By Liu Min and Shaw Wan
BEIJING, January 22 (TMTPOST) — China has stepped up efforts to facilitate data trading. Last December, the national government called on businesses to “accelerate the construction of the data infrastructure system” by releasing the Opinions of the CPC Central Committee and the State Council on Establishing a Data Base System to Maximize the Role of Data Factors. The latest regulations covered multiple areas of data management, including data right confirmation, circulation, transactions and distribution.
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Deliberated and adopted in June, the planning document detailed the government’s plan to promote the development of the digital economy, which was one of the goals set in the 14th Five-Year Plan (2021-2025). Prices of stocks related to data centers and the digital economy, such as Nanjing Canatal Data-centre Environmental Tech Co., Ltd. (603912, SH), hit their daily hike limit at the news.
Cities that were rich in resources for the digital economy had got into the business before the secondary market. Since the beginning of 2021, there has been a rush to build data exchanges in places like the Beijing-Tianjin-Hebei Metropolitan Region surrounding the national capital Beijing, the Yangtze River Delta that encompasses Shanghai, as well as Fujian province in southeastern China.
“It ushered in the era of data trading 2.0,” said Wang Jiandong, an official from the Big Data Development Department at the State Information Center at the World Artificial Intelligence Conference last September.
The Beat Data Trading 1.0
The three years from 2014 to 2017 have witnessed a boom in the number of data exchange platforms.
The first one, Zhongguancun Shuhai Big Data Trading Platform, debuted in February 2014. It served as a third-party transaction channel by providing sale and purchase of data usage rights to users. Storage or analysis of data was not included in its service package.
The platform was founded by the Zhongguancun Big Data Alliance, an industry association of over 60 members including a scientific research institute backed by the Ministry of Industry and Information Technology. With a registered capital of 10 million yuan, it claimed to get enterprises, individuals, governments, and scientific research institutions connected, to make use of the massive data assets so as to develop a trillion-yuan business, and to help Beijing take a lead in the global industrial development.
Crazy as they might sound, such dreams were carried on by over 20 data exchanges in the next three years because they were confident that the industry was worth trillions of yuan. In April 2015, the Guiyang Big Data Exchange was established in southwestern China’s Guizhou province with national support. It set a national record for a single big data transaction, as a biotechnology company bought big data of global pharmaceutical R&D patents for 16 million yuan. This deal empowered the company to strive for a daily trading volume of 10 billion yuan.
However, it turned out to be a flash in the pan. Soon the exchange quietly reduced its trading volume target to 1 billion yuan per year. In three years, the exchange stopped sharing information about transaction volumes as they became too low. It applied for bankruptcy and reorganization twice in 2021 after being taken over by local Assets Supervision and Administration Commission in 2020.
This was not an isolated case. In northern China’s Shandong province, three out of the four data trading platforms founded in 2017 have been shut down.
“We believe that the data exchanges established before 2017, except for the Guiyang Big Data Exchange, have all died, as most of them have no actual businesses. Some were building information platforms for the government, which I think has nothing to do with data trading,” said Zhang Bo, an expert in this field.
Their failure was due to a lack of the technologies, laws and regulations needed in data right confirmation, pricing and transactions. “Firstly, it is difficult to standardize data. Secondly, data right confirmation can also be complicated. Whose data they are? Who can have access? And how can they be used? Thirdly, how can we share, use and even monetize data while protecting them? And finally, the pricing. How to set the price? And how about transfer pricing?” said Li Xiaojia, the former chief executive of Hong Kong Exchanges and Clearing Ltd.
The Golden Era of Underground Markets
The doom of data trading firms left a vacuum in a growing market. That was when over-the-counter (OTC) transactions with low compliance costs and flexible rules seized the chance to prosper.
In 2020, the scale of the Chinese market for the big data, including phases like data cleaning, labeling and trading, reached 54.5 billion yuan. 96 percent of them were conducted in the OTC markets.
An insider who went by the name Yu Yang used to work at a data intermediary. He earned commissions by selling data that were bought from big data companies to small businesses like beauty salons, automobile 4S shops and dentistries. For each piece of data, he could earn tens of yuan. “Out of 100 people, almost three of them will visit the small business because of the data that I sold, which makes a conversion rate of 3 percent. In general, that number is two to three thousandths,” said Yu.
