Chinese data security in focus

Report on trustworthiness meets skepticism

charnsitr/Shutterstock.com

The Chinese financial technology giant formerly known as Alipay – whose e-payment system has increasingly expanded into B.C. in recent years – says a new report shows that Chinese firms may be more trustworthy when it comes to handling private consumer data than their western counterparts.

But a leading consumer information policy advocate said the report (and Ant Financial Services Group’s interpretation of the results) should be taken with significant skepticism. That’s because the report, published by the Economist Intelligence Unit (EIU) in Hong Kong, is filled with yes-or-no questions that often gloss over the fundamental cultural differences between China the West when it comes to what proper data privacy practices actually entail.

Ant Financial is a subsidiary of Chinese tech conglomerate Alibaba Group (NYSE: BABA).

The report in question, EIU’s Transparent Business Barometer, was sponsored by Ant Financial and surveyed 250 executives in China, the United States, Europe and Southeast Asia on the topic of data privacy. The interviewees are from companies ranging from technology and financial services to retail, and the findings showed that “executives in China and Southeast Asia are more likely to tie data privacy practices to good corporate governance than those in the West,” said Ant Financial in an email.

“Almost all executives in China (98%) agree that data privacy is an important part of good corporate governance – running counter to the commonly held view that privacy is an afterthought for Chinese firms,” the report said. The same figure for U.S. executives surveyed was 87%, while western Europe saw its figure dip to 81%.

One possible reason for the higher numbers for the Chinese market, the report’s authors said, may be “the importance of trust, which in China may be higher between data-gatherers (companies and/or the government) and data-providers (individuals) than in other regions.”

But simply asking executives whether or not they tie proper data privacy practices to good corporate governance does little to reveal whether the companies they run would be trusted handlers of consumer data, said Martin Abrams, executive director and chief strategist at the Information Accountability Foundation in Plano, Texas.

Abrams said the EIU report could have benefited from a more open-ended questioning format.

“ I could ask the question, ‘Define what it means to be a responsible handler of data,’” he said. “And I can get answers and compare them, because there’s content associated with them. But to say to two organizations, ‘Are you an accountable organization?’ That’s not a question that I would ask and be able to use the answers effectively.”

Part of the issue, however, goes deeper than the format of the questions. Abrams noted that China has a vastly different social expectation of “proper use of personal data” than that of the West, where individual rights are paramount. In China, the concept of maintaining social harmony is so highly placed that what seems like proper use of personal data in Beijing may look like an egregious violation of personal rights in Canada, the United States and Europe, he said.

“You can have a situation in China where the government can do social scoring – determine how good a citizen you are by your interactions, then segment the access to services,” Abrams said.

The concept of social scoring is not inconsistent with the concept of a large internet company having a sense of needing to be in control in order to ensure stability, he said.

“We did a big ethics project in terms of how to create an ethical basis on artificial intelligence and big data,” he added. “And to try to come up with a universal ethic is almost impossible, because the differences between the concept of the individual interests trumping all other interests, especially when it comes to data, versus this concept of social harmony … is fundamental. What’s fair can look different to different people.”

EIU senior editor Michael Gold, who worked on the report, agreed there are some data blind spots in the document – the most notable of which is that the responses were all from executives, with none from consumers. However, Gold added, he hears less angst in Chinese public dialogue about companies collecting consumers’ personal data than in western countries.

“Whether that actually accurately reflects the reality on the ground, I’m not going to comment on that per se,” Gold said. “But it seems that at least the perception is that … China understands how important basic online trust is in a sharing economy, so it seems that’s the perception in China to a greater extent than in the western world.”

Abrams said it is important to note that, because Alipay is trying to expand into places like Canada where the culture expects accountability in handling private data, the Chinese e-payment giant has good reason to abide by Canadian norms, because trust is its fundamental business.

But to leap to the conclusion that Chinese companies overall may be more trustworthy than western counterparts when it comes to safeguarding data would be going too far, he added.

“I would trust Alibaba to operate within Canadian norms once they know what those norms are, but it’s because of the business Alibaba is in, not because it is a Chinese company,” Abrams said. “Alibaba is trying to expand its business out of China into a broader, global marketplace. They are trying to establish that based on saying, ‘We are a trustworthy custodian of data, and we are a trustworthy custodian because Chinese companies are more likely to be trustworthy of data….’ But I don’t think that, per se, Chinese companies are by nature ready to be better governors of our data.”

Since opening its office in Vancouver last year, Alipay has built a base of 180,000 North American merchants that accept Alipay as a method of payment. The latest addition came last November, when 7-Eleven became the first Canadian convenience retailer to jump into the fray.

Alipay occupies about half of China’s enormous, trillion--dollar electronic-wallet sector.