Is Google a monster that must be tamed by regulators and governments around the world or will it eventually rule the world?

These were the questions U.S. economist George Gilder raised during the 2020 New Economy Think Tank Summit in Beijing on January 4, where digital economy professionals discussed trends and exchanged insights.

The reality is that the world economy is becoming more and more digitalized with the development of the Internet, big data technologies and artificial intelligence, posing opportunities as well as challenges. In 2019, major Internet and IT companies occupied seven of the top 10 spots of the most valuable companies in the world, according to statistics.

A major fix

Digital transformation is affecting policymaking across a large spectrum, including competition, consumer rights and interests, and the digital economy (privacy, security, infrastructure, economic impact), among others. The U.S. and European countries have all ratcheted up measures to control Internet giants' misconduct with multiple investigations.

China, home to an increasing number of Internet companies that are growing exponentially, is taking steps to regulate the digital economy. On January 2, the State Administration for Market Regulation (SAMR) rolled out a draft amendment to the Anti-Monopoly Law, which is considered a major fix since its adoption in 2008 and will solicit public opinions for a month.

SAMR, founded in 2018 as part of an overall reform of state institutions, is responsible for market regulation, anti-monopoly law enforcement, investigations into price violations and competition through inappropriate means, and management of intellectual property rights.

The decision of the Fourth Plenary Session of the 19th Central Committee of the Communist Party of China released on October 31, 2019 stressed the importance of anti-monopoly policies for the Chinese economy.

The government should "strengthen the basic status of the competition policy, implement a fair competition review system, and strengthen and improve anti-monopoly and anti-unfair competition law enforcement," according to the decision.

Compared to the current Anti-Monopoly Law, the draft seeks to include digital economy patterns. The present version stipulates that proprietors who occupy a dominant market position shall not abuse their position to exclude competitors or restrict competition. Such proprietors are identified according to market share, related market competition and ability to control sales and raw material procurement.

The draft identifies Internet company proprietors and gives extra consideration to network effect, economy of scale, lock-in effect and capacity to control and handle data. It also stipulates that proprietors and industry associations who violate the law will be subject to a maximum fine of 50 million yuan ($7.2 million), a hundred times more than the current law.

Provisions concerning the fair competition review system have also been added, requiring the standardization of government administrative action to avoid policies that limit competition. When administrative organs and public organizations formulate regulations concerning the market, they should guarantee fair competition in accordance with relevant state provisions.

Meng Yanbei, a professor of economic law at Renmin University of China, told Beijing Review that regulation of the digital economy is a systematic project involving multiple laws and regulations regarding data, algorism, piracy, transaction principles and others.

The draft highlights the importance of the fair competition review system, improving the regulatory framework concerning the new features of the digital economy and providing a Chinese solution to challenging digital economic patterns, Meng said.

China's Anti-Monopoly Law has a history of only 12 years, thus it lags behind advanced countries in theoretical studies and practical experiences when it comes to anti-monopoly issues. But the thriving digital economy is providing major countries with a level playing field, according to Meng.

"The draft's attempt to include the digital economy reflects legislators' effort to keep up with the times," she said.

Common concerns

Scholars who attended the summit discussed the digital economy, innovation and competition, agreeing that innovation and dynamic competition have injected great vitality into the economy and brought increasing value to society.

In Gilder's view, China has created a new kind of platform company that empowers its customers and even its competitors, and thus is a new feature of the world economy and a positive development.

He said he believes that one of the reasons behind China's entrepreneurial success is that it has platform companies like Alibaba and Tencent that provide opportunities for entrepreneurs across the country to feed on their innovations.

"Alibaba is not a dominant force that rules and centralizes people, powers and facilities," Gilder said. "It is a new kind of company that fosters new enterprises and entrepreneurs. It also develops fundamental new technologies that are propagated around the world."

Xue Lan, Dean of Schwarzman College of Tsinghua University, said the productivity paradox, the innovation paradox and the failure of supervision are three growing pains of the digital economy.

To tackle these problems, Xue proposed agile governance, which means policies should strike a balance among multiple targets. In the case of the digital economy, it should promote innovation and protect customers' interests, and respond in a timely manner to industrial innovations.

"Regulators should learn from companies before making decisions and companies should also be accustomed to more regulations," Xue said, citing the example that in the U.S. state of California, drone companies and regulators formulated rules together to protect the public interests from drone flights. "Mutual learning should be encouraged," he stressed.

The best solution for all is to achieve a fair market environment while leaving enough room for future innovation, Xue said. Together with the government and legislators, companies and industry associations, whose business concerns the public interest, are also encouraged to shoulder their responsibilities in establishing rules.

Harmonious coexistence 

Large and small companies must cooperate in order for the digital economy to innovate and grow, said Gao Hongbing, Vice President of Alibaba and Director of AliResearch.

"It is very important for an enterprise to be strong in market innovation and competition," Gao said. "An enterprise must have the ability to constantly promote its innovations to the market, society, partners and even competitors through its creativity. It is what we call common values in business."

"Most importantly, a digital economy platform should guarantee consumers' interests," he said, adding that Alibaba is not just an e-commerce company, but also a hi-tech company that is devoted to innovation, exemplified by its advanced logistics and trade platforms. It is leveraging digital technologies and its platform systems to connect production with demand, increasing productivity and lowering financial costs.

Zhang Qiong, former Deputy Director of the Legislative Affairs Office of the State Council, said future legislation should uphold principles such as maintaining neutrality, inclusiveness and prudence. And the laws must be devised with a global and future-oriented perspective, while encouraging the development of advanced productive forces.

"A fair and equal market environment is the foundation for the coexistence of large and small companies," Zhang said. "Achieving a fair market environment, while leaving enough room for future innovation is necessary for all companies, both big and small."

Copyedited by Rebeca Toledo

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