China makes new laws to regulate hi-tech sector a major priority for next five years

China's leadership has vowed to ramp up legislation to regulate tech firms and ensure the supporting legal system keeps up with the pace of the country's digital economy as a policy priority for the next five years.

The focus on regulating areas such as internet finance, artificial intelligence and big data was highlighted in the Communist Party's detailed blueprint to overhaul the country's legal system as part of a broader five-year plan.

"[We must] follow and study closely legal systems related to the digital economy, internet finance, artificial intelligence, big data, and cloud computing so that we can fill our shortcomings in these areas," the official Xinhua news agency said in a report citing the plan.

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"[We must] also strengthen coordination and system building of our legal systems among different regions, and by amending the law, [we need to] address the issues of low penalties and the cost of violation being too low."

China's digital economy already accounts for more than a third of total GDP, but its supporting legal system still lags behind.

Beijing has long allowed a relatively lax regulatory environment to encourage the development of the digital economy.

In a reflection of its resolve to address the problems this has created, Beijing recently introduced a series of regulatory measures including anti-monopoly rules for greater supervision of the country's tech giants.

Facing an increasingly challenging international environment, China's leadership considers it vital to the national interest to boost its legal arsenal in areas such as the digital economy and international disputes.

Last Saturday the Ministry of Commerce issued a new order prohibiting companies from complying with foreign laws sanctioning Chinese firms and individuals.

In the Xinhua report published on Sunday, the five-year plan called for better laws to protect intellectual property - apparently responding to Western allegations of China engaging in rampant copyright violations.

Jin Haijun, a legal academic at Renmin University, said Beijing's strategy was comprehensive, and he expected more detailed rules and regulations to come.

It could be interpreted as China's ambition to take the lead in shaping global rule-setting for newly developing areas, he said.

"My understanding is that unlike in traditional industries, China can develop at a faster pace in many of these emerging technologies, like digital technology, and take a leading position in the world. [China's impact] on the world can be significant as data is mobile and cross-border," Jin said.

"Data security is not unique to any particular country like the US, China or Europe. Whichever country can take the lead in achieving breakthroughs in legislation or its model of development ... can provide a model for the next-generation internet or digital technology and that's why everybody is talking about what the China model is."

Professor Wang Jiangyu, director of the Centre for Chinese and Comparative Law at City University of Hong Kong, said Beijing had come to recognise that "international law can be a useful instrument for China".

"In the past, China's lack of understanding of the use of international legal tools has been at the cost of its national interest, despite the fact that China actually has a strong team of international law scholars," he said.

Wang added that China would also have to comply with the rules, institutions, procedures and interpretations of international law if it pursued this strategy.

"There is no 'Chinese international law', there is only international law followed by all states," he said. "There are, of course, different interpretations about certain international legal doctrines or issues, but they should all be understood within the context of international law."

Besides addressing issues in emerging sectors such as the digital economy, the party's blueprint also revealed that Beijing would step up efforts to explore a "one country, two systems" model to resolve the Taiwan issue.

"[We should] explore a 'one country, two systems' Taiwan solution to further peaceful reunification of the motherland," the plan read. "[It] should include the establishment of an institutional mechanism that can promote peaceful development of cross-strait relations, improve and promote cross-strait exchanges, deepen integration and development across the Taiwan Strait, and institutional arrangements and policies that can better protect the Taiwanese compatriots."

Stephen Tan, president of the Taipei-based Cross-Strait Policy Association, a think tank on mainland-Taiwan relations, said the special mention of a Taiwan solution was significant.

"[Chinese President] Xi Jinping proposed two years ago to have various parties study the possibility of having the 'one country, two systems Taiwan model' for peaceful reunification. But this is the first time his words are officially included in the outline of the Communist Party's five-year national development project, meaning this will become an ongoing task of the government, which is quite noteworthy," Tan said.

"Instead of asking for various parties to discuss the proposal as Xi had urged, the outline called for cross-strait exchanges of legal experts, which is also noteworthy. The focus should be the so-called 'establishment of the institutional mechanism' in promoting the peaceful development of cross-strait ties. There is no explanation for what the 'institutional mechanism' represents, and [the Communist Party] may define it in other follow-up documents."

Additional reporting by Lawrence Chung

This article originally appeared on the South China Morning Post (SCMP).

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