China’s New Privacy Regulation Reforms Tech Giants Social Retail Scene
China’s five-day-long May Day ‘Golden Week’ has seen revenge spending at full effect, with domestic travels predicted to see 265 million trips made during the period, surpassing 2019 levels. Further to that, several municipalities in China such as Shanghai launched the ‘Double Five Shopping Festival’ with over 1,900 events and branded partnerships lined up for two months across shopping, tourism and entertainment venues. Beijing’s own ‘2021 Consumer Season’ also saw the government distribute billions of yuan in various coupons to stimulate consumer spending offline and online. Several major e-commerce platforms such as Tencent, JD.com, Pinduoduo and others are also supporting the program with their own digital coupons.
Throughout the pandemic, permanent habits were shaped with no less than 70% of Chinese citizens say they plan to shop more online in the future than they did before. The increasing reliance on technology has also raised alarms to China regulators, as they begin a rigorous sweep over the country’s largest technology companies over monopolistic actions, but also in data collection and fictitious advertising.
Beginning May 1, China’s top regulators – the Cyberspace Administration, the Ministry of Industry and Information Technology, the Ministry of Public Security and the State Administration for Market Regulation – has made it illicit for apps to collect excessive personal data such as location or biometrics, commonly used for targeted advertising.
While the country has been subjected to ‘Big Brother’-style monitoring for decades, the younger Chinese generation is more aware and sensitive of data abuse. Keith Yuen, Greater China Cybersecurity Leader of EY shares, “Chinese consumers are no longer indifferent to the illegal use of personal information (PI), and whether consumers’ PI can be protected legally and effectively has become an important element of how trustworthiness of an enterprise.”.
Now having a series of laws and regulations issued by the Chinese government to protect consumers on their rights will put enterprises on the edge with how much data they can collect, and for sifting out any illegal practices such as selling data to third parties. Recently, several international brands – Kohler, Max Mara, BMW and Infiniti – were exposed for having used CCTVs for facial recognition to track consumer behavior, resulting in the brands being placed under public scrutiny, issuing an apology note indicating actions to revise and reform.
In protecting consumer rights, retailers are strained with limited data capturing – an activity that is vital for brands to leverage to effectively target their customers. The new set of laws establishes a standard and obligations for businesses to comply in managing personal information and cybersecurity. “The implementation of the law is expected to purify the market competition environment, help law-abiding enterprises to establish consumer trust and competitive advantages to achieve sustainable business growth in China.”, explains Yuen.
Live-streaming, another phenomenon bred out of the pandemic with a valued success have also been monitored by China’s market watchdog with a set of rules to govern misleading practices and data privacy. A pending set of new rules on live-streaming will be in effect on May 25, to clamp down on fake products, falsifying new numbers, promotion of pyramid schemes and any gambling content.
Platforms are required to hire professional moderators to vet through content and users and take necessary steps to secure users’ personal information. Sharry Wu, Greater China Consulting Business Transformation Leader of EY comments, “Online activities would require more control and we have seen enterprises are already fading e-commerce elements from social marketing strategies.”. Yet, Wu believes consumers and hosts will eventually abide and conform to the new regulations under a safe and transparent, commercial environment whereby consumer confidence will gradually increase especially for health-focused sectors.
The short-term impact from the new governances will strain internet giants – Alibaba
, Kuaishou, Bytedance, amongst many others – as online activities become more controlled, hindering any future social commerce activations. As such, sales volume and strategies may be shifted towards offline channels to mitigate the internet changes under safeguarding of consumer’s data and privacy.