Shenzhen moves to create data business framework with draft privacy law

By Elles Houweling

The Shenzhen government has released a draft law prohibiting businesses from conducting extensive personal data collection. This is yet another ambitious step to rein in the power of Big Tech companies and, if passed, would become the first local data protection law in China.

The draft proposes a hefty fine of up to 50mn yuan ($7.7m)  for companies that engage in algorithmic price discrimination, where a platform offers different prices to different users based on how much it thinks they are willing to pay, which in turn is based on what the platform knows about individuals. This has become a common practice among China’s travel booking platforms.

The Shenzhen Special Economic Zone has been discussing the issue for a year as China aims to implement stricter regulations concerning data collection and ownership. The draft proposal was published by the Shenzhen legislature this week for public feedback until June 15.

The proposal points out that “big data is an important strategic resource for economic and social development.” Shenzhen, especially, is China’s technology hub and hosts over 300 big data companies.

“However, due to the lack of relevant legal systems at this stage, the development of Shenzhen’s digital economy is also facing huge challenges, such as personal data protection mechanisms and frequent disputes over unfair competition of data usage among enterprises,” it added.

The proposal stipulates that “natural persons have personal rights and interests in their personal data.” Based on this, the regulation proposes five basic principles: legality and fairness, minimum necessity, openness and transparency, accuracy and completeness, and assurance.

The regulation also clarifies that a user has the right to say no to data collection and know, copy, correct, and delete his or her personal information online.

The law particularly points out that apps are banned from profiling users under the age of 18 and serving them with personalised recommendations, a rule that could challenge the business model of apps that use this type of algorithmic selection, such as ByteDance (TikTok’s parent company).

Furthermore, the proposal also establishes the principle of fair data competition. Companies are prohibited from committing acts that infringe on the legitimate rights and interests of other market entities or consumers.

This falls in line with Beijing’s recent wave of antitrust fines imposed on big tech companies. In March, several big names, including Tencent, Baidu, ByteDance and Didi Chuxing, were slapped with hefty fines for monopolistic behaviour.

The enhanced consumer protection regulations in Shenzhen could set the tone for other local governments in China to implement similar measures.

In recent times, the national government has implemented stricter rules to curb the power of Chinese tech giants.

Last month, China’s internet watchdog, the Cyberspace Administration of China (CAC), once again expanded its watchlist of apps that carry out illegal collection of personal data. Short-video apps TikTok and Kuashou are now on that list, as well as Microsoft-owned Bing and LinkedIn.

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