China’s grand plan for a world-beating digital future

China’s grand plan for a world-beating digital future

Beijing will set up a new department to implement its “Digital China” plan to improve the country’s information technology infrastructure and regulation over the next decade.

Although the new body is known as the National Data Bureau, its mandate will not be limited to the management of data flow in 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”, the State Council said on Tuesday.

It will also take up some of the State Council’s responsibilities, such as the planning of China’s Big Data strategy and digital infrastructure.

Meanwhile, the Ministry of Science and Technology will also be restructured. Most of its functions will be taken by other departments, including the Ministry of Agriculture and Rural Affairs, the Ministry of Industry and Information Technology and the National Health Commission. 

The Ministry of Science and Technology will then have a stronger role in strategic planning, resource allocation and regulation. It will continue to manage China’s laboratories, international technology projects and the National Natural Science Foundation of China.

The changes will be discussed and approved by the National People’s Congress during its ongoing annual meeting, which will end on March 13.

All this came to light after Vice Premier Liu He said on March 2 that China should boost its semiconductor sector with a “whole nation” approach, which will allow the government to mobilize the resources of the nation’s research institutions and companies to achieve technological breakthroughs.

The Chinese Communist Party (CCP) Central Committee and State Council on February 27 published the Overall Layout Plan for the Development of a Digital China, calling for the integration of the nation’s digital and real economies. 

The plan aims to promote the use of digital technologies in economic, political, cultural, social and environmental areas. 

By 2025, China will form a nationwide system to achieve its “Digital China” goal, according to the plan. By 2035, China will be among the world’s top countries in terms of its digitalization level, if all goes to plan.

The plan said new infrastructure projects will include 5G and gigabit optical networks, computing and data centers in the country’s western region and facilities related to the mobile internet of things. It said it will also encourage the launch of more internet and Beidou satellite applications.

About 10,000 Chinese businesses including 6,000 factories have already installed dedicated 5G networks that support artificial intelligence (AI) applications to enhance productivity, according to industry sources involved in the rollout.

They include Huawei Technologies, which since 2018 has faced several rounds of sanctions from the United States – its 5G technology is banned by the US and by some countries in Europe and North America due to security concerns. In recent years, the company has diversified its business to smart ports and mines in China.

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More infrastructure needed

There are still many stubborn obstacles to China’s digital vision.

“There are a lot of unresolved systemic problems that hinder the data flow,” said Pan Helin, co-director of the Digital Economy and Financial Innovation Research Center at Zhejiang University. “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 establishment of the National Data Bureau will help resolve the problems. He said 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.
Yang Chang, chief analyst at Zhongtai Securities Co, said data is a key production factor after land, labor, capital and technology while its strategic value is increasing. Yang said the National Data Bureau will encourage state-owned and private companies to use their data to create commercial value.

Zhang Ying, a deputy director at the Shanghai Municipal Commission of Economy and Informatisation, said the new bureau will enable smooth data flows across China’s borders. Zhang said as there is no standardized platform for mainland-based and overseas companies to exchange their data, the transferred data is usually fragmented and unusable.

Besides, she pointed out that if foreign firms are allowed to export their mainland units’ data, they will be more interested in investing and developing their businesses in China.

On October 31, 2019, the CPC for the first time categorized “data” as a production factor, along with traditional ones including manpower, capital, land, knowledge, knowhow and management. Since then, the term “data factors,” which refers to data with economic value, has been frequently used in official statements. 

Between late 2020 and mid-2022, the government launched a series of new antitrust and privacy rules to regulate the technology sector. It also required Chinese technology companies to gain approval from Chinese regulators if they want to go public overseas.  

In June 2021, the NPC standing committee passed the Data Security Law, which says social media platforms should support user data exchange between different instant messaging apps and prohibit blocking cross-platform access and file transfers.

China aims to create more ‘smart cities’ under the Digtial China plan. Photo: AFP / Pablo Camacho / AltoPress

Well-organized and regulated data flow will also help the central and local governments generate new income, said some commentators.

In October 2021, former Chongqing mayor Huang Qifan said companies should pay a “data tax” if they traded any of their users’ data. He said the tax rate could be set at about 20-30% of the revenue companies obtain from data transactions.

He said the central government could set up a center to manage all local data activities and allow several key cities to set up data transaction bourses. He said all these data transactions should be traceable with the use of AI and blockchain technologies.

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Read: ‘Data tax’ could be next blow to Chinese tech giants

Follow Jeff Pao on Twitter at @jeffpao3