China rolls out new regulation to rein in algorithms used on apps as Beijing continues to clip wings of Big Tech firms

The new regulation, which was drawn up by four government agencies, will take effect on March 1
Algorithms, which leverage artificial intelligence and big data generated by app users, have helped shape trends and online discussions in China

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Tracy Quin ShanghaiandJane Zhangin Hong Kong

Published: 10:00pm, 4 Jan 2022

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China is rolling out a new regulation to rein in algorithms used on apps to recommend what consumers would like to read, watch, play and buy online, marking Beijing’s latest effort to bring the country’s Big Tech sector firmly in line with state policies.

The regulation, which was published on Tuesday, will take effect on March 1. It was jointly drawn up by the Cyberspace Administration of China (CAC), the Ministry of Industry and Information Technology, the Ministry of Public Security and the State Administration for Market Regulation (SAMR).

App operators who extensively use algorithm recommendation in their platforms – including e-commerce giant Alibaba Group Holding, social media and video gaming market leader Tencent Holdings, TikTok owner ByteDance and on-demand delivery services provider Meituan – are directed by the new regulation to “promote positive energy” and allow consumers to decline personalised recommendations generated by their services. Alibaba owns the South China Morning Post.

Algorithms, which leverage artificial intelligence and big data generated by app users, have helped shape trends and online discussions in China, which has the world’s largest internet population as well as the biggest market for e-commerce, video gaming and smartphones.

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“Tech companies that use personalised recommendation mechanisms, such as those operating food delivery, customised content distribution and e-commerce platforms will experience the most impact from this new regulation,” said Ding Mengdan, a lawyer at Beijing Yingke (Hangzhou) law firm.

While algorithm technology has helped promote economic development and broader internet use across China, it has also caused problems, such as using big data analysis to price products to the disadvantage of consumers

The new regulation, according to a statement from the CAC on Tuesday, seeks to address “algorithmic discrimination”, which has led to differentiated pricing of products and services. Certain internet platforms have been charging consumers extra fees based on data about these users’ spending habits.

The CAC said the new regulation also aims to put a stop to so-called content intoxication. For example, the algorithm used by Chinese short video-sharing platform Douyin, the sister app of TikTok, has been known to keep users constantly engaged with a near-endless amount of content tailored to their tastes and interests. In addition, the algorithms used on many video games are designed to keep encouraging players to spend more time and money on them.

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The algorithm regulation is expected to help authorities clamp down on information recommendations, which have the potential of “shaping public opinion” or “social mobilisation”, according to the CAC.

Online news providers will be required to get a licence for their services. They are also specifically prohibited from publishing information that is not from the government’s list of approved news sources. In October last year, Beijing released its white list of 1,358 news outlets.

The new regulation directs algorithm recommendation service providers to “protect the interests of elderly people”. In particular, these platform operators must monitor, identify and provide information related to telecommunications network fraud for the benefit of the elderly.

With the SAMR’s involvement, the new regulation also provides clauses related to antitrust and unfair competition requirements.

“Tightening regulation [on algorithms] means the disappearance of grey areas and the increase of operating costs [for platform operators],” said Wang Qiongfei, lawyer at Hangzhou-based Kinding Law Firm. “Some small and medium-sized internet companies may face difficulties in terms of development, a factor that affects their survival [in the industry].”