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    Companies in Shanghai Take First Steps to Trade Data Like Stocks

    As companies start to use China’s data exchanges, Beijing’s vision for data trading comes closer.
    Dec 03, 2021#technology

    With Shanghai’s launch of a data exchange, Chinese companies are starting to join government-backed platforms that aim to create open marketplaces for data.

    The Shanghai Data Exchange, which was established in 2017, opened for business on Nov. 25. It joins over a dozen other similar exchanges, but appears to be the first with significant amounts of non-state data on offer.

    The Shanghai Data Exchange provides 20 data products, including flight information from China Eastern Airlines, shipping information from COSCO Group, and various data from telecommunications network operators China Mobile, China Unicom, and China Telecom.

    At least two major Chinese tech companies are also participating, offering data products on the exchange. JD.com, known for premium e-commerce and logistics, has a product called “JD Digital City Mirror,” while AutoNavi, a maps and ride-hailing app owned by e-commerce giant Alibaba, lists its “AutoNavi Road Report.” No details are currently available about these products, which appear to have been created for the exchange.

    It may be the first time major private companies have offered data for sale on a Chinese data exchange.

    Seeing private companies move onto the Shanghai Data Exchange is quite significant, Tom Nunlist, senior analyst at Trivium China, told Sixth Tone.

    “It marks the beginning of a whole new landscape of commercial data opportunities in China,” said Nunlist.

    Oil for the digital age

    “The motivation behind it is to create a fair, well-functioning market, where small companies can have access to tons of data owned by big companies, so they can innovate some good things for the economy,” Camille Boullenois, a consultant at Sinolytics, a research-based consultancy focused on China, told Sixth Tone.

    China’s government has sought to promote trade in data for years, describing it as a “new factor of production” — a resource that, like oil, shapes the entire economy. Companies use huge data sets to forecast markets, predict what consumers will buy, and train AI models to understand the world, among other tasks.

    But access to big data is often monopolized. If you happen to own, say, an e-commerce marketplace with over 1 trillion yuan ($157 billion) of turnover per year or a social media network with a billion users, data is free for the taking. Giant tech platforms earn outsize rewards from their digital oil wells, while guarding their most valuable data with utmost importance.

    Chinese economic planners have a vision for a different kind of data economy, in which most data is traded in online marketplaces akin to stock or commodities markets — meaning that more companies can get access to big data and experiment with new applications.

    Private participation

    Data exchanges are key to this vision. They’re the digital marketplaces in which these deals are meant to take place.

    Data trading has gone on for a long time in private markets. There have been data products sold online, but the lack of supervision and transparency in this area might lead to reduced consumer privacy, Shao Zhanpeng, an expert in data economy who is now lecturing in Hohai University in Nanjing, told Sixth Tone.

    “It’s a process of standardization,” Shao said.

    The first Chinese data exchange was established in the southwestern city of Guiyang at the end of 2014. Now, there are in total 17 regional and municipal data exchange centers, including Beijing’s most recent launch of a government-run platform. Meanwhile, Shenzhen plans to build a data exchange center for the Guangdong-Hong Kong-Macau “Greater Bay” region.

    Some exchanges are run directly by local governments, while others are public-private ventures.

    Historically, these pioneering projects have struggled to attract corporate users. Government agencies were the primary sources of the datasets, and few transactions took place, according to domestic media.

    “There have been difficulties in the regulation, pricing, and definition of data ownership,” Shao said. “Only once these issues have been solved, can trust be built between buyers and sellers.”

    Several corporate deals have already been reported for the Shanghai exchange. 

    The Industrial and Commercial Bank of China bought enterprise energy consumption data from the Shanghai Municipal Electric Power Company for its corporate banking business.

    BaseBit. Ai, a private technology company specializing in data analysis has also made some purchases, and will provide technology support for the platform to “ensure the information privacy and data security,” according to the company's website.

    Privacy concerns

    Privacy is another crucial issue. Data about people’s behavior is supposed to be anonymized before sale, but security researchers have repeatedly shown that they can use clues in big data sets to identify individuals. Although China published a standard for anonymizing data in May, the risk of re-identification can be hard to assess, Boullenois said.

    There’s a tricky balance between the security of data sets and its market value, she added. “If the data set is very much anonymous, and it is impossible to lead to any real re-identification, it is less valuable to companies.”

    Beijing’s vision for the data economy remains a long way off, Nunlist said, but Shanghai appears to have taken a step toward it. “The exchange is still very experimental, and there are many foundational challenges to solve, including standardizing data valuations, and how to determine and protect data property rights. Companies signing up early will participate in finding answers to these questions — which could be an advantage down the road.”

    Editor: David Cohen.

    (Header image: Moment/People Visual)