Newsletter on Chinese Antitrust 01.07-07.07.2023

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Newsletter on Chinese Antitrust 01.07-07.07.2023

Review № 21 of Chinese Antitrust News from the Experts of the BRICS Competition Centre 

- Fines of fintech giants: $984 million Ant Group and $330 million Tenpay
- Qihoo 360 founder: AI should be seen as a "helper" and "co-pilot"
- Shanghai Proposes Draft Guidelines for Assessing Antitrust Compliance of Digital Platforms
- 4 agencies will jointly remove administrative obstacles to fair competition
- China has created a mechanism for effective communication between authorities and business
- Zhejiang Province's 3 Steps to Promote the Development of Digital Platforms
- Top 10 Examples of Combating Unfair Competition
- New inspections of Chinese companies listed on the NYSE
- Creation of a comprehensive Internet regulation system
- It is proposed to create a global open innovation network for the digital economy
- China's first open source OS
- Draft Cyber Violence Rules
- Automakers pledge to protect fair competition
- Beijing will create a market for data as a factor of production


Fines of fintech giants: $984 million Ant Group and $330 million Tenpay

Financial regulators in China announced a fine of 7 billion Chinese yuan (≈$984 million) to the fintech company Ant Group (Alibaba family). As stated, the violations related to settlement services, bank insurance services, the establishment of funds, the fulfillment of anti-money laundering obligations, etc. Along with Ant Group, a number of banks and companies were also fined, including China Post Bank, Ping'an Bank, PICC. A separate fine of 2.4 billion Chinese yuan (≈$330 million) was received by Tenpay, Tencent's payment service.

The suspension of Ant Group's IPO in October 2020 is unofficially considered the start of a Chinese regulatory campaign against digital giants. From that moment on, the authorities focused on “streamlining” the development of platforms and their high-quality, regulated development. To date, most of the violations identified on financial platforms have already been eliminated.

The Ant Group said it "wholeheartedly accepts" the penalty and intends to improve compliance to advance scientific technology and serve the cause of the real economy.

The news of the fine was published on the website of the Central Bank of China in the format of an article titled "Financial Regulators Successfully Complete Elimination of Violations and Strengthen Level of 'Normalized' Regulation of Financial Services on Platforms." Thus, the focus is not so much on the decision on a specific fine, but on summing up the results of a long and comprehensive campaign to regulate the activities of fintech.

Sources: PBCBaijiahao

Qihoo 360 founder: AI should be seen as a "helper" and "co-pilot"

Zhou Hongyi, the founder of Qihoo 360 Internet security company, defined the role of large models as “assistant” and “co-pilot”: when introducing them into your operations, you need to maintain a certain distance, guarantee their security and accountability. He noted three principles of commercial large models: security (network, data, algorithms), reliability and controllability. At the same time, it is important to exercise caution and ensure the presence of a person “in the loop”, so that the will of a person plays a key role in decision-making.

Source: Sina News

Shanghai Proposes Draft Guidelines for Assessing Antitrust Compliance of Digital Platforms

The Shanghai Market Regulatory Authority is holding public consultations on the draft Guidelines for Evaluating Antitrust Compliance of Digital Platforms. It specifies the content and process requirements for digital companies' antitrust compliance reports. Scoring criteria are also provided, according to the sum of which the company is assigned to one of seven categories (AAA, AA, A, BBB, BB, B, C): AAA are “exemplary” companies, and C are companies with serious shortcomings. The criteria include the degree of development of the compliance management system, the ability to recognize and control risks, staffing with resources, etc.

In addition, it is planned to create an investment fund in Shanghai to support promising technology companies. The fund will be set up by an investment company affiliated with the local government, and the funds will go to a wide range of firms from start-ups to public companies.

Sources: SAMRSCMP

4 agencies will jointly remove administrative obstacles to fair competition

In order to form a "single national market", develop the legal basis for fair competition, combat local protectionism and administrative monopoly, SAMR, together with the State Committee for Development and Reform Affairs, the Ministry of Finance and the Ministry of Commerce, announced a campaign to eliminate regulations and procedures that impede development fair competition. The current charters, regulatory and policy documents developed before December 31, 2022 and related to the economic activities of business entities are subject to verification. The main focus will be on decisions and rules that hinder entry and exit from the market and the free circulation of goods and factors of production, affecting operating and production costs, etc. If the main content of the document contradicts the needs of a single market and fair competition, it must be canceled if the contradiction contains only part of the document - it is subject to careful revision.

Source: SAMR

China has created a mechanism for effective communication between authorities and business

The State Committee for Development and Reform announced the creation of a mechanism for interaction between the government and private entrepreneurs. As part of the mechanism, a meeting has already been held with the heads of five private enterprises: these are construction equipment manufacturers Sany Heavy Industry Co. Ltd., household appliances AUX Group, Bosideng down clothing, Nongfu Spring drinking water, and YTO express courier service provider. Businessmen outlined the difficulties they face in the course of their business activities and put forward specific proposals for further optimization of the legal and institutional environment to ensure the development of private companies.

The Committee, in turn, indicated its readiness to listen to the opinions of private entrepreneurs, study and put forward practice-oriented effective political guidelines, help enterprises in solving their real problems and thereby create a favorable environment for their development.

