Wednesday, October 27, 2021

China’s control over ‘algorithms’ another challenge for US investors

Vaccination

A “matrix”-like cue references a dystopian future where Chinese citizens are trapped in a fake reality managed by state-controlled computer algorithms.

It is not too far-fetched to even imagine it.

The country’s cyberspace watchdog, the Cyberspace Administration of China (CAC), recently announced that it will establish governance and rules to tighten its grip on the algorithms companies use to interact with their users.

Algorithms are widely deployed, which are used by companies to interact with users on a daily basis. Think of it as the engine that drives our Internet search results, restaurant recommendations based on our location and taste preferences, show and movie recommendations based on our viewing history, the route our GPS app takes us through in traffic and more. Based on pattern etc. We depend on different algorithms whether we realize it or not. And today—when every company needs to be a technology company—investing in algorithms, artificial intelligence and machine learning has become increasingly imperative.

For Chinese consumers, all they see is what videos they watch on Douyin (China’s version of TikTok), what recommendations they watch on Alibaba’s Taobao shopping platform, send decisions to logistics apps like Didi and Meituan, and trends on Weibo. translate subjects. For example, China’s Twitter-like application).

It is unclear how the Chinese Communist Party (CCP) intends to regulate algorithms based on such technologies. But some general guidelines have been set.

According to the CAC statement in Chinese, “a multi-pronged regulatory approach should be established for algorithm protection, collection and monitoring of illegal behavior, while emphasizing that technology innovation must be protected.”

The announcement, which said it would take about three years to roll out the guidance, comes a month after the CAC issued a set of draft guidelines on how algorithms should behave.

Some of this may stem from legitimate concerns around using algorithms to manipulate the results or rankings of some tech companies, and fabricate the popularity of certain topics over others, or to make them more addictive to users. The CAC is careful to state that such rules “would benefit consumers and online users.”

A special provision would have far reaching effect. It says that technology algorithms must promote (read: CCP-approved) mainstream values, and requires that algorithmic models demote (read: eliminate) material that disturbs economic or social systems.

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Similar to regulations imposed on China’s population, its technology algorithms must also be censored, loyal to the CCP, adhering to the all-important “Xi Jinping view on socialism with Chinese characteristics”.

If this seems like excessive redundancy, then no one is paying attention. In recent months, Chinese leader Xi Jinping has launched campaigns to reshape Chinese society and its future development, from early childhood education to video games to activist rights. And controlling how computer algorithms interact with human users necessarily needs to be part of that effort.

We know that Xi has ambitions to control or influence the global Internet, given its strategic importance in shaping social and political discourse. And it’s easy to see how this recent development fits within that framework. In the CCP’s quest to influence and police one’s views, computer code becomes a form of costless labor force multiplier.

From an economic perspective, especially for American investors who hold positions in Chinese technology companies subject to these state control mechanisms, the calculus becomes even more complicated. Companies such as Didi and Alibaba are listed on the US stock exchange, and millions of Americans hold their shares either directly or indirectly through mutual funds or ETFs. American Pensions—through venture capital and private equity—are also shareholders in firms such as ByteDance, the parent company of TikTok.

In addition to reading income reports and keeping track of these companies’ income statements and balance sheets, shareholders should also be aware of governance issues and increased CCP control over corporate management. Shareholders must acknowledge that the companies they “own” will be subject to adherence to Xi’s future agenda.

The question is, should US investors be complicit in this?

The views expressed in this article are those of the author and do not necessarily reflect the views of The Epoch Times.

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Fan Yu is an expert in finance and economics and has contributed to analysis on China’s economy since 2015.

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This News Originally From – The Epoch Times

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