Guideline set to regulate China's platform economy

China published a slew of directives on regulating and guiding the "healthy and sustainable development" of the platform economy on Wednesday.

The 19-point notice, which was issued by nine central government organs led by the National Development and Reform Commission, highlights strengthening financial regulations on platform companies, reining in monopolistic and improper practices of internet companies, and increasing their obligations regarding taxation.

The notice defined the platform economy as "a new economic form "with internet platforms as the base and data as the driving force, which is supported by a new generation of information technology and internet infrastructure.

Recognizing the increasingly prominent role of the platform economy in China's social and economic development, the directive aims to "establish and improve relevant rules and regulations, and optimize the environment for the development of the platform economy".

Investment by internet platforms in financial institutions and financial organizations should receive stricter oversight, according to the notice. Platform companies, and those who invest in them, should strictly abide by the capital and leverage ratio requirements.

Supervision of payments should be improved to cut the "inappropriate connection" between payment tools and other financial products. The country should study formulating regulations on nonbank payment services to prevent malpractices derived from abusing market dominance.

The circular also proposed revision of the country's anti-monopoly law and improving laws related to data security and personal information protection.

It suggested the clarification of the boundaries and responsibilities of internet companies and strengthening those of mega platforms. A compliance management system targeting platform companies should be put in place, along with an effective external supervision and evaluation system.

The directive called for the "legitimate, just and necessary collection and use of personal data", and vowed to "severely punish" any illegal practices. Stringent measures should be introduced to crack down on black-market data trading and big data swindling to increase transparency.

The directive also encouraged platform enterprises to better conform to taxation collection through measures such as reporting tax-related information.

Advertising on internet platforms should also come under greater scrutiny, with closer supervision of practices such as misleading consumers through inferior products and failure to review whether products qualify for market access.

Yi Tong, a researcher at the Beijing Academy of Science and Technology, said the value of data cannot be maximized if a company or industry uses it exclusively.

Yi said it is especially important when China is accelerating informatization, the process through which new communication technologies are used, and calling for continuous breakthroughs in technologies.