(Bloomberg) — China kicked off a formal campaign to rein in the potential abuse of algorithms by internet giants from ByteDance Ltd. to Tencent Holdings Ltd., taking aim at the way social media platforms serve up ads and content to hook users.
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The Cyberspace Administration of China will conduct on-site inspections of firms and ask them to submit their various services for review, the internet watchdog said in a statement Friday. Large-scale websites, platforms and products with big influence will be targeted, it said, without naming any.
The campaign is aimed at implementing and enforcing sweeping rules unveiled in August governing the industry’s use of algorithms to surface content for users, which took effect last month. It’s part of a broader effort that started in late 2020 to curtail the widening influence of China’s largest and richest corporations, whose platforms now control every sphere of public discourse and entertainment.
A barrage of regulations covering everything from gaming and online education to video censorship has since spooked the industry and prompted a shift in priorities to core growth versus unbridled expansion. The cyber-watchdog said in a subsequent statement it interviewed representatives from a dozen companies including Tencent, Alibaba Group Holding Ltd., Meituan and JD.com Inc. to address job cuts totaling 216,800 from July to mid-March — a prime concern for Beijing given the potentially destabilizing effect on the broader economy.
The agency highlighted that the companies actually hired 295,900 people over the same period, a net increase. Yet competition for jobs in the tech industry remains fierce and employers are willing to shell out to attract or retain top-flight talent. Tencent doled out more than $200 million apiece to two unidentified executives in 2021, even as it cut founder Pony Ma’s compensation for a year in which Beijing’s crackdown sent Tencent’s stock down by 19%.
Read more: China Plans Control of Tech Algorithms U.S. Can Only Dream Of
Investors, which wiped out more than $1 trillion of Chinese tech stock value at the height of the crackdown, remain cautious this year. On Friday, Tencent was down about 1.8% while video streaming firm Bilibili Inc. was among the worst performers in Hong Kong. Meituan also weighed on the gauge, following news Sequoia Capital had reduced its stake in the food delivery giant.
One of the greatest areas of uncertainty for investors involves Beijing’s intentions for the country’s vast social media sector — an arena dominated by Tencent and ByteDance.
The government has always maintained an iron grip on the industry, rooting out dissent and other forms of undesirable content that could undermine its rule. But while various agencies have targeted reckless competition in online commerce and ride-hailing during the crackdown, they’ve yet to level specific sanctions against the social media leaders.
Regulators proposed far-reaching restrictions on content algorithms back in August to forbid practices that encourage online addiction, as well as any activities that endanger national security or disrupt social order.
In its 30-point proposal, the government asked that companies disclose the basic principles of any algorithm recommendation service and provide convenient options for turning off algorithm recommendations. It also said algorithms must adhere to “mainstream values” and “actively spread positive energy.”
Tech industry algorithms have been at the heart of political controversies around the world. Facebook Inc. and Google have been accused of serving up news stories and videos that exacerbate political polarization and fuel violence. While the U.S. government has had limited success in forcing changes, Beijing’s regulators have substantial power.
In February, Beijing’s internet watchdog launched a website where algorithm providers who influence public opinion or mobilize the masses can submit their services for record-keeping.
Companies including ByteDance and Tencent have made tweaks to their products following Beijing’s effort to protect personal privacy, for example, by offering users a way to opt-out of AI recommendations on apps like video service Douyin and the messaging platform WeChat.
QuickTake: Why China Keeps on Targeting Its Technology Giants
(Updates with CAC statement on layoffs, share action from the third paragraph)
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