Welcome back to TechCrunchs China Roundup! This digest contains the most recent developments in China's tech landscape, and what these mean for people around the globe.
China's efforts to reduce the influence of its tech giants is the biggest news this week. Regulators are now focusing on the abusive use of algorithm-powered user recommendations. This week saw several major acquisitions. Xiaomi will acquire Deepmotion, an autonomous vehicle startup by Xiaomi, while ByteDance is believed to be purchasing Pico, a virtual reality hardware startup by Pico.
Algorithmic regulation
Beijing has released the draft for a new regulation that will regulate how Chinese tech companies use algorithms. These algorithms are the heart of nearly all profitable tech businesses, from news aggregation and short videos to ride-hailing, delivery of food, and e-commerce. Manish Singh, my colleague, wrote a summary of the policy. Here's a closer look at what the top cyberspace watchdog in China has proposed as a 30-point document.
Beijing is very concerned about how machine-recommended content could deviate from the values propagated by Communist Party. This can even be detrimental to national interests. It believes algorithms should be in line with the national interest.
Algorithmic recommendations must uphold the mainstream values of society and should not be used to endanger national security (Point 6).
Regulators demand more transparency from companies' algorithmic black boxes, and they are holding them responsible for the consequences of their programming code. Take, for example:
Security of algorithms should be the responsibility of service providers. They should create a system to review published information, implement security oversight, and publish relevant rules for algorithmic recommendation (Point 7). Point 8: Service providers shouldn't create algorithmic models that encourage users to become addicted, high-value consumers, or any other behavior that disturbs public order.
The government is also putting an end to discriminatory algorithms and giving consumers some autonomy.
Point 10: Service providers shouldn't use illegal or degrading information to suggest content or create biased user tags. Point 14: Service providers must inform users about the logic, purpose and mechanism of the algorithms being used. Point 15: Service providers should make it possible for users to disable algorithmic features
Regulators don't want internet giants to have an influence on public opinion or thinking. Although not stated in the document, authorities will continue to exercise censorship control.
Point 13: Service providers shouldn't use algorithms to censor or make excessive recommendations, manipulate search results or rankings that lead to preferential or unfair treatment, influence online opinions or avoid regulatory oversight.
Certain algorithms, like many other aspects of tech business, must be approved by the government. In the event of an investigation, tech firms will need to hand over their algorithms.
If their recommendation algorithms could affect public opinion or mobilize civilians, service providers must file with the government (Point 20). For investigation purposes, service providers must keep a log of their recommendation algorithms for six months.
The law, if passed, will change the business logic of Chinese tech companies that depend on algorithms to make their money. These rules will require programmers to study them and to be able to interpret the codes for regulators. Although the proposed law appears to be beyond the reach of the European Union's data rules, it remains to be seen how the Chinese one will get enforced.
Lei Jun puts his money on autonomous cars
Xiaomi's earnings call revealed that it would acquire DeepMotion (a Beijing-based autonomous driving startup) to help its autonomous driving efforts. According to Wang Xiang (presidence of Xiaomi), the deal will cost Xiaomi $77.3 million. A lot of this will be in stock. However, a lot will be delayed until certain milestones have been reached.
Lei Jun, founder of Xiaomi, hinted earlier that the firm would enter the crowded market. Lei Jun, the founder of Xiaomi, announced that 500 autonomous driving specialists are being recruited across China on Weibo (China's equivalent to Twitter) on July 28.
China's latest generation of electric vehicle manufacturers has made automation a selling point. Many companies combine advanced driver-assistance system (ADAS), with Level 4 autonomous driving. These exaggerations in marketing materials can mislead consumers, and raise questions about the technical capabilities of these emerging EV players.
Similar plans have been revealed by Xiaomi to produce electric cars via a separate car-making company. DeepMotion's ADAS capabilities are a great complement to Xiaomi's future cars. As Wang explained:
We believe there are many synergies between [DeepMotions ADAS] technology and our EV initiatives. It tells you two things. Number one, we will launch EV business. As I stated in our prepared remarks, our focus has been on the hiring of the right team to run the EV business, formulating the strategy, and formulating the product strategy. We aren't afraid to use it and incorporate other teams if that helps us accelerate our plan.
DeepMotion was founded by Microsoft veterans and specializes in high-precision mapping and perception technologies. This puts DeepMotion in the vision-driven autonomous driver camp. Many major Chinese EV manufacturers rely on lidar of consumer quality to automate their vehicles.
ByteDance now virtual
According to Chinese VR news site Vrtuoluo, ByteDance is believed to have bought Pico, a Beijing-based VR hardware manufacturer for 5 billion Yuan ($770 million). ByteDance was not immediately available for comment.
Due to the high-end processors required for advanced VR headsets, they are often very expensive. Experts say that the majority of VR hardware manufacturers have yet to reach the mass market. They are losing cash and relying on venture capital and corporate deals to survive.
Although ByteDance may be purchasing a losing business, Pico, one the largest VR manufacturers in China, offers a fast track for the TikTok parent, which allows them to get into VR manufacturing. ByteDance is the largest distributor of short videos in the world and a newcomer to videogames. If the Pico deal is approved, we will be able to see how virtual content production works.
