China’s Involvement in Global Digital Governance

Zhang Monan

Over a century ago， western countries achieved rapid development boosted by the industrial revolution and opened the door to world trade with “solid ships and strong cannons”. The “solid ships and strong cannons” in the digital era will shape the landscape of future development and competition. It is imperative to grasp the historic opportunities offered by the digital revolution and take on the challenges posed by global digital governance， which will put countries in a favorable position to tap the profound changes unseen in a century.

GLOBAL DIGITAL GOVERNANCE HAS BECOME THE “NEW RACE TRACK” FOR MAJOR POWER RIVALRY

The new technology revolution is poised to shape state-to-state relations. Digital economy is becoming a new high ground of strategic competition among major powers. Digital technology， digital rules and digital sovereignty are becoming the new focal areas of major power rivalry， mainly reflected in the following aspects.

First， the interaction between digital technology and geopolitics is growing. Following the trade war and tech war， the United States waged a new digital cold war against China. Geopolitically， the Indo-Pacific has become a critical region of digital rivalry. In Southeast Asia， the United States has stepped up its digital diplomacy with the ASEAN countries through the “Innovation Connect” program established within the framework of “U.S.-ASEAN Connect Initiative”.

Second， the trend of linking digital governance rules with values is growing. Certain countries link digital technologies with values such as the rule of law， institutions and even human rights. For example， the United States and other countries promote value-based digital diplomacy and form the Democracy and Technology （D-10/T-12） alliances.

Third， the competition in digital governance and rule-making is growing fiercer. In recent years， in efforts to maintain the “digital hegemony”， the United States has been expanding its global interests in the name of the so-called digital liberalism and through the World Trade Organization （WTO）， Asia-Pacific Economic Cooperation （APEC）， the U.S.-Mexico-Canada Agreement and the U.S.-Japan Digital Trade Agreement. The United States also led the introduction of the APEC Cross-border Privacy Rules System， including such countries as Japan， South Korea， New Zealand， Canada， Australia and Mexico as signing parties. The European Union adopted the General Data Protection Regulation as a template for global data governance. The European Commission issued a strategic document titled Shaping Europes Digital Future， proposing to adopt a “global digital cooperation strategy” committed to forming universally-applied international standards and rules for digital economy. Such measures reveal the ever more intense competition of international rule-making in the digital arena.

Fourth， the global digital protectionism is rising. In recent years， digital sovereignty has gradually become a key component of core national interests. Countries have launched an all-round campaign for interests， positions and rivalries of digital sovereignty. The United States， Japan and the European Union have taken concrete actions to set rules and regulations for the digital arena by exercising legislation， law enforcement and jurisdiction.

A LANDSCAPE OF CHINA-U.S.-EU COMPETITION HAS BEEN INITIALLY FORMED IN GLOBAL DIGITAL GOVERNANCE

With an eye on the global digital governance， we can see that the United States and the European Union dominate two major digital governance systems in the world. In the meantime， Japan， China， Russia， India， Canada and South Korea have developed their own advantages， but are yet to compete with the United States and Europe in terms of dominance and position in global digital governance.

First， the United States expands its digital interests globally through free cross-border data flows.

The strategic intention of the United States is to expand its global interests as a digital hegemony through the free cross-border data flows， and gradually form the “American template” for digital governance. In this template， externally， the United States advocates the so-called free trade， requires other countries to open their market and lower market access threshold， and puts forward such initiatives as the cross-border free flows of data， non-localized storage and exemption of maintenance platforms. Internally， instead of implementing the rules of free cross-border data flows and non-localized storage advocated by itself， the United States requires localized storage of key data， imposes stricter screening on foreign capital that acquires American enterprises through legislative authorization， and employs a package of taxation， financial， fiscal and judicial means to press its global advantages in cutting-edge fields with a whole-of-government strategy. Thus it can be seen that the United States adopts blatant double standards externally and internally.

Second， the European Union leverages on the single market to dominate digital sovereignty and promote EU standards.