Source: People's Daily

Zhejiang Province's 3 Steps to Promote the Development of Digital Platforms

On July 5th, Zhejiang Province, where Alibaba and Tencent are headquartered, hosted the Digital Platform Promotion Conference, China's first provincial platform-economy event. More than 100 platforms attended the conference, including Alibaba, Netease, and others. The authorities announced three steps:

  • China's first policy manual dedicated directly to supporting big tech has been published. The guidance includes 25 different measures, including the introduction of the digital yuan and the promotion of platform listing on Chinese exchanges, the development of data and algorithm management rules, the promotion of fair competition, and so on;
  • A strategic cooperation agreement was signed between SAMR and the government of Zhejiang Province to jointly promote the development of digital platforms. The Market Authority intends to roll out large-scale support for Zhejiang's platform economy through system innovation, policy decisions, and capacity enhancement;
  • The provincial government has renewed its all-round strategic cooperation framework agreement with Alibaba. The previous similar agreement was signed three years ago.

Sources: BaijiahaoSAMRGov.cn

Top 10 Examples of Combating Unfair Competition

An event organized by SAMR to increase the capacity to combat unfair competition selected the best examples of effective law enforcement. From 240 applications submitted, the agency selected 10 of the best, most representative and illustrative cases involving seven different types of violations. This is the second time such an event has been held. Over the 5 years of SAMR's existence, 5,000 cases of unfair competition have been considered and 257 million fines (≈$35.5) and penalties have been collected.

2023 marks the 30th anniversary of China's Anti-Unfair Competition Law.

Source: SAMR

New inspections of Chinese companies listed on the NYSE

US auditors have begun a new round of audits of Chinese companies whose shares are traded on the New York Stock Exchange, Bloomberg sources told Bloomberg. More than a dozen companies will be affected this time, including Tencent Music Entertainment Group and NetEase Inc. These are clients of the Chinese offices of such audit companies as PricewaterhouseCoopers, Ernst & Young and Deloitte & Touche.

Despite mounting regulatory costs and geopolitical tensions, at least 16 Chinese companies entered US capital markets in 2023 and managed to raise a total of $460 million.

In the fall of 2022, the Public Company Accounting Oversight Board (PCAOB) conducted its first round of reviews to ensure compliance with the 2020 Foreign Companies Liability Act (HFCAA). Under this document, companies that want to be listed on US exchanges are required to provide full access to their financial statements, but until recently, China, citing national security concerns, refused to comply with this requirement.

Source: BNN Bloomberg

Creation of a comprehensive Internet regulation system

On June 30th, a meeting was held in Beijing on the results of the basic stage of the formation of a comprehensive Internet regulation system. The events are based on the “Opinions on accelerating the establishment of a comprehensive Internet regulation system”. The process involves the formation of six subsystems: the management and regulation of the Internet, the dissemination of "positive" energy, content control, public involvement in regulatory processes, the formation of a legal framework for regulation and the introduction of new technologies. During the meeting, the outstanding results of the work of cyberspace regulators of 12 administrative units and seven central and government bodies that are most actively implementing the new system were noted.

Source: Weixin

It is proposed to create a global open innovation network for the digital economy

At the Global Conference on the Digital Economy, it was proposed to create an open innovation network for the digital economy around the world. The conference was devoted to the main theme "Data drives development, intelligence determines the future." At the opening ceremony, representatives from Beijing and 18 partner cities (Abu Dhabi, London, San Francisco, Vienna, Vientiane, Zaragoza, etc.) published the Digital Economy Cooperation Initiative. It covers accelerating the digital transformation of cities, sustainable development and supporting global digital inclusive cooperation. The goal of the initiative is to create an open innovative network of the digital economy between the cities of the world, as well as within the framework of multilateral and bilateral structures.

Source: People's Daily

China's first open source OS

China has released the first open source desktop operating system, openKylin 1.0. This step demonstrates the country's ability to independently develop OS and meet its own demand in this area. OpenKylin 1.0 was created by a group of Chinese companies, including China Electronics Corp (the largest state-owned electronic information company), China Industrial Control Systems Cyber Emergency Response Team, Kylinsec Technology, and others. The new system will help ensure security in sectors such as government services, finance, communications , energy, transport, etc., and will provide information support to national IT chains. Currently, the Chinese OS market is dominated by foreign brands: Microsoft Windows, Google Android and Apple Mac OS.

Source: China Daily

Draft Cyber Violence Rules

The Cyberspace Administration of China is holding public consultations on the draft rules for countering cyberviolence. The rules deal with the liability of platforms (“Internet information service providers”) and list various obligations, including:

  • Develop account management and content verification mechanisms;
  • Include the results of countering cyber violence in annual reports on the regulation of information content on the Internet;
  • Develop inappropriate content prevention models;
  • Block, remove or restrict dangerous content;
  • Monitor comments and take action on dangerous posts;
  • Check live broadcasts and short videos and interrupt broadcasts if necessary; and etc.

Violation of the rules is subject to punishment in accordance with the laws of the PRC "On Cybersecurity" and "On the Protection of Personal Data". If these laws do not establish punishment, such measures as a warning, reprimand, requirement to eliminate the violation within the prescribed period, as well as the application of a fine from 10 thousand to 100 thousand Chinese yuan, are allowed; in especially severe cases, up to 200 thousand with the suspension of content updates.

Source: Weixin

Automakers pledge to protect fair competition

At the China Automotive Forum 2023, leading automakers including Tesla, FAW, Geely, Great Wall, BYD signed a voluntary commitment to protect fair competition in the automotive industry. The obligation includes the following provisions:

  • Comply with industry norms, regulate marketing campaigns, do not violate the price order;
  • Do not use false information for promotion purposes;
  • Give priority to quality;
  • Promote socialist values.

Source: Weixin

Beijing will create a market for data as a factor of production

As part of the new initiative, the Beijing government plans to release a series of pilot programs, policies and standards related to data as a factor of production. In particular, it is planned to create a multi-level data trading market, further increase the openness of production chains in the digital economy. The Beijing data market is expected to reach $27 billion by 2030.

Source: Cnstock


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