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How Will China’s Generative AI Regulations Shape the Future?

By Securiti Research Team
Published October 16, 2023

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Generative AI remains a highly dynamic phenomenon. OpenAI's CEO, Sam Altman, has been fairly transparent about his views on AI and how little his team understands the technology they're dealing with.

However, he has been absolute on one surprising aspect related to AI: regulation. In his now high-profile testimony before the US Senate, Altman called for strict and thorough regulation of the technology, a belief he repeated in South Korea as part of his AI regulation world tour.

Few countries have been as proactive as China in regulating Generative AI.

Now more than ever, these regulations, discussed in greater detail below, have begun to have a noticeable impact on China's leadership in AI development. This impact will become increasingly seismic in the coming months and years.

Understanding how these regulations are poised to affect China's future will aid tremendously in gaining vital foresight into the future of technology and its place within the world in general.

China's AI Regulations: A Brief Overview

In April, the Cyberspace Administration of China released a draft, "Measures for Generative Artificial Intelligence Services." The interim measures were meant to manage the use of AI services like OpenAI's ChatGPT.

More importantly, the measures aimed to lay the groundwork for future regulation of generative AI products and services in addition to how they would operate in China in tandem with several pre-existing regulations.

The Chinese Regulatory Approach

China has gained plaudits for a highly proactive approach to AI regulations. While the country does not yet have dedicated central legislation related to the use of AI, there has been no shortage of official guides, outlines, roadmaps, and initiatives launched to ensure the AI sector continues to thrive while being managed responsibly.

Official releases such as Made in China 2025, the Next Generation Artificial Intelligence Development Plan of 2017, Action Outline for Promoting the Development of Big Data (2015), Deep Synthesis Provisions, and Administrative Provisions on Recommendation Algorithms in Internet-based Information Services ensure that the development, use, and deployment of any AI-related tech within China's is governed within the confines of properly defined ethics and considerations.

The aforementioned guides are used in tandem with China's three data-related regulations, including the Cybersecurity Law (CSL), Data Security Law (DSL), and Personal Information Protection Law (PIPL).

Moreover, separate provincial regulations for specific regions, such as the Shanghai and Shenzhen Regulations, deal with AI-related matters on a more specific and municipal level.

As a result, not only can China boast of a highly structured and methodical regulatory infrastructure in place to curate the use and development of AI technology within its borders, but it can also make targeted amendments within these regulations dependent on the needs to ensure regulations do not impede innovation at any juncture.

Impact on Local Tech Companies

Owing to the sheer size of the Chinese economy, any regulatory decision in Beijing has a ripple effect on the rest of the world economy and the business world in general. However, its most immediate effect is almost always on the local tech companies.

This was the case when the initial draft measures were released in April. Considered by some as overly strict, it followed a pattern of CAC ensuring the presence of thorough and comprehensive mechanisms that would allow the central government a deeper insight into how various organizations were developing different AI products and services.

Other requirements included standards to ensure the training data and the output generated were of adequate accuracy and strict emphasis on using legitimate data sources.

However, the latest draft measures (AI Measures) offer critical leeway to organizations developing AI services, with only organizations offering their services directly to the public being subject to these requirements.

Economic Growth & Productivity

Similar to the rest of the world, Chinese tech companies have been busy burning the midnight oil in undertaking several ventures that could give them the lead in the global AI market.

Traditional giants such as Baidu and the Alibaba Group have seen record investments over the last couple of months, with dozens of AI models and algorithms being developed in the wake of ChatGPT's monumental success since the start of 2023.

However, despite the presence of both investment and products at various stages of development, most tech companies in China have held back from introducing their products to the wider public.

The recent announcement of the finalized version of the draft measures introduced in April has been cited as the primary reason. Most organizations developing AI products and services have adopted a wait-and-see approach before releasing their products to ensure they stay within legal requirements.

Additionally, tech companies within the B2B sector have focused on expanding the industrial applications of their products, with JD becoming the latest name to join the list with its ChatRhino model.

Balancing Innovation & Regulation

In this particular regard, China faces the same fundamental issue as the rest of the world: how best to balance innovation and regulation.

As elaborated earlier, the AI Measures provide some much-needed "breathing room" for tech companies within the AI sector, as these measures will only apply to content created or generated for the public.

Crucially, the AI Measures exempt research institutions and services developed exclusively for overseas users. This allows Chinese tech companies with greater incentives to collaborate with international partners and expand their services globally without fear of backlash at home.

China's regulatory reputation has been intensely debated over the years. Many point to the strict censorship of the Internet, social media, and the overall flow of information as detrimental to technological innovation.

However, regulators in the country have adopted a more nuanced approach to AI regulation, with the AI Measures emphasizing the need to balance "development and security."

To this end and to protect data subjects, the AI Measures bind generative AI service providers to comply with network information security and personal data protection obligations. The measures also direct to ensure the safety of vulnerable groups, i.e., minors, by preventing overreliance or addiction to generative AI.

The requirement of generative AI products to undergo a security assessment before their availability for use shows the extra due diligence put in place for the safety of the users. Additionally, seven national agencies will oversee the implementation of the AI Measures, including the National Development and Reform Commission and the Ministry of Education, signaling the degree of importance China has placed on effectively handling AI regulations.

The AI Measures also address the potential risk of generative AI using existing work of original creators, directing service providers to respect and not infringe upon the intellectual property rights granted by the law. Organizations are also required to take effective measures to improve the transparency, accuracy, and reliability of the content generated using AI.

What The Future Holds

In many ways, China's regulatory actions related to Generative AI starkly contrast its previous record. The regulatory bodies clearly see the potential AI represents for China as well as China's own strengths within the field.

No country can match China regarding AI-related academic papers, patents, investments, and funding raised. More importantly, China's overall AI investments are expected to cross the $26 billion mark within three years, with the country forecasted to account for almost 10% of global AI investments.

Needless to say, China has a strong case to be the world leader in the AI industry. The establishment of the Shanghai and Shenzhen Innovation Zones, in addition to exclusive regulations for these regions, indicates the resources China is willing to dedicate towards its ambitions of global AI leadership with complete self-sufficiency.

How Securiti Can Help

Generative AI presents a unique opportunity for businesses globally. At the same time, owing to the collective lack of understanding related to its potential, it can cause severe data compliance issues for organizations.

Organizations in China will find themselves facing a similar conundrum. As proactiveness within AI adoption has enabled China to press its claim as the global leader in AI, a similar approach toward regulatory compliance will be necessary.

Securiti, a leader in providing enterprise data privacy, security, compliance, and governance solutions, has various dedicated modules and products to help organizations meet any regulatory obligations they may be subject to, specifically ones where organizations may be required to undertake special measures related to user data in the context of generative AI.

A global leader in providing enterprise data privacy, security, compliance, and governance solutions, Securiti Data Command Center enables organizations to optimize their oversight and compliance with China's extensive AI and data regulatory regulations.

As a result, organizations can identify and respond to any irregularities within their compliance protocols proactively while minimizing any chance of regulatory violations or neglect.

Request a demo today and learn more about how Securiti can help your organization achieve regulatory compliance with AI regulations in China today.

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