology, industrial production, platform services, military-security applications and legal frameworks. In contrast, digital initiatives in other countries tend to be siloed into specific technologies or areas. They are less comprehensive and integration linkages are low, with gaping holes in their information ecosystem. Most economies, outside of US and China, generally face problems of scale and lack the ability to exploit global opportunities.
Third, China’s government seems to resemble the management of global tech firms like Meta or Tesla. There is an unchallenged leader with a lifetime tenure to implement his vision; it possesses substantial power to override subordinates and stakeholders, and recruit talent and technocrats to support projects. The Chinese government can “move fast and break things”. China can devise new policies and rules, conduct trials and experiments, clear obstacles, mobilise resources and then modify or even reverse policy direction as circumstances require. It is hard to think of another country that can be as pragmatic, as willing to make mistakes and as decisive in changing policies or pulling the plug on failed policies. Overall, China practices strong central oversight combined with extensive use of data; and places emphasis on speed and scale.
Lastly, the pace at which the Chinese populace absorbs innovative technology is astonishing. There is a large enthusiastic community supporting new uses and products. You hardly hear of trade unions, government officials or citizens blocking the use of technology. If technology fails to take-off in China, it is likely because it isn’t good enough. In contrast, there is much resistance in the West to digitalisation especially in relation to surveillance, facial recognition, AI and CBDCs.
If digitalisation and informationalisation is inevitable, what are the best options for the West? In fact, the West seemingly has the advantage – technology leadership, democracy and freedoms. Yet, the West seems to recoil from information disruption and are struggling to preserve their economic competitiveness, living standards and to manage internal contradictions (such as inequality). The pursuit of self-sufficiency with industrial policy is, to an extent, a reversion to the legacy industrial and capitalism mindset. I’m sceptical that a strategy of imposing technology roadblocks on its competitor and attempting to build small parts of the value chain will work. In my view, the West needs to address its own shortcomings in managing information, be willing to completely disrupt industrial legacies and be bolder in reimaging concepts like democracy, freedom of speech, privacy and human rights for the information society.
Digital China is the first model to emerge as a viable alternative to Western industrial capitalism. In contrast, there is no such equivalent model in the West. Hence, Digital China can be regarded as the pioneer model for managing the transition into an information society. The model itself is tentative, exploratory because there is still a long way to go in figuring out how best to organise and regulate information.
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 The Four Modernizations was coined by Zhou Enlai in 1963 and specifically referred to the modernisation of agriculture, industry, national defense, and science and technology. https://en.wikipedia.org/wiki/Four_Modernizations
 Wang Huning is thought to be the main political strategist for three Chinese presidents with a role in drafting concepts such as the Chinese Dream, Chinese-style modernization, and the Belt and Road Initiative.
 The concept for “Digital Fujian” in 2000 was proposed by Wang Qinmin, then-vice president of Fuzhou University.
 See State Council Information Office on “China’s law-based cyberspace governance in the new era”.
 See Jeff Pao.
 See Jeff Pao.
 See Jeroen Groenewegen-Lau and Michael Laha review of China policies to integrate and align innovation resources.
 “IPv6+ is a routing system for internet data that allows senders to specify to the network provider the type of content in a data packet and the route it should take. By contrast, the current and future globally-accepted IP standards, IPv4 and IPv6, deliberately abstain from providing information beyond the IP-addresses of senders and receivers in order to avoid some users being favored – or discriminated against” which is harmful to net neutrality. See Antonia Hmaidi and Kai von Carnap.
 See Zichen Wang, Jinhao Bai and Ennis Xu.
 See Tobias Adrian, Federico Grinberg, Tommaso Mancini Griffoli, Robert M. Townsend and Nicolas Zhang for analysis on how technological innovations can be leveraged for public policy objectives. A common ledger, smart contracts, and encryption offer significant gains to market efficiency, completeness, and access, as well as to transparency, transaction and compliance costs, and safety.
 See “The journey from privacy to transparency (and back again)”.
 See “Public and private roles in managing data (Part 3: Evolving roles)”.
 See Center for Strategic & International Studies (CSIS).
 Attributed to Mark Zuckerberg.