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State-owned Enterprises Ordered to Migrate to State-owned Cloud Services

China’s national data security law went into effect on September 1, 2021. Just days before it became effective, the China State Council’s State-owned Assets Supervision and Administration Commission (SASAC) for Tianjin issued a directive mandating state-owned enterprises in Tianjin to accelerate data migration from cloud services of tech companies like Alibaba and Tencent to the state-owned infrastructure. Currently, Alibaba, Huawei, and Tencent dominate the cloud computing market in China.

In a directive dated August 12, 2021, Tianjin’s SASAC directed state-owned enterprises in Tianjin not to build new data centers, or purchase servers and other storage hardware. State-owned enterprises cannot renew or sign new contracts with cloud platforms owned by Huawei, Alibaba, Tencent, China Unicom, China Mobile, and China Telecom. Data stored in these platforms must be migrated to cloud platforms controlled by SASAC within two months of the expiration of existing contracts, with the final deadline being at the end of September 2021.

Section 3(3)(1) on page 7 of the SASAC directive reads, “The data of state-owned enterprises are state assets and must be put under state-owned assets supervision and administration…”

Since early 2021, local SASACs have started local state-owned cloud platform projects. The essence of “state-owned cloud” is to shift from a cloud platform hosted by a third party to a state-owned cloud built and operated by local state-owned enterprises. In March 2021, Tianjin state-owned cloud started operation, with three state-owned enterprises, including Tianjin Communications Group and Tianjin State-owned Capital Investment and Operation Co., Ltd. In March, the SASAC of Zhejiang Province also initiated a project that included a state-owned cloud platform. In April, SASAC of Sichuan Province officially kicked off its state-owned cloud platform.

Sources:

Lianhe Zaobao, September 4, 2021
http://www.haozaobao.com/shiju/20210904/99713.html

State-owned Assets Supervision and Administration Commission of Tianjin, August 12, 2021
http://www.d1net.com/uploadfile/2021/0827/20210827062000825.pdf

Yicai, September 7, 2021
https://www.yicai.com/news/101166263.html

China to Regulate Algorithms behind Internet Platforms

On August 27, 2021, the Cyber Administration of China, the country’s top Internet regulator, issued a draft version of the “Internet Information Service Algorithmic Recommendation Management Provision.”

“The use of algorithmic recommendation technology … refers to the use of generative or synthetic–type, personalized recommendation–type, ranking and selection–type, search filter–type, dispatching and decision-making–type, and other such algorithmic technologies to provide information content to users.”

The draft version stated, “Algorithmic recommendation service providers shall uphold mainstream value orientations, optimize algorithmic recommendation service mechanisms, vigorously disseminate positive energy, and advance the use of algorithms upwards and in the direction of good.”

“Algorithmic recommendation service providers may not use algorithmic recommendation services to engage in activities harming national security, upsetting the economic order and the social order, infringing on the lawful rights and interests of other persons, and other such acts prohibited by laws and administrative regulations. They may not use algorithmic recommendation services to disseminate information prohibited by laws and administrative regulations.”

“Algorithmic recommendation service providers shall strengthen information content management; they shall establish and complete feature databases to be used to identify unlawful and harmful information”

“Where unlawful information is discovered, transmission shall cease immediately, measures such as deletion shall be adopted to handle it, information spread shall be prevented, and relevant records preserved; and a report shall be made to the cybersecurity and informationization department. Where harmful information is discovered, it shall be dealt with according to online information content ecology management-related regulations.”

“Algorithmic recommendation service providers shall … vigorously present information content conforming to mainstream value orientations in key segments such as front pages and main screens, hot search terms, selected topics, topic lists, pop-up windows, and more.” “The national cybersecurity and informationization department is to establish a categorized and graded management system, to implement categorized and graded management of algorithmic recommendation service providers on the basis of the public opinion properties of algorithmic recommendation services or their social mobilization capability, content categories, scale of users, the degree of sensitivity of data handled in algorithmic recommendation, the degree of interference in users’ activities, etc.”

