A shift in China’s stance on tech regulation presents a host of new opportunities for UK companies in the tech and healthcare spaces, writes Elinor Greenhouse, Senior Adviser, Tech and Innovation, China-Britain Business Council
At the conclusion of the Third Plenum in Beijing this week, innovation and the balancing of development and security were set out as some of China’s core strategic priorities. Meanwhile, in Westminster, there has been much speculation over the omission of a dedicated AI bill at the state opening of parliament, despite indications that the draft bill is largely complete. It seems China and the UK are on the same page in this regard as, while the EU AI Act is set to come into force at the start of August, China’s Draft Artificial Intelligence Law has also been pushed further back.
Delivering the keynote speech at the China Internet Rule of Law conference last week, Wang Hongyu, Director of China’s Legislative Affairs Committee (LAC), made this clear in confirming that China’s plans for implementing AI regulation are still under development. Comparing the legislative approaches of China, the US and the EU, he contended that, although there are undoubted risks in the early stages of development of AI, an over-emphasis on security hinders development and can lead to a loss of competitive advantage, adding that “not developing is the greatest risk”.
This phrase may be familiar to followers of Chinese politics, as it forms an integral part of the logic underpinning tech policy and reform. After what has become known domestically as the “century of humiliation”, during which China was subject to foreign intervention, annexation and subjugation by a host of industrialised nations, technology and innovation are seen as a cornerstone of national security in modern China. Symbolic of strength, competence and prosperity, they are a key policy priority throughout China’s five-year plans. Innovation is as much a matter of national pride as it is security.
Against the backdrop of a difficult economy – with slower than expected growth in the second quarter of this year, cooling consumer demand and a faltering property market – Wang’s comments come as part of a broader trend toward relaxation of regulations around innovation in support of “high-quality development”. At the end of March, we saw the Cybersecurity Administration of China (CAC) announce relaxations to cross-border data transfer, creating exemptions where it is necessary for the performance of a contract, e.g. in cross-border e-commerce, international payments and tourism, and also in the transfer of HR data (for more details, see CBBC member Bird & Birds’s take on the changes here.)
At the same time, pilot programmes lifting foreign investment restrictions in telecommunications services kicked off in Beijing, Shanghai, Hainan and Shenzhen earlier this year. Moreover, reports indicate that China’s National Health Commission is set to revise stringent regulations on the use and management of human genetic resources in a bid to boost R&D in China’s biotech sector.
These measures mark a change in the tide for regulation in innovative industries after the crackdowns seen on tech giants in 2021 as China moves to place innovation front and centre in its plans to stimulate growth, striking a balance between safety and innovation. On the ground at CBBC, we are seeing significant opportunities for grant funding for companies in innovative industries looking to China for manufacturing and R&D. While there are still clear red lines for engagement in sensitive sectors, taken together, these changes present a host of new opportunities for companies in the tech and healthcare space to capitalise on, and we expect to see further easing of regulations in these industries.