China plans control of tech that US can only dream of

It wants to forbid practices that "encourage addiction", ban US IPOs and warns against "996" excessive-work culture

Published Sat, Aug 28, 2021 · 05:50 AM

Beijing

CHINESE regulators are seeking to implement far-reaching rules about the algorithms technology companies use to recommend videos and other content, claiming authority over Internet services that governments like the United States have struggled to regulate.

And in what will be another hit to China's tech sector, the government is also said to be framing rules to ban Internet companies whose data poses potential security risks from listing outside the country, including in the US.

The Cyberspace Administration of China (CAC) unveiled a 30-point draft proposal for "algorithm recommendation management regulations" that would directly affect companies including ByteDance, Tencent Holdings and Kuaishou Technology. The rules would forbid practices that "encourage addiction or high consumption", as well as any activities that endanger national security or disrupt social and economic order.

Algorithms have been at the heart of political controversies around the world. Facebook and Google have been accused of serving up news stories and videos that have exacerbated political polarisation and fuelled violence. In US Congressional hearings in March, the tech titans were accused of using their platforms to hook kids on services like YouTube and Instagram.

While the US government has had limited success in forcing changes, Beijing's regulators have substantial power. The Chinese government has implemented a series of crackdowns this year against monopolistic practices and unfair competition in the technology industry. The CAC is seeking public comment on the draft for 30 days and did not specify when it planned implementation.

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The proposed rules could also impact companies like Alibaba Group Holding, which uses its technology to recommend products to shoppers, as well as foreign companies like Apple which steers users to its App Store.

Here are some of the key proposals:

  • Companies must disclose the basic principles of any algorithm recommendation service, explaining the purpose and mechanisms for recommendations in a "conspicuous" manner.

  • They must provide users convenient options for turning off algorithm recommendations and "immediately" implement requests to opt out.

  • Algorithms should not be used for price discrimination based on users' preferences and habits.

  • Providers must regularly assess and test their algorithms and data to avoid models that will induce users' obsessive behaviours, excessive spending or other behaviours that violate public order and morality.

  • They must adhere to "mainstream values" and "actively spread positive energy, and promote the application of algorithms for the better".

  • Algorithms cannot be used to set up fake accounts or falsely influence rankings and search results to benefit the provider, influence online discourse or avoid regulatory oversight.

  • Algorithms cannot endanger national security, disrupt economic and social order or infringe on the legitimate rights and interests of others.

  • Algorithm providers who can influence public opinion or mobilise the masses need to submit their services for the CAC's approval. Those without approval could be fined by up to 30,000 yuan (S$6,254) and ordered to terminate service.

Yesterday, China also issued its most comprehensive warning yet against the excessive-work culture that pervades the country's largest corporations, using real and richly detailed court disputes to address a growing backlash against the punishing demands of the private sector.

The Supreme People's Court and Ministry of Human Resources and Social Security published a lengthy essay on Friday about labour violations and unreasonable overtime, labelled "996" because of the common practice of working 9am to 9pm, six days a week. It outlined 10 cases - including but not limited to the tech industry - in which employees were forced to work extra hours, or put in harm's way.

In one case, an unidentified tech firm asked employees to sign agreements to give up overtime pay, which the court ruled unlawful. In another, a media staffer passed out in the office restroom at 5.30am before dying of heart failure. The court ruled the death work-related and asked the company to pay the victim's family about 400,000 yuan.

"We are seeing a strong trend towards encouraging people to use the court system to go after tech companies. We think civil litigation will increase," said Kendra Schaefer, head of digital research at consultancy Trivium China. But the question remains, she adds, as to "whether or not this signals regulators are turning their attention to this social problem".

China's increasingly profitable tech giants are grappling with public outrage over their grueling schedules, a backlash fuelled by a growing chorus of complaints on social media and even deaths. Tech billionaires from Alibaba founder Jack Ma to JD.com chief Richard Liu have long endorsed the practice as necessary for survival in an intensely competitive industry - and the key to accumulating personal wealth.

China's tech workers face immense pressure to log long hours to meet exacting deadlines, while often lacking clear legal recourse - in contrast with Silicon Valley, where the likes of Google dangle incentives like lavish cafeterias to motivate workers.

"To be able to work 996 is a huge bliss," Alibaba founder Jack Ma once said. "If you want to join Alibaba, you need to be prepared to work 12 hours a day. Otherwise, why even bother joining?"

But the tide is turning. Chinese President Xi Jinping's administration has launched a campaign to rein in the growing influence of the country's largest corporations, while calling on the private sector to share the wealth. The online criticism adds to the challenges for tech companies already weathering heightened scrutiny over their treatment of blue-collar workers and endemic issues such as forced drinking during official functions.

Mr Xi's government, meanwhile, is trying to boost domestic consumption and the country's birth rate - a relentless work culture could stand in the way of his overarching goals.

The "996" regime is especially prevalent in the sprawling tech sector, whose foot soldiers started to protest after the promise of giant payoffs through stock options faded alongside a market wipeout. It dates back years: In 2019, a group of Chinese programmers took to GitHub to banish startups accused of mistreating employees from using their open-source code.

The controversy culminated earlier this year with the deaths of two workers at hard-charging e-commerce app Pinduoduo. One woman collapsed while walking home with colleagues at 1.30am and could not be resuscitated, while another employee committed suicide.

Companies including ByteDance and Kuaishou Technology have in recent months taken steps to dial down working hours. The two short-video giants, for their part, have cancelled an alternating system where employees take just one day off per week every two weeks.

"It's a good sign that the supreme court is finally paying attention. This is about politics as much as it's about rule of law given the recent crackdowns on companies like Alibaba and Meituan," said Suji Yan, a startup founder who helped initiate the GitHub campaign.

Mr Yan said he tried to help tech workers file labour lawsuits or complaints against their employers throughout 2019, but got a tepid response from courts and regulators.

While Chinese labour laws require extra pay for overtime outside an eight-hour workday, employers have found workarounds and the enforcement of such rules has long been in question. In one case published by the supreme court Friday, an unnamed Internet firm told employees it only counts overtime starting 9pm - no earlier. In another, an unidentified pharmaceutical company said all paid overtime needed a manager sign-off. China's human resources ministry and the courts now aim to develop guidelines to resolve future labour disputes.

"The overtime issues at some industries and companies have come to the public's attention," the court said in its notice. "Legally, workers have the right to corresponding compensation and rest times or holidays. Obeying the national regime for working hours is the obligation of employers. Overtime can easily lead to labour disputes, impact the worker-employer relationship and social stability." BLOOMBERG

READ MORE: Winners and losers in China's sweeping private-sector crackdown

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