“The providers of algorithmic recommendation services with public opinion properties or social mobilization capabilities shall conduct a security assessment according to relevant State regulations.”

“Algorithmic recommendation service providers shall cooperate with relevant competent departments carrying out security assessment, supervision, and inspection work according to the law, and provide the necessary technical, data, other data, and support and assistance.”

The Provision also specifies the punishment such as a fine between 5,000 and 30,000 yuan for violating the regulations. “Where an act violating public order management is constituted, public order management punishment is to be imposed according to the law; where a crime is constituted, criminal liability is to be prosecuted according to the law.”

Source: Cyber Administration of China, August 27, 2021
http://www.cac.gov.cn/2021-08/27/c_1631652502874117.htm

STCN: U.S. Approved Huawei’s Purchase of Automotive Chips

China Security Times (SecuTimes or STCN) recently reported that U.S. officials have approved the blacklisted Chinese telecommunications company Huawei to purchase hundreds of millions of dollars’ worth of chips for its growing auto parts business. In the meantime, the Office of the United States Trade Representative issued a statement saying that Katherine Chi Tai, the U.S. Trade Representative, held a video conference with senior officials of the American Chamber of Commerce China Center Advisory Committee and the US-China Business Council. Tai pointed out that the U.S. is conducting a comprehensive assessment of U.S.-China trade policies and reiterated the importance of U.S.-China trade relations. The Biden administration has granted Huawei suppliers licenses to sell chips used in auto parts such as video screens and sensors. These approvals came as Huawei shifts its business to projects that are not susceptible to the U.S. trade ban. Sources close to the U.S. licensing offices also revealed that the U.S. government is preparing to issue licenses for chips in other vehicles that may have components with 5G functionalities. A Huawei spokesperson declined to comment on these licenses.

Source: STCN, August 25, 2021
https://bit.ly/3kzkdMB

China’s New Regulation: Security Assessment Required for Sending Important Auto Data Overseas

China’s car sharing company Didi Chunxing was subject to a state security audit after its Initial Public Offering (IPO) in the United States in late June. Recently, Beijing issued new regulations requiring that important car data be stored within the country and that a security assessment be implemented before any data leaves China.

According to China’s state media such as Xinhua News Agency, the “automobile data security management regulations (for trial implementation),” effective October 1, 2021, were jointly promulgated by the State Internet Information Office of China, the National Development and Reform Commission, the Ministry of Industry and Information Technology, the Ministry of Public Security, and the Ministry of Transportation.

The regulations state that, if there is a need to provide important data outside the country for business purposes, the auto data operator should implement a security assessment and should not let the data leave the country in violation of the security assessment. The operators are required to report such data activities in their annual report.

The regulations point out that the auto data carrier, when conducting important data processing activities, should follow the provisions of the risk assessment, and submit the security risk assessment report to local authorities. The national cyber authorities will spot-check the security assessment. Car data processors are supposed to cooperate.

Source: Central News Agency, August 20, 2021
https://www.cna.com.tw/news/acn/202108200133.aspx

BBC Chinese: Chinese Government Has Stake in ByteDance which Owns TikTok; Rubio Asked Biden to Ban TikTok

BBC Chinese Edition recently reported that, according to China’s official National Enterprise Credit Information Publicity System, a Chinese company with a government background has invested in ByteDance, owning one percent of the shares. The name of the investor is Wangtou China (Beijing) Technology Co., Ltd. The company was owned by three Chinese state agencies. The company’s registration documents show that it is jointly owned by the China Internet Investment Fund, a subsidiary of China National Radio, and Beijing Cultural Investment Development Group. The China Internet Investment Fund was established by the National Internet Information Office and the Ministry of Finance. That level of stake allows it one seat on the board of ByteDance. ByteDance owns TikTok, which has 700 million international users, including 100 million U.S. users. The U.S. Trump administration issued two bans on TikTok, citing national security concerns. In June of this year, the U.S. Biden administration revoked a series of Trump era executive orders against TikTok. With the new Chinese government investment in ByteDance, U.S. Senator Marco Rubio issued a statement calling on Biden to ban TikTok again.

