The latest target of China’s tech regulation blitz: algorithms

BEIJING — Chinese authorities are planning to restrict how companies use algorithms to sell products to consumers, a move analysts said likely runs counter to business interests and sets a precedent for other countries.

China’s largest tech companies from e-commerce giant Alibaba to TikTok-owner ByteDance have built their multibillion dollar businesses on algorithms that serve up content a customer is more likely to spend money or time on, based on previous viewing records.

The increasingly powerful cybersecurity regulator on Friday released sweeping draft rules for regulating use of these so-called recommendation algorithms. The proposal is open for comment until Sept. 26, with no specified implementation date so far.

The groundbreaking rules could set up a clash between China’s technology giants — which have been subject to increasing regulation over the past 10 months — and Beijing, which has sought to rein in their power.

And China’s algorithm rules will be closely watched by other countries and technology firms around the world for how it might affect business models and innovation, analysts said.

“Companies are going to have a lot to say about this because this has the potential to restructure business models,” Kendra Schaefer, Beijing-based partner at Trivium China consultancy, told CNBC.

The rules have also thrown up questions about how enforcement will happen and how intrusive regulators might have to be to actually get companies to comply with these rules.

These proposed rules come as the Chinese government has ramped up its regulation on homegrown technology giants in the last year, primarily in the name of cracking down on monopolistic practices and increasing data protection.

On Wednesday, a new data security law took effect. A personal data privacy law is set to take effect on Nov. 1.