China targets big tech algorithms as crackdown persists

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(Bloomberg) – China has launched an official campaign to curb potential algorithm abuse by internet giants ByteDance Ltd. to Tencent Holdings Ltd., targeting how social media platforms deliver ads and content to hook users.

China’s Cyberspace Administration will conduct on-site inspections of companies and ask them to submit their various services for review, the internet watchdog said in a statement on Friday. Large-scale websites, high-influence platforms and products will be targeted, he said, without naming any.

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The campaign aims to implement and enforce sweeping rules unveiled in August governing the industry’s use of algorithms to surface content for users, which came into effect last month. It’s part of a broader effort that began in late 2020 to limit the growing influence of China’s biggest and wealthiest companies, whose platforms now control all spheres of public discourse and entertainment.

A barrage of regulations covering everything from gaming and online education to video censorship has since spooked the industry and prompted a shift in priorities towards grassroots growth over unbridled expansion. The cyber watchdog said in a later statement that it interviewed representatives of a dozen companies, including Tencent, Alibaba Group Holding Ltd., Meituan and JD.com Inc., to deal with the removals of jobs totaling 216,800 from July to mid-March – a major concern for Beijing. given the potentially destabilizing effect on the economy in general.

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The agency pointed out that companies actually hired 295,900 people over the same period, a net increase. Yet competition for jobs in the tech industry remains fierce, and employers are willing to shell out to attract or retain top talent. Tencent handed out more than $200 million each to two unidentified executives in 2021, even as it cut founder Pony Ma’s compensation for a year in which Beijing’s crackdown sent Tencent shares tumbling 19 %.

Read more: China plans to control tech algorithms the US can only dream of

Investors, who wiped out more than $1 trillion in value from Chinese tech stocks at the height of the crackdown, remain cautious this year. On Friday, Tencent was down about 1.8% while video streaming company Bilibili Inc. was among Hong Kong’s worst performers. Meituan also weighed in on the gauge, following news that Sequoia Capital had cut its stake in the food delivery giant.

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One of the biggest areas of uncertainty for investors concerns Beijing’s intentions for the country’s vast social media sector – an arena dominated by Tencent and ByteDance.

The government has always maintained an iron grip on the industry, weeding out dissent and other forms of unwanted content that could undermine its rule. But while various agencies have targeted reckless competition in e-commerce and ride-sharing during the crackdown, they have yet to impose specific sanctions against social media leaders.

Regulators proposed sweeping restrictions on content algorithms in August to ban practices that encourage online addiction, as well as any activity that endangers national security or disrupts social order.

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In its 30-point proposal, the government asked companies to disclose the basics of any algorithm recommendation service and provide practical options for opting out of algorithm recommendations. He also said that algorithms must adhere to “dominant values” and “actively spread positive energy.”

The tech industry’s algorithms have been at the heart of political controversies around the world. Facebook Inc. and Google have been accused of broadcasting news stories and videos that exacerbate political polarization and fuel violence. While the US government has had limited success in forcing changes, regulators in Beijing have substantial power.

In February, Beijing’s internet watchdog launched a website where algorithm providers that influence public opinion or mobilize the masses can submit their services for record keeping.

Companies such as ByteDance and Tencent have made changes to their products following Beijing’s efforts to protect privacy, such as offering users a way to turn off AI recommendations on apps such as the service. Douyin video and WeChat messaging platform.

QuickTake: Why China continues to target its tech giants

©2022 Bloomberg LP

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