China’s Latest Internet Regulation Could Cripple Businesses

What Happened: On January 5, China announced a sweeping update to its internet protocol. The update, to be implemented on March 1, 2022, will require algorithm service providers to offer internet users increased control over how companies target them, or the option to turn off recommendation services — thereby limiting companies dependency on the moderation of content. The State Internet Information Office, the Ministry of Industry & Information Technology, the Ministry of Public Security, and the State Administration for Market Regulation all jointly issued the Internet Information Service Algorithm Recommendation Management Regulations reform. 

The Jing Take: This new regulation aims to give netizens power over what online preferences they see online. This will affect companies that have pegged their business model, and gained popularity, through the operation of and overreliance on predicting preferences. Up until now, companies and merchants have been able to use seemingly all-knowing algorithms to target specific demographics or individuals in order to sell products or influence opinion. Algorithms could anticipate your spending power, ensuring that merchants could adjust their selection accordingly. Businesses such as Douyin (with 600 million monthly active users) and even Taobao (with over 800 million monthly active users) rely heavily on services predicting consumer preferences in order to operate. 

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This form of big business surveillance has overshadowed digital footprints for far too long now, but all local online merchants, e-commerce companies, short video apps, and social media platforms will be impacted by the news. Plus, under the new rules, algorithms will no longer be allowed to influence online public opinion, evade supervision and management, or contribute to a monopoly and unfair competition. Certainly not good news for businesses whose revenue may be harmed in the short-term. But if companies now must renegotiate their relationship with their customer to something more creative, more personal, more authentic — is that really such a bad thing? 

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.

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