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Algorithms vs. regulators Battle Royale kicks off in China


China is taking a first step towards regulating algorithms. How this experiment unfolded could help Western regulators understand what to adopt – and what to avoid – as they also reflect on tighter controls on Western social media giants.

China launched a sweeping three-year plan to regulate the use of algorithms last month, positioning itself as a potential trailblazer as governments around the world step up regulation of big tech. According to the draft rules released in August, companies cannot use algorithms that result in addiction or overspending. Users should also have the right to opt out.

General regulations, if strictly enforced, could fundamentally disrupt the business models of many successful internet companies. For example, ByteDance, the owner of TikTok, has had great success recommending eye-catching content using their powerful algorithm.

Certainly, some aspects of China’s proposals are clearly aimed at maintaining government control. The guidelines of the Internet watchdog say that algorithms must respect core socialist values ​​and promote positive energy. Democratic societies are unlikely to accept such restrictions, and even more benign rules would likely be subject to legal challenge.

But looking at how China’s movements work – and what the scale of the collateral economic damage is ultimately – could still prove useful for other countries that are also grappling with the enormous societal impact of the Internet companies. The European Union proposed a bill in April to regulate artificial intelligence systems in certain so-called high-risk uses such as critical infrastructure, university admissions and loan applications. In the United States, Congress recently held a Facebook audience following the Wall Street Journal’s investigations into the social media giant.

The biggest problem with regulating algorithms is their degree of opacity. This is becoming an increasingly important problem as more and more decisions are made by machines that learn by analyzing large amounts of data. It is not easy, sometimes even for the creators of algorithms, to determine the exact reason why an artificial intelligence is making a particular decision. Bias embedded in training data could unknowingly creep into the decision-making process. And algorithms can also focus narrowly on certain goals, like amplifying viral content, without considering other impacts. In addition, they are also constantly updated, which makes regulation even more difficult.

It is a big challenge even for China, which has more powerful tools. Another problem is how to make the algorithmic process more transparent and accountable, without taking too broad a brush that could stifle any innovation, especially in small businesses. This is one of the big risks Beijing takes in being the forerunner – it can reap immediate benefits, it says, in terms of increased social control and fewer nasty side effects like addiction and debt. But it can also crush the potential emergence of any new ByteDance in the process.

Algorithms have become an integral part of everyday life. Regulation may finally have to catch up, but how to do it remains a difficult puzzle. Investors in US internet companies and their detractors should both watch the China experience closely.

Write to Jacky Wong at jacky.wong@wsj.com

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