The European Union exports more EU standards through its huge single market and its pursuit of digital sovereignty. Externally， the European Union produces the “Brussels effect” through its enormous rule-making capability and huge single market， and introduces more European standards to the world by seeking technical sovereignty and digital sovereignty. Internally， the European Union itself doesnt have many large native digital multinationals， but a vast number of American enterprises are present in Europe. Therefore， the European Union delivers its policies by improving internal regulations and strengthening the management of large-sized platform enterprises. In addition， the European Union also gains competitive advantages by imposing strict foreign investment review and creating and preserving market order.

Third， China takes the advantages of industry and market to safeguard overall national digital security.

China， as an emerging economy and a developing country， lags behind developed countries in terms of digital rule-making and has not yet formed a relatively complete system of digital governance. However， in recent years， based on its national conditions and development interests， China has been building a sound ecology for digital development and strengthening its digital governance.

First， China takes data as a critical factor of production to unlock the potential. The first is to establish the primary position of data. The Central Committee of the Communist Party of China （CPC） and the State Council promulgated the Opinions on Building a More Complete System and Mechanism for Market-oriented Allocation of Factors as a guidance for the market-oriented reform of data factors. The Outline of the 14th Five-Year Plan further proposed to establish and improve the market rules of data factors， coordinate data development and utilization， protect privacy and public security， and accelerate the establishment of basic systems， standards and norms for the property rights of data resources， transaction and circulation， cross-border transmission and security protection. The second is to unleash the vitality of data factors. By far， China has established 18 data trading platforms， all dedicated to exploring data confirmation and data trading mechanisms.

Second， China forges a favorable policy environment to enhance the competitiveness of core digital industries. The first is to upgrade the digital economy as a national strategy. Since the 18th National Congress of the CPC， China has implemented the Internet Power Strategy and National Big Data Strategy to speed up the seamless integration of Internet， big data， artificial intelligence and real economy. Efforts have also been made to build a digital China and a smart society， create a globally competitive digital industrial cluster and cultivate the digital economy ecology. The second is to implement relevant supportive policies. China has rolled out the Guidance on the “Internet Plus” Action Plan， Outline of Digital Economy Development Strategy and Plan for Digital Economy Development in the 14th Five-Year Period and other important policy documents. The third is to constantly enhance the competitiveness of core digital industries.

Third， China strengthens national security and vigorously engages in international cooperation in digital economy and governance. The first is to tighten up national digital security in the holistic approach to national security. The second is to initially work out the “China Solution” for data governance. The third is to vigorously engage in the negotiation and cooperation on international digital rules. China has joined hands with other countries to launch such initiatives as the Global Initiative on Data Security and the Initiative on Belt and Road Digital Economy Cooperation. China has also formally applied for membership of the Comprehensive and Progressive Agreement for Trans-Pacific Partnership （CPTPP） and the negotiation on the Digital Economy Partnership Agreement （DEPA）. These major initiatives demonstrate Chinas strategic will and determination to actively engage in the formulation of global digital trade and governance rules and enhance international cooperation in digital trade and governance with a more open attitude.

CHINA FACES MORE COMPLEX AND TOUGHER CHALLENGES WHEN ENGAGING IN GLOBAL DIGITAL GOVERNANCE

Currently， intense rivalry is taking place in the rule-making of global digital governance. Major powers are entering ever fiercer competition for digital rules. The United States and the European Union have launched multiple digital strategies targeting China and posed grave challenges to China.

First， the United States takes digital governance as the forefront of the new digital cold war. At the multilateral level， the United States leverages on such platforms as the WTO and the APEC to set agenda on issues concerning China， thus forming issue coalitions. At the regional level， the United States adopts the Indo-Pacific Strategy and “D-10/T-12” to serve the purpose of forging a digital alliance encircling China. The United States also attempts to use the Indo-Pacific Economic Framework to produce a U.S.-dominated regional digital trade agreement in Indo-Pacific， in isolation with the World Trade Organization. Once a digital alliance is built up， the United States will be in the position to impose its new confinement strategy on China.

