China’s top market regulator introduced Friday a draft rating system for Chinese internet companies in an attempt to define their services and corresponding responsibilities.
Why it matters: China is continuing to beef up efforts to regulate the internet by establishing an oversight framework for its technology sector; the proposed rating system follows numerous penalties this year for offenses ranging from monopolistic practices to data breaches.
Details: The State Administration for Market Regulation (SAMR) on Oct. 29 issued for public comment draft guidelines for a rating system for Chinese internet platforms that includes platforms’ future responsibilities.
- The Chinese market watchdog will classify internet platforms into six categories according to industry, namely online sales, life service, social entertainment, information, financial services, and computational applications.
- The platforms are further classified into super, large, and medium-and-small based on their user scale, business type, and capacity.
- The regulator defines super platforms as those having more than 500 million annual active users, a wide range of business types, and a market value of more than RMB 1 trillion ($156 billion). The description applies to tech giants such as Alibaba, Tencent, ByteDance, and Meituan.
- Large platforms are defined as having more than RMB 50 million annual active users and a market valuation of more than RMB 100 billion. The draft doesn’t give specific benchmarks for medium and small platforms, only referring vaguely to them as having “certain” users and market caps, among other criteria.
- Super platforms are expected to uphold more responsibilities by playing a leading role in promoting fairness in competition, opening up their ecosystems, securing data, developing risk management, and fostering innovation.
- The concept of a “super platform” will be “conducive to deepening the understanding of antitrust issues and addressing the balanced development of platforms,” according to SAMR.
- The public comment period runs until Nov. 8. SAMR gave no indication when the rules would go into effect.
Context: The total value of Chinese internet platforms with a market cap greater than $1 billion increased from $770.2 billion in 2015 to $3.5 trillion in 2020, with an average annual compound growth rate of 35.4%, according to data from the China Academy of Information and Communications Technology.