No reversal on China’s tech crackdown in sight as Xi calls for more work on laws

BEIJING — Chinese President Xi Jinping told top leaders to speed up work on new laws for the technology sector during a speech in early December, according to the Chinese Communist Party’s bimonthly journal published Wednesday.

It’s a sign that regulation is not going away yet, even though the speech covers little new ground and economists expect the worst of Beijing’s crackdown is over.

China must “accelerate the pace of legislation in the fields of digital economy, internet finance, artificial intelligence, big data, cloud computing, etc.,” Xi said, according to a CNBC translation of the Chinese text.

He also called for more laws to ensure national security, and urged increased use of law for “international struggles” — including countering foreign sanctions.

But most of Xi’s speech, delivered on Dec. 6 to China’s Central Politburo of top leaders, focused on broad theoretical points such as not blindly following Western systems.

In the last year, a succession of new rules aimed at tackling alleged monopolistic practices by tech companies, data security and other issues have shocked global investors. The regulations address long-standing problems, but their abruptness has disrupted businesses and prompted mass layoffs.

“We anticipate there will be continuing developments in regulations particularly as related to tech,” said Mattie Bekink, China director at the Economist Corporate Network. She pointed out that Beijing has released plans for building a “Chinese socialist rule of law” by 2035.

“I do think the use of regulation as a tool to shape the economy and society that China wants is not over,” Bekink said.

She noted how law in the West tends to focus on the relationship between individuals and the state, while in China, the focus has been on commercial law — relationships between private sectors and the state.

Xi’s speech — given over two months ago but released publicly this week — is just one of the many official statements offered to the public in a country where information is tightly controlled.

Reading between the lines of similar official commentary, economists concluded last week that the worst of China’s regulatory crackdown is over as Beijing focuses more on growth. But they said that doesn’t mean a reversal or an end to new rules.

“Xi puts a lot of emphasis on the use of law,” said Chen Long, partner at Beijing-based consulting firm Plenum. “The Chinese government uses a lot of regulations to govern. It’s been his idea since 10 years ago that he wants to make a lot of regulations into law, so you have a legal basis for these policies.”

Chen expects fewer surprises on tech regulation this year compared to last year.

But he emphasized it’s important not to read too much into Xi’s speech. “This speech is not something new,” he said, “but a summary of what they have done.”

Even on the point of China’s use of law to counter foreign sanctions, Beijing had passed such legislation in June. If the Chinese government deems individuals or entities as involved in taking discriminatory action against Chinese citizens or entities, the law allows Beijing to freeze assets or deny entry, among other measures.

“China wants to use law to protect its interests in relation to other nations, including both adding domestic authority and having a voice in shaping international law norms to better serve its interests — which I don’t think is unusual for a nation to do,” said Jeremy Daum, senior fellow at Yale Law School’s Paul Tsai China Center.

China’s crackdown on tech comes as the industry has grown rapidly beyond the scope of existing regulations. It’s a balance governments worldwide are trying to strike as they consider how to regulate cryptocurrencies, data and other new technologies.

In some areas such as algorithms, Beijing is acting more quickly than other governments and could even set a global precedent, analysts have said.

Meanwhile on the political front, Chinese authorities have promoted their efforts to eliminate poverty and grow the middle class — a move away from prioritizing economic growth at all costs.

Much of the shift came just after the ruling Chinese Communist Party celebrated its 100th anniversary on July 1. This coming fall, the party is expected to give Xi an unprecedented third term as president.