China’s next regulatory target — algorithms, the secret of many tech giants’ success

A computer code is shown on a screen above a Chinese flag.

The secret behind the success of many of the country's giants has been targeted by China, which has finalized regulation that governs the way technology companies can use recommendation algorithms.

The rules, which were first floated last year, will come into force on March 1.

How many technology companies operate is dependent on how they use the technology.

The investors will be watching to see if the rules will affect the business models of companies, and how regulators will enforce the law.

China has a regulation for its algorithm.

Chinese laws prohibit companies from using recommendations that endanger national security.
The recommendation services that provide news information need to have a license. This provision was added to last year's draft rules.
The basic principles, purpose and main operation mechanism of the recommendation service need to be explained to users.
Users have to be able to opt out of recommendation services.
Users need to be able to select or remove tags that are used to power recommendation.
The elderly must be protected against fraud and scam by companies that facilitate safe use of recommendation services. This was a new addition to the previous draft.

It would be a problem for the government to dig around in the Algorithms, a company's most valuable asset.

The changes reflect some of the biggest concerns across Chinese society today, such as content control online, the aging population crisis, transparency of big tech companies, anti-competitive behavior and more.

Companies can be fined up to 100,000 yuan for violating the rules.

Regulators and tech companies could have a fight over the regulation. In order to find violations, regulators may have to inspect the code behind the Algorithms.

The government would be a problem if they were to dig around in the company's most valuable asset.

How much of the code does the CAC have access to? Can the Cyberspace Administration of China really make sure that that kind of stuff isn't happening if they have access to the code?

Regulators will be trying to oversee tech companies' algorithms.

The enforcement agencies and the companies will bear the main responsibilities in complying with these rules, according to the head of digital trade at the World Economic Forum.

These rules are not an absolute death sentence for companies.

The WEF's Fan said that the new rules will likely adapt over the long term, given how crucial they are to the way tech companies operate.

Fan said that the rules may have an impact on the companies in the short term, especially as the Chinese tech companies rush to interpret, implement and comply with the rules.

These rules are extensive and far-reaching, but they are not a death sentence for companies. It is possible for companies to develop work-around solutions to comply with the rules while meeting their business objectives.