China Shakes Up Technology, Data Regimes to Counter US Curbs

(Bloomberg) -- China granted a key ministry new powers and created a bureau to oversee increasingly valuable data, shaking up oversight of its vast technology arena as Xi Jinping’s administration battles the US in areas from AI to semiconductors.

The moves — part of a broader overhaul of official bodies to further consolidate Xi’s hold over the world’s second-largest economy — should help Beijing better coordinate efforts to catch up with its geopolitical rival in cutting-edge technology.

In a significant move, Beijing will establish a national bureau to police and protect data resources, according to a State Council reform plan submitted to the National People’s Congress. It also plans to expand the Ministry of Science and Technology’s role in orchestrating nationwide initiatives and formulating strategic policies, suggesting it can better direct critical efforts such as reducing a reliance on American technology.

From Xi on down, Chinese officials have increasingly voiced the need to harness the entire country’s resources to accelerate the development of critical technologies — a single-minded focus on fending off US sanctions and achieving self-sufficiency labeled the “whole nation system.” The idea is to create so-called chokepoint technologies, such as chipmaking machines and jet engines, to both ensure supply chain continuity and wield as bargaining chips against the West.

“Science and technology was the theme of the two sessions this year” and the US was the driving force behind that, said Tom Nunlist, a data policy analyst at Trivium China. The establishment of a data bureau that sits under the country’s top economic planner makes clear also a growing focus on data governance. “It definitely shows the government’s commitment to developing data as a strategic resource, and the belief that it needs its own department.” 

The new agency could help Beijing tighten its grip over the valuable information gathered by swaths of the economy, including its internet industry. The government has sought to limit the power of its growing private sector by gaining control over the vast quantities of data generated across the country. Globally, governments are increasingly trying to gain better visibility into and control over the flow of information, particularly as new data-reliant technologies such as artificial intelligence emerge.

The revamp may reflect frustration about the unwieldiness of the current internet regulator — the Cyberspace Administration of China — which has also focused in part on propaganda. But it may introduce an additional layer of bureaucracy, warned Lester Ross, partner-in-charge at the law firm WilmerHale in Beijing.

“National security concerns have brought the issue of data protection to the fore, on both sides of the divide,” said Tiffany Tam and Robert Lea, analysts with Bloomberg Intelligence. “While there are genuine concerns, the issue is becoming increasingly politicized.”

Read more: China Dumps Internet Moguls for Chip Mavens in Senior Ranks

Beijing also elevated the rank of its patent regulator — which will now report directly to the State Council — with the goal of improving China’s ability to create and protect intellectual property. A semiconductor expert who now serves as an NPC delegate suggested recently that the country must amass a defensive portfolio of chip patents to counter US tech curbs.

Xi has called for faster scientific breakthroughs to help China secure self-sufficiency in semiconductors and other advanced technology as Washington mounts pressure through trade sanctions and restrictions. He also ordered the ruling Communist Party to exercise more control over the country’s science and technology agenda, paving the way for the creation of more powerful overseers to steer a tech war against the US. 

The US has blacklisted arguably all of China’s most advanced companies and research institutes in diverse fields from chips and supercomputing to the cloud and data mining. National champions including Huawei Technologies Co., Semiconductor Manufacturing International Corp. and most recently Inspur Group are banned from accessing American technologies.

“In the face of international tech competition and a severe situation of external containment pressures, we must further organize our technological leadership and management system to better coordinate our strength to overcome challenges on strategic core technologies,” the government document read. That will help China “accelerate the achievement of high-level technological self-reliance.”

(Updates with analysts’ comments from the fifth paragraph)

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