China has made a significant move to propel its data economy by allowing tech companies to account for data as assets on their balance sheets. The unprecedented China data monetization policy aims to turn data into an economic asset class like oil. Yet while there is huge potential for data assetization in China, the uptake has been slow, and only a minority of companies have taken advantage of the regulatory opening. While the policy allows Chinese tech companies to monetize data, compliance issues are keeping many companies out of the game.
The policy, launched by the Ministry of Finance of China in January 2023, enables companies to record data as inventory or intangible assets on their balance sheets. In theory, this opens up the potential for data trading in China, allowing companies to cash in on their data assets in financial markets, which can improve company valuations and increase growth in the digital economy.
China's Digital Economy Growth
As China rapidly grows in the data economy, China alone is estimated to have produced 32.85 zettabytes of data in 2023, which accounts for more than 27% of the global total. By 2025, China's portion is expected to hit 48.6 zettabytes as the country raises the stakes on its quest to be a world leader in data. The massive amount of data produced, from ride-hailing trips to e-commerce transactions, positions China at the forefront of shaping future global data management and accounting standards. As data governance regimes in China become more mature, the government has been emphasizing the importance of data protection and compliance. In 2013, President Xi Jinping compared data to oil resources, stating that whoever controls big data technologies will hold the key to future development. This conceptual shift to viewing data as an economic asset is at the center of China's national strategy to dominate the data market.
The Gradual Adoption of Data Assetization
Despite the supportive regulatory environment, policy adoption has been sluggish.
For example, China Unicom, one of the world's largest mobile operators, was the first to report data assets on its balance sheet, with 204 million yuan ($28 million) labeled as data assets. But only 55 listed and 228 non-listed companies—out of nearly 60 million registered companies—had registered data assets as of the end of 2024, the Shanghai Jiao Tong University estimated. The slow rate reflects the challenge for firms to navigate the complex data regulations and ensure data is legally obtained, securely stored, and protected. The compliance hurdles are particularly high for China's smaller tech companies, which generally lack the resources to meet the stringent requirements of data security compliance. These companies are holding back from monetizing data until they get greater clarity and support from standard-setters. The majority of private tech companies are also protecting their data and remain cautious, even as Chinese regulators push for more open data service potential.
Regulatory Push to Open Up Data
Chinese regulators in December 2023 issued a joint statement calling on companies to open up data in line with the government's drive to create a more unified national data market.
This is the most recent effort to nudge enterprises to commercialize data through data trading platforms and use data for financial products like bank loans. For example, China's Guiyang big data exchange, which opened in 2015, made headlines when it was reported to have stored more data than Chinese e-commerce giant Alibaba. China's Data Market Trends are towards setting up national data exchanges, where businesses can buy and sell data assets. The government's push to make data an asset could shape global accounting norms in the years ahead. But issues such as loose standards, data quality issues, and low trust in the system have plagued early attempts at data monetization.
Smaller Companies Are Watching Big Tech
Other Chinese firms, smaller ones especially, are following the lead of big companies like China Unicom in embracing this new policy of data assetization. Small businesses are worried that setting up new systems of data governance and meeting the government's high standards in their data storage is complicated and will involve large costs.
A executive from a Beijing tech firm characterized the process as "super complex," and said that many companies are taking the guidance of data compliance experts in working out how best to register data assets. He said that while the slow take-up is to be expected, smaller companies may be particularly stretched in keeping up with the regulatory environment.
China's Push for Data Resource Development
China's government has put more pressure on companies to monetize data through national data markets. In July 2023, the chief of the National Data Administration (NDA), Liu Lehong, urged building a digital economy where data is the main factor of production. It reflects Beijing's presumption that data is a key resource for the country's development, similar to traditional resources such as oil.
The NDA, established in 2022, is responsible for governing national data governance and promoting data resource development. The authority aims to establish a unified national market for data, integrating local data markets and opening up data for financial transactions. However, this push towards data assetization remains a work in progress, and its success will depend on the capacity of companies to keep up with the evolving regulatory environment.
China's Data Protection and Privacy Laws
The push for open data services also raises questions of data protection and privacy laws. Chinese regulators have in recent months reiterated the necessity to strike a balance between data monetization and safeguarding the rights of consumers. Such a balance will be central to encouraging enterprises to register data as assets while ensuring sensitive information remains under wraps.
As China's data market further matures, the country's efforts to standardize data monetization and develop data exchanges could set future global standards for data management. However, the tricky questions of data security, data privacy regulations, and trust have to be tackled to ensure China's data economy is a success in the long run.
Conclusion
China's foray into data assetization presents a unique chance for tech companies and the broader data economy.
As the world's largest producer of data, China will be a leader in data trading and data monetization. However, the policy's slow adoption is a testament to the complexity and compliance hurdles that companies must navigate under this new policy regime. Should it succeed, China's data governance could lead the way towards global data standards, transforming how data is managed, traded, and valued in the digital economy. By embracing data assetization and following the country's data protection laws, Chinese companies are able to unlock new revenue streams and drive growth in the data economy. As the market further matures and norms are set, the global data economy can possibly look to China's experience as a template for data asset management and monetization.
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