Source: BBC Chinese, August 20, 2021
https://www.bbc.com/zhongwen/simp/chinese-news-58268021

Lianhe Zaobao: SoftBank Suspended Investments in China

Singapore’s primary Chinese language newspaper Lianhe Zaobao recently reported that Japanese investment giant SoftBank suspended new investments in China while observing the development of China’s rectification of its domestic technology industry. Masayoshi Son, Chairman and President of the SoftBank Group, said at a press conference, “We want to wait and see the changes before the situation becomes more clear.” SoftBank previously invested in Internet giants including Didi, ByteDance (the parent company of TikTok), and Alibaba. China’s recent wave of anti-monopoly regulations this year has brought huge changes to the stock prices of these companies. Since July, Alibaba’s stock price has fallen by 14 percent. Seven Chinese Ministries are jointly conducting cybersecurity reviews on Didi, which also reduced the value of SoftBank investments. According to SoftBank’s 2021 first quarter financial report, its net profit suffered a year-over-year decrease of 39 percent.

Source: Lianhe Zaobao, August 12, 2021
https://www.zaobao.com.sg/realtime/china/story20210812-1181086

Editors Resigned to Protest Scientific Journal Publishing Unethical Papers from China

Eight out of the 25 board members of the scientific journal, “Molecular Genetics & Genomic Medicine,” resigned recently to protest the journal’s publishing many articles that Chinese authors had written and which could lead to unethical or discriminating DNA profiling. The journal is published by Wiley, a world premier scientific publisher based in New Jersey.

Yves Moreau, a bio-information expert at the University of Leuven in Belgium found that, earlier this year, the journal published 18 papers with ethical issues. Some of the papers described genetic differences between ethnic groups, which the Chinese police could use for DNA profiling. Other papers relied on samples that Moreau suspected were taken without proper consent. Beijing wants to build a genetic library for all of the 700 million males in China and thus has collected DNA from all males, some with people’s consent and some by force.

In March, Moreau raised the issue to Suzanne Hart, the journal’s editor-in-chief. After not getting a meaningful answer, he raised the issue to the full board in June. Some board members also inquired of Suzanne Hart and eventually, eight out of the 25 board members resigned in protest.

Sources:
1. Radio Free Asia, August 7, 2021
https://www.rfa.org/mandarin/Xinwen/9-08072021152536.html
2. The Intercept, August 4, 2021
https://theintercept.com/2021/08/04/dna-profiling-forensic-genetics-journal-resignations-china/

Zoom to Pay $85 Million to Users after Lying about Privacy

Well-known Chinese news site Sina (NASDAQ: SINA) recently reported that popular video conferencing provider Zoom Video Communications will have to pay $85 million to its users as part of the settlement of a class-action lawsuit. The company was accused of lying about offering end-to-end encryption on its services; as well as providing user data to Facebook and Google without permission. This came nine months after Zoom agreed to security improvements and a “prohibition on privacy and security misrepresentations” in a settlement with the Federal Trade Commission. However, the FTC settlement didn’t include compensation for users. In addition to payments, Zoom agreed to over a dozen major changes to its practices. Zoom later issued a statement promising, “The privacy and security of our users are top priorities for Zoom.” Back in 2020, it was revealed that Zoom did not offer end-to-end encryption despite claiming to do so. Ever since the COVID-19 pandemic forced more people to work from home, Zoom’s user base has increased fivefold. In April 2021, the company had 497,000 customers with more than 10 employees, compared to only 81,900 in January 2020. Zoom said that, as more people get vaccinated and return to work, its growth may slow down.

Source: Sina, August 2, 2021
https://finance.sina.com.cn/tech/2021-08-02/doc-ikqciyzk8970558.shtml