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Why you can’t afford to ignore Chinese concerns for data privacy

April 29, 2022 |   Sinorbis

China, once the "wild west" of big data, has enacted some of the most stringent personal information restrictions in the world. The new laws attempt to deal with growing data privacy concerns following a series of controversial events in recent years to restore trust in the digital economy. It is critical that foreign brands operating in China take steps to ensure they comply or face significant penalties. But the regulatory changes may also deliver the coup de grâce to the common Western misconception that Chinese consumers don’t care about personal information privacy. Taking note of this shift is also critical to brand messaging. 

The misconception does come with a grain of truth. Privacy, as a highly individualistic ideal, has traditionally been an alien concept to Chinese culture. Partly, this is because of China’s deep communitarian philosophical roots. Moreover, for most of China’s modern history, privacy hasn’t figured as a critical concern. The World Bank now defines China as an upper-middle income country, but it’s easy to forget how different most Chinese peoples’ living standards were mere decades ago. More than 800 million people have been lifted from poverty since China began opening its economy in 1978. GDP growth has averaged almost 10 per cent a year. The top priority for many people in China has been growing their wealth and improving their opportunities. 

In some cases, Chinese consumers have traded privacy for convenience and access to services. In 2019, Fortune magazine wrote: “Chinese culture generally doesn’t place the same value on privacy that Western culture does.” The quote comes from an article about Ping An, China’s second-largest insurance company and its second biggest non-state-owned company by revenue at the time. The insurer had rolled out innovative new products, including a “superfast onsite investigation” system that allowed customers to receive refunds within minutes of uploading pictures of the vehicle damage via an app. Its bet—that big data intelligence could reduce fraud and human error and create a more efficient service. Ping An claimed the service saved $US750 million a year. 

Ping An operates as a so-called ‘system aggregator’. It owns the customer relationship and offers a broad range of ecosystem-driven services like mobility and activity tracking. This innovative mega service with multiple digital touchpoints is familiar to China watchers. China’s tech giants – Baidu, Alibaba and Tencent, sometimes referred to by the anacronym BATs – dominate the digital space. They also own the major “mega platforms”, which aim to increase user numbers by offering a wide range of services that improve the platform’s stickiness. By centralising the platform in a range of activity, BAT create a closed business loop provides incremental capital to the service.  

In a highly-digitally adept and enabled culture, this has led to dozens and dozens more digital touchpoints to track and target Chinese consumers. In recent years, controversy over tech company use of this big data, as well as personal information leaks, have led the Chinese government to implement new data regulation to help protect the wellbeing of Chinese citizens. At the same time, the government has also increased its own surveillance. A lot of media has focussed on the seeming dichotomy of these two approaches. In the coverage, it’s easy to miss the profound shift in Chinese consumer concerns. 

In 2016, the tragic death of 18-year-old Xu Yuyu brought concerns about personal information leaks to the centre stage. The aspiring student died of a heart attack after she learned she had been cheated out of 9,900 yuan (which is around $USD1,500) intended for university tuition fees. The scammers had bought her personal details, including her name, telephone number, address and the name of the high school she graduated from, from a hacker. The incident triggered widespread outrage across China and led to a crackdown on telecommunication fraud and a tightening of bank security measures. The Ministry of Public Security issued a top-level arrest warrant after the incident, and the seven suspects were arrested within 10 days. 

Sensitivity to how personal information is handled by tech companies has also grown. Baidu founder Robin Li sparked social media furore following a 2018 interview in which he was quoted saying that if Chinese people ‘are able to exchange privacy for safety, convenience or efficiency, in many cases they are willing to do that, then we can make more use of that data’. State media reported on the outrage users expressed online, citing comments like, “Who told you we are willing to give up our data?” In the same year, a consumer rights protection group in Jiangsu province sued Baidu for collecting user data without consent, before later withdrawing the suit when Baidu removed the function to monitor users' contacts and activities. 

In 2019, 14 mobile apps were named and shamed by a Ministry of Industry and Information Technology-associated auditor after they “excessively collected sensitive personal data” without user consent. Then, four weeks later, the four top internet regulators issued a joint announcement stating that they would evaluate 1,000 mobile apps from online payment to food delivery services to assess how they collect personal data.* Those with unsatisfactory results will have their business licenses revoked. 

In 2021, China’s government crackdown on its big techs sent investors into a tailspin. The threat posed by regulatory actions ranging from antitrust abuses to data violations, during its nadir, wiped more than $US 2 trillion from overall market value. But the move is very much in line with China’s long game: to establish a digital economy that aligns with social harmony and Chinese consumers’ wellbeing. And the move also recognises a growing concern by its citizens about the way their personal information is utilised. Chinese data law sentiment amongst some of the most favourable in the world. McKinsey, meanwhile, noted GenZ – a critical cohort for international universities as well as global brands – are showing even greater concerns for data privacy. Marketing 101 demands brands listen to their consumer. Getting up to speed with China’s new data privacy laws isn’t only essential for regulatory compliance, but to responding to and acknowledging the concerns of your consumer.  

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