Yu believed that the data he got from big data companies might come in an irregular way. Some were mined from different websites, while others were leaked by people from the source companies. Data intermediaries like the one Yu worked for would process such data before selling them to companies that need them for marketing strategies.
The rise of black market transactions brought about many problems and even tragedies. Xu Yuyu, an 18-year-old high school graduate who was just admitted to a university died of cardiac arrest in August 2016 , after being conned into giving her college tuition of 9,900 yuan away. The ringleader committed the telecom fraud by illegally purchasing information of 100,000 college entrance exam takers.
Xu’s case became a turning point in regulating the OTC transactions. In May 2017, many executives of Datatang, a once leading AI data service provider, were taken away for investigation due to the disclosure of customer privacy. The company"s market value slumped from 2.1 billion yuan to 700 million yuan.
Four years later, the Data Security Law and the Personal Information Protection Law came into effect, targeting the non-compliant data transaction industry. Small and medium-sized data brokers found it hard to bear the rising compliance costs.
Thus, the golden era of OTC markets ended.
State-owned Firms Dominate Data Trading 2.0
In 2019, data were listed as the fifth factor of production, after land, labour, capital and entrepreneurs, at the Third Plenary Session of the 19th CPC Central Committee, a national CPC conference. In April 2020, the national government put the marketization of data on the agenda by releasing the Opinions on Improving the Systems and Mechanisms for Market-based Allocation of Factors of Production.
The Covid-19 pandemic also accelerated the application of big data in China. And as the macroeconomic environment changed, companies were more inclined to adopt precision marketing, which was in dire need of data for each market segment.
Driven by such demand, various data exchanges were established. Beijing International Data Exchange was founded in March 2021. Other cities like Tianjin, Shanghai, Chongqing and Shenzhen also built their local data trading centers. These data exchanges were initiated by the local government and dominated by provincial and municipal state-owned assets supervision and administration commissions, unlike the ones that came into being in data trading 1.0, which were mostly jointly built by private technology enterprises and big data companies with a relatively small scale of investment. Although local state-owned assets supervision and administration commissions also took part in the process, the private capital was the major contributor.
According to public information, there are 46 state-owned data exchanges as of last December. An expert told TMTPost that, along with the private firms, there should be over 150 companies that can provice data trading services.
In the newly released Opinions of the CPC Central Committee and the State Council on Establishing a Data Base System to Maximize a Better Role of Data Factors, players in the over-the-counter (OTC) markets risked losing their tickets to the games, as the national strategy encouraged to “standardize and guide OTC trading as well as cultivate and strengthen trading in the field .” It also aimed to coordinate and optimize the planning and layout of data trading centers, including limiting the number of data exchanges. The interconnection of regional data trading organizations and industry data trading platforms with state-run data exchange platforms would also be promoted.
"Speaking of official state-run data exchanges, Shenzhen Data Exchange should be the only one. In terms of the construction of the entire data trading system, theoretical research and technical platform construction, I think it is also the closest to a mature data trading center," said an expert. “It is related to the regional economy, on which the digital economy depends."
Other than gaining authorization from Beijing, some local data exchanges adopted a differentiation strategy. For example, the Suzhou Data Exchange focused on sectors that rooted in the province, like biomedicine and finance. It also established strategic cooperation with the Shanghai Data Exchange that’s located in China’s financial hub.
“It’s better that each place manages their own data, as they all understand that data are valuable assets. Without a proper trading channel and monetization methods, they won’t be much willing to exchange data,” an analyst told TMTPost.
Although state-run data trading firms have taken a lead, it’s not easy to facilitate data trading across the nation as the marketization of data involves multiple steps like data collection, storage, governance, transactions, analysis, and financing.
“The goal of building data exchanges is to lower the threshold of data use and activate the supply-side reform of the data factor market,” said Wang Guan, deputy general manager of Shenzhen Data Exchange. “It is not that the legitimation of data trading markets would shrink the market size of OTC markets. They can work together to build a vast market for data. Although the market share that OTC firms have may decline, the overall markets will for sure surge.”
关键词： Deck assets Crazy industrial global
