Bund Summit Calls for China to Establish Central Government Data Department

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Experts participating in the 2021 Bund Financial Summit (2021外滩金融峰会) have called for greater involvement by the Chinese state in the regulation of big data.

Speaking at the Bund Summit in Shanghai, Fudan University professor Huang Qifan (黄奇帆) called for the establishment of a central government data authority that will be responsible for the unified regulation of all domestic data activities.

“Data should enjoy transaction rights, and those transaction rights should belong to the state,” said Huang. “Any internal data activities should abide by the state’s data security rules.

“Data exchanges must be administered by the state. The government can make direct capital contributions, it can also invest via state-owned digital enterprises, or adopt diversified equity and mixed-ownership structures in terms of equity design. But they should be share-controlled and managed by the state.”

Huang said that state-ownership will help to guarantee data security and further increase trust, helping to break data islands and ensure fairness in transactions.

The Fudan professor forecasts a surge in data generation and Internet activity over the next several years as China steps up its digital transformation, and expects the development of another 20 million servers by 2025 as part of its new infrastructure drive.

Zhang Xiaohui (张晓慧), head of the Qinghua Wudaokou Financial Academy, highlighted the risk of big tech companies creating data monopolies.

“In the digital era the power of data is hard to overlook,” said Zhang “It’s easy for big data companies to obtain data and form monopolies.

“Some of these tech companies prevent data customer from flowing to competitive adversaries, impacting the ability of customers to choose freely between different platforms.”

Zhang said that big tech companies have also engaged in the provision of financial services without first obtaining licenses, while online consumer loans suffer from “warped financial values” and inadequate consumer protections.

For this reason Zhang says the principle of “the same regulation for the same activities” (相同业务相同监管) must be applied, while fintech companies must be licensed for operation in order to prevent regulatory arbitrage.

“During their early period of development China’s fintech companies enjoyed ‘regulatory profits,'” said Zhang. “For example some financial institutions previously engaged in depository and lending activities that are similar to those are banks, yet were not subject to regulatory requirements such as capital adequacy ratios and leverage ratios.

“This not only led to unfair competition between fintech companies and traditional financial institutions, to a significant extent it expanded pressure on traditional financial institutions, and in particular small and medium-sized financial institutions.

“At the same time it also triggered warped incentives, spurred excessive pursuit of regulatory arbitrage by fintech companies, and weakened their drive to use independent tech innovation to improve financial services for the real economy.”

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