1. Tencent faces the music
Tencent’s next on antitrust regulators’ hit list.
On Thursday, Reuters reported two insider sources as saying that China’s anti-monopoly watchdog (SAMR) was planning to slap the tech giant with a hefty fine:
- “Tencent should expect a penalty of at least 10 billion yuan ($1.54 billion)…both people said.”
According to the sources, Tencent is on the hook for:
- “[N]ot properly reporting past acquisitions and investments for antitrust reviews…and for anticompetitive practices in some of its businesses.”
SAMR is reportedly going after Tencent’s music business:
- “[SAMR] informed Tencent that it should expect a fine, give up exclusive music rights, and may even be forced to sell the acquired Kuwo and Kugou music apps.”
Some context: In case you’ve been living under a rock, regulators have launched a massive crackdown on anticompetitive practices by China’s tech giants.
- Earlier this month, Alibaba got whacked with a record-shattering fine of RMB 18.2 billion (see April 12 Tip Sheet).
- On Monday, SAMR announced that food delivery giant Meituan is facing an antitrust probe (see April 27 Tip Sheet).
Get smart: Regulators want to make an example of the biggest names in Chinese tech.
Get smarter: While fines and forced selloffs are painful, they won’t do much to dent the tech giants’ core businesses.
2. Heaven is high, but the emperor is not far away
There was big news in China on Thursday morning.
China took a major step towards building its own space station (Space.com):
- “The core element of the Chinese Space Station launched to Earth orbit…atop a heavy-lift Long March 5B rocket from the Wenchang Spacecraft Launch Site on the island of Hainan.”
Coverage of the launch was all over official media.
This is just the first of a three-step process:
- “The 54-foot-long (16.6 meters) module, known as Tianhe…will be joined in low Earth orbit later by two slightly smaller elements, forming a T-shaped space station that China aims to complete by the end of 2022.”
Xi Jinping was stoked about the launch (CPC People):
- “The construction of a space station and a national space laboratory is an…important leading project in building [China into] a science and technology superpower and a space superpower.”
Get smart: China does a good job of promoting its scientific achievements – and generally making science “cool.” That’s important, because it means that more top talents go into science than in the West – where top students tend to be drawn into financial services and internet companies.
3. Second draft of Personal Information Protection Law released
On Thursday, the Standing Committee of the National People’s Congress released the second draft of China’s Personal Information Protection Law (PIPL).
Some context: The PIPL is one of three key laws that will form the foundation of China’s data security and privacy regime. The first draft was released in October 2020.
Get out of my brain: Companies will be required to provide users an option to opt out of algorithmically-personalized advertisements based on users’ usage habits.
There’s more: Other notable changes to the draft include:
- Stronger language prohibiting companies from providing personal information to foreign law enforcement agencies without approval
- Requirements for major tech platforms to establish independent oversight institutions to review user data processing (see April 28 Tip Sheet)
- Further clarity on the roles that various state agencies will play
Fun fact: The draft also covers what to do with the personal information of deceased persons.
- Spoiler alert: Family members decide.
What to watch: We expect a third round of review, then finalization of the law later this year.
4. The (data) safety dance
At yesterday’s NPCSC meeting, the PIPL wasn’t the only major data legislation getting a look-over (see previous entry).
The Data Security Law (DSL) also got a second review.
- The new draft of the DSL includes more specificity in terms of controls on domestic data leaving the country.
Most critically: The draft expands the scope of data subject to export controls beyond data handled by Critical Information Infrastructure Operators (as stipulated in the 2017 Cybersecurity Law).
- Other “important data” exiting China will also need to be reviewed.
The problem: “Important data” is still a poorly-defined concept.
Policymakers are aware of this issue – and plan to sort it out:
- The DSL calls for the release of a catalog to define what exactly constitutes “important data.”
The draft also specifies monetary penalties for those that provide domestic data to foreign law enforcement without authorization:
- A fine of RMB 100,000 to 1,000,000 for offending data controllers
- A fine of RMB 20,000 to 200,000 for persons directly responsible
The draft is open for comments until May 28.
What to watch: The release of an important data catalog should finally provide some specifics for foreign firms to latch on to.
5. It’s growing, we promise
On Thursday, the National Bureau of Statistics published a statement on its website countering reports that China’s population fell in 2020:
- “China’s population continued to grow in 2020.”
- “The detailed numbers will be released in the seventh census report.”
But the census data still isn’t out.
ICYMI: Official census results are over a month late, and rumors are flying that officials are set to report a decline in population (see April 28 Tip Sheet).
Even the demographers cited by Global Times painted a bleak picture.
- One demographer says it’s likely China’s population is less than 1.4 billion due to statistical errors in the annual reporting process, noting the census is more reliable.
- Another estimated that China’s population might peak as early as 2022.
Yikes: For the past decade, China’s population projections have put the peak around 2030.
Get smart: Whatever the census results show, it’s pretty clear they came as a shock to the top leadership, who are now scrambling to craft a policy response.
The big picture: Falling birth rates and the rapidly aging population will present major headwinds to growth over the next few decades.
6. Sun Chunlan checks on vaccine supply
On Thursday, Vice Premier Sun Chunlan checked out Beijing’s production of COVID-19 vaccines.
While praising current efforts, Sun also called for (Gov.cn):
- “Sparing no efforts to tap [unused vaccine] production potential”
- “Accelerating the production output and supply”
- “Reinforcing the quality and safety guarantees [of vaccines]”
Some context: As the vice premier in charge of healthcare, Sun spearheaded the central government’s efforts to fight COVID-19 in Wuhan when the pandemic first erupted in early 2020.
And here’s the thing: When Sun speaks, people listen.
- Vaccinations really ramped up after Sun urged local officials to get serious about their mass vaccination efforts last month (see March 23 Tip Sheet).
With vaccinations picking up, Sun’s concern has shifted to ensuring there is enough vaccine to go around.
On Thursday, she urged cadres to:
- Guide companies to plan production scientifically
- Make sure that there are no problems getting vaccines to where they need to go
Our question: Could the leadership be foreseeing a vaccine shortage?