What Happened: The Cyberspace Administration of China (CAC) is making headlines again, this time by announcing that algorithms designed and used by technology firms should uphold core socialist values and that enterprises should set systems for algorithm safety and responsibility, according to Reuters.
“A multi-dimensional regulatory system will be established to monitor algorithm safety risks, archival administration, and illegal behavior,” said a statement posted on the CAC’s website.
The Global Times reports that the initiative was developed after CAC solicited the public’s suggestions on a new set of regulations for algorithm management in late August, requiring algorithm service providers to abandon algorithms that block information, manipulate ranking lists and search results, control searches and selection, falsify likes and comments, or intentionally redirect online traffic.
It is expected that CAC and the other eight government departments will create the initiative rules over the next three years.
The Jing Take: The GIG economy has flourished over the last decade because of algorithms that collect data from users. While initially, customers were delighted at the prospect of receiving targeted advertising and products, that is no longer the case. In fact, a global backlash against tech giants and their practice of collecting and using personal data has reached a fever pitch.
During the Trump administration, the White House released Executive Order 13859, which encourages innovation in AI. However, the memo mentions that the deployment of AI models should “improve safety, fairness, welfare, transparency, and other social goals.”
Additionally, the European Commission has proposed the Digital Services Act (DSA) and the Digital Markets Act (DMA). Both aim to create safe digital spaces that prioritize the protection of personal data. The EU has also confronted online platforms that employ manipulated algorithmic systems to amplify biases and the spread of misinformation.
Clearly, China’s desire to design algorithmic moderation systems is not unique. Nevertheless, we cannot underplay the impact of the regulations on retail. Today, tech giants like Alibaba, JD.com, and Tencent use AI-powered algorithms to recommend products and services based on past purchases or personal preferences, largely affecting luxury brands sold on these platforms. And by doing so, they deliver personalized customer experiences and reduce the overall cost of inventory management.
For obvious reasons, Beijing’s restrictions will also influence brand efforts in attracting online traffic and boosting digital sales. That is especially true for the biggest ads spenders, which remain focused on their digital marketing strategy instead of their product development strategy. A mediocre product with slumping sales needs increased exposure through targeted ads to create a need for it.
Beijing’s move will establish a more transparent and fair relationship between brands and customers. Foreign companies will no longer rely on online algorithms to sway customers to connect with products and services. As such, they will be forced to create value through products with outstanding qualities.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.