Second， Chinas existing domestic rules are still largely incompatible with global rules. Chinas current rules for digital trade and digital governance are not as broad and deep in terms of issues covered as high-standard global digital trade rules. Although China has signed bilateral and multilateral free trade agreements that cover traditional issues such as treatment of digital products and digital trade facilitation， China hasnt or hasnt sufficiently covered such emerging issues as cross-border data flows， privacy protection and market access of digital services. China also lacks systematic design for rule-making and negotiation strategies of digital trade and digital governance. China still stands at a disadvantage in the rivalry for the bilateral and multilateral negotiation over digital trade and governance rules.

Third， Chinese digital enterprises are facing tough challenges when going global. Chinese digital economy has not effectively translated its sheer huge scale into flourishing digital trade and competitiveness. In recent years， Chinese digital tech enterprises have been frequently suppressed and sanctioned when going global. As their efforts to expand overseas business are dampened， they face the risk of being confined to the domestic market. But as a country with considerable potential in digital market， China needs to take the strategic initiative to further open up its domestic digital market and avoid reciprocal countermeasures imposed by the European Union， the United States and other countries.

CHINA NEEDS TO SEIZE THE INITIATIVE TO ENGAGE IN GLOBAL DIGITAL GOVERNANCE IN THE NEW ERA

In new circumstance， China needs to move in the development direction of rules governing global digital trade and governance， actively engage in bilateral， plurilateral and multilateral negotiations on digital trade and governance rules， and offer the “Chinese Solution” and policy framework for essential issues concerning digital trade and governance.

First， China needs to comprehensively improve its digital governance and vigorously push forward high-level opening up in the digital field. The first is to accelerate the efforts to construct and improve critical and fundamental institutional arrangements for digital governance. Such efforts include improving system of cross-border data flows， considering drawing up a “white-list” with relevant countries and regions， and strengthening the risk assessment and supervision of border-exit data; improving the system of foreign investment security review and implementing approval or filing management for critical digital infrastructure， key digital security technologies， important algorithm software and other products and sensitive data; sharpening the legal tools as countermeasures against the “long-arm jurisdiction” of the United States and Europe， drawing on the border-exit data supervision regulations of the United States and Europe to extend and assert relevant laws to overseas. The second is to gradually expand the market access and opening-up in the digital field and support the institutional innovation and pilot programs of free trade zones （ports）. Efforts should be made to establish data customs， set up offshore data center and further roll out pilot programs of digital free trade zones in Hainan Free Trade Port， Shanghai Free Trade Zone， Guangdong-Hong Kong-Macao Greater Bay Area， Beijing Pilot Digital Trade Zone and digital service export bases. On the premise of guaranteeing security， China should relax the market access requirements for value-added telecommunications， cloud computing and digital technologies.

Second， China should proactively engage in bilateral， plurilateral and multilateral economic and trade negotiation and increase its voice in international rule-making. In the international economic and trade negotiations over digital governance， China should adopt coordinated strategies that are bilateral， regional and multilateral and sustain the balance among China， the United States and Europe.

The first is to take a multilateral path. China should work to add digital trade and governance rules within such multilateral institutions as the World Trade Organization. The addition includes clauses on cross-border data flows， privacy protection， digital services and technical barriers. The second is to take a regional path. China should push forward negotiation on open plurilateral agreements， leverage on existing regional trade agreements such as APEC and RCEP to accelerate the upgrading of digital trade clauses in RCEP. Participation in the negotiation on the CPTPP and DEPA provides China an opportunity to pursue institutional opening-up in the digital fields and accelerate negotiations on docking high-standard rules. The third is to take a bilateral path. With digital economic and trade rules and digital governance as the priorities， China should vigorously put in place cooperation-oriented digital economic and trade rules and policy coordination frameworks. Digital trade clauses and institutional arrangements should be upgraded in FTA negotiations. The fourth is to take a balanced path， aiming at striking a balance in the China-U.S.-Europe triangle. China should jostle for broader space for strategic cooperation by using the differences of interests between the United States and Europe in the digital field and EUs pursuit of digital sovereignty.