Sculpting the Intangible

Data plays a crucial role in our daily lives, enabling personalised services based on consumer habits, granting loans based on credit histories, and facilitating telemedicine through the use of medical data. These applications are made possible by the processing and exchange of large volumes of data.

On 4 January, the Three-Year Action Plan (2024-2026) for “Data Elements X,” a joint initiative of the National Data Administration and 16 Chinese ministries, was unveiled. The plan outlines the use cases for leveraging data in 12 key sectors, including industrial production, modern agriculture, transport, and financial services. This raises questions about data transactions, the current situation in China, and the challenges facing this emerging sector.

An emerging sector

Data transactions involve the organisation, valuation, circulation, and marketing of data as goods, facilitating the exchange of information for money.

Last year marked an important milestone with the conclusion of China’s first spatial data transaction between the Beijing Institute of Surveying and Mapping and Beijing Hereto. The institute designed a data product using its proprietary data on Beijing’s central axis. The design process involved asset registration and assessment of data quality and value. The product was sold to Beijing Hereto through the Beijing International Big Data Exchange platform and was later transformed into interactive applications. Additionally, technologies such as augmented reality are being used to offer the public an immersive experience of Beijing’s central axis, blending virtual and real augmented reality.

The 2023 China Data Transaction Market Analysis and Research Report shows that interest in data transactions is rapidly growing in China, driven by the development of the digital economy. The report also reveals a rapid and stable expansion of this sector in recent years. In 2022, the Chinese market for data transactions grew by 42 percent year on year, reaching a value of 87.68 billion yuan ($12 billion). This represents 13.4 percent of the global market and 66.5 percent of the Asian market. Forecasts suggest that the market will continue to grow steadily, potentially reaching 204.6 billion yuan ($28 billion) by 2025.

China is not only a major producer of data but also the first country to officially recognise data as a factor of production. Current data transactions represent an experimental phase of regulatory innovation with vigorous development. As of October 2023, up to 48 data exchanges had been built across the country, testifying to the upward momentum of this sector.

Challenges ahead

It is a new factor of production that throws into question the conventional methods of ownership, circulation, distribution, and governance. This is because data is intangible and can be duplicated at almost no cost. This indicates that it constitutes a new factor of production. There are a number of issues that arise as a result of this new reality, notably with relation to trust and oversight associated with data transfers.

The president of the Beijing National Accounting Institute, Qin Rongsheng, shared his opinions on the trust framework for data transfers in an interview with ChinAfrica. Initially, he emphasised how hard it is to determine where the data originated from. He believed that consumers often lack the technical and professional abilities necessary to verify these sources, and that data that does not comply with regulations poses significant problems. Additionally, he highlights the possibility that suppliers may copy and resell data, which would be detrimental to the rights of use. On the other hand, suppliers themselves are concerned that users may abuse or disclose their data, which would be a violation of their rights.

“It is vital for all parties engaged in the transaction to have great faith in the origin and quality of the data, as well as rigorous adherence to the behaviours that were agreed upon, in order to rectify this problem. Therefore, in order to develop and strengthen the trust system of data transactions, the relevant authorities should make use of both administrative methods and market processes,” Qin said.

In addition to this, he highlighted the need for enhancing market regulation, which is still in its infancy in China and confronts obstacles such as information asymmetry, difficulty in monitoring data transfer and usage, and risks to the rights of parties. The adoption of real-time information disclosure rules, the implementation of monitoring systems to guarantee compliance with agreements on data supply and usage, and the strengthening of risk control to defend the legitimate rights of stakeholders are the three activities that Qin suggested should be taken.

A three-tiered framework consisting of “methods, standards and guides” was presented by the Shanghai Data Exchange at its annual conference on 26 November 2023. This was the first time that the Shanghai Data Exchange has presented its trading regulations. In order to successfully adapt to the development and regulatory needs of the data exchange market, this structure is arranged around four essential modules: player management, transaction management, operational management, and dispute resolution.

The pricing of data exchanges is quite important. In spite of the fact that it seems to be rather popular, Yu Xiaohui, director of the China Academy of Information and Communications Technology, believes that the pricing that is now in place in the industry is out of date. According to Jinfeng Software, a business that specialises in the creation of software that is connected to data, consultations are the approach that is used the most often to determine costs. These consultations typically need two to three days of talks. In order to overcome these difficulties, Wang Yan, head of the China Digital Asset Research Centre, suggests enhancing data property rights management systems at each level. This would allow for the establishment of a pricing and price monitoring system that is more reasonable and scientific.

The Chinese market for data transactions is on the verge of experiencing enormous increase as a result of the continuing development of computerisation. Wang Chenhui, who is one of the co-founders of the Leadleo.com platform, emphasises the significance of cooperation and creativity among all of the players in order to foster a market that is regulated, standardised, and inventive. This will, in his opinion, help to hasten the growth of the digital economy.