Understanding Beijing’s data lockdown: Q&A with Mu Chen of Baiguan

One recent Friday night in a resort town three hours east of Beijing, Mu Chen (陳沐 Chén Mù) scaled the Great Firewall and connected with me using an American video conference platform.

His leap was a fitting way to land in conversation about how his Chinese-raised, Western-educated brain is pulled in two directions when talking about Beijing’s decision to limit access to data — restrictions that, for instance, withhold youth unemployment data from the public, and stop people outside China from seeing popular academic and commercial databases whose rich information has powered international scientific cooperation and global investment in China.

Chen’s company, BigOne Lab, works at the heart of those contradictions.

This is an abridged, edited transcript of our conversation.

—Jonathan Landreth

In a recent podcast, you talk about China valuing “pragmatism” over “transparency.” Was that behind Beijing halting unemployment data?

The way they announced the stoppage caused some emotion in society. However, one premise is that this is the only way for information to flow down to society and gather feedback. The more years I spend back in China, the more I’ve observed that there are many channels for the government and decision-making bodies to gather information. They host sessions with representatives from the business community and talk with scholarly experts. This is happening repeatedly: different levels of government talking to relevant people about what they think is relevant.

Information flows two ways. One typical example is that you can see the State Council, or the Central Committee, and the Politburo, inviting economic scholars to study sessions to discuss what they’ve published, then that will be published on CCTV. But there’s also lower-level communication going on with select people. There’s a massive system that’s working to ensure information is flowing up and down.

We mentioned pragmatism. That’s the decision surrounding how to manage the expectations of the entire society on the economy, right? The methodology of calculating the U.S. unemployment rate is, from my perspective, not clear. When you’re publishing something that’s unclear and news about it is trending up, and the way it’s being read is trending negative, then it’s like digging a hole for yourself. Then you have to explain it. The methodology itself might be outdated, and so it’s like digging a hole to publish it.

Another perspective is that the governing system should release economic data, like the Federal Reserve does in the U.S. That’s how information should be transmitted to the broader society and how you gather expert information, right? We presume that’s best practice. Each time something is different from best practices, my first reaction is, “Something’s wrong.” That’s often the Westernized side of me. We often react to things like that. But the Chinese side of me would then say, “Okay, actually, put that Western mind aside and think. What if you were in [the Chinese government’s] shoes? They need to govern to get their paycheck. What kind of job are they doing? What’s their purpose? How are they going to achieve their purpose, not in a Westernized way but their way?” All of which might not be understandable in the West.

There are a lot of ways to share data. The Chinese way might have certain cultural nuances about transparency, like, maybe you’re “losing face” if you’re transparent. But when we take a step back and think about the Chinese government as professionals, they have jobs to do. They cannot make a decision just because it’s “losing face,” or for other superficial reasons. There must be some sort of deeper reason for the government to make a decision.

You observe a lack of professionalism among Chinese government officials, especially when facing the public. What’s the incentive to speak the truth when there’s no free press to check you?

There’s a lack of interdisciplinary skills. The people at the Bureau of Statistics are good at statistics, but they might not be good at PR. It doesn’t mean that they lack professionalism in their field. The Western side of me understands you’ve got to have the voters check you, or have the free press check you — but again, in China, there’s a basic assumption among people that government officials are getting the job they have to do right, and that they are being governed by certain systems. They cannot just do whatever they want.

In a work by a Chinese political science PhD from my alma mater, the University of Virginia, the author interviewed local government officials and found that they all had Key Performance Indicator check sheets. The mayor might decide some KPI and then break it down and then put it down to the district head. He’d then distribute that KPI to other teams. So, there’s a scorecard, one that’s definitely needed to govern such a big official team, right? Part of those scorecards are social stability and social welfare, right? The weight of those aspects of the KPIs changes every five years or so. It’s not just GDP, but the mix of the scorecard, that keeps governing skills in check.

Putting yourself into the shoes of the senior officials governing the junior officials, you don’t want to just look at what the junior officials are telling you. That’s just typical, normal management: you have got to have some third-party sources to help you verify information. In the West, maybe it’s the free press itself. In China, there are other systems. There are teams from the Central Disciplinary Commission and the Bureau of Statistics to cross-check information.

It goes back to pragmatism. Regardless of what the value system is, you still need to install the system to manage people. What contributes to the lack of discipline, or the skill of public relations, is also the lack of a need to manage the press. I don’t want to sound offensive, but think about it: Trump was great with the press and publicity, but his management skills and the results? Well, some people think that he was great and some people say he’s not great. Does checking the system really work? If the press is creating all false information, then doesn’t that mean that the function of the press is not working? It’s just a system design. It’s hard to comprehend because it’s different.

Some Chinese friends who live here in the U.S. argue that freedom of the press and democracy are overrated.

Talking about the shortage of information, I think it depends on how you look at it. Every five years, China’s central government will publish their governing philosophy and principles in the Five-Year Plan. Then each department in every province will take that spirit of the central government — which is more about principles and less about execution — and break that down and then publish their own documents. The perception of a lack of information comes from the language system being so different. I had to read the 20th Party Congress Report three times because I’m not familiar with the language to understand the ideas and thinking behind it. They actually tell you ahead of time what they are going to do in the next five years. It is in a very different language, so it’s not easy to understand. I agree that it comes across like there’s no information.

When I looked at the implementation of the “Double Reduction” policy in the education system, for instance, it was actually an expression of the spirit of a mandate that the government reduce the burden of school for kids, by providing more equal opportunity and equal resources for different people from different social classes. It was first announced in 2017, when the Central Committee addressed it, but I think people just didn’t know that they’d been spending time on that. That’s the challenge, right? If you don’t know it’s coming, then negative emotions in people are going to come up.

This was the mandate that cut down on often expensive after-school tutoring, right?

Previously, the more money you had, the more you could spend on out-of-class training and tutorials. Richer people got more tutoring access and resources and might get better education, in essence. The principle was to reduce and restrict that so that everyone could get equal access to education.

Western media called it centralization of state education, which prevented independent study. Chinese state media called it a leveling of the playing field. In effect, it was a clampdown on the tutoring that had led some Chinese to study overseas.

I put myself into their shoes and thought, “Okay, if you don’t do this, what can you do?” It’s so hard. It’s always so hard.

When you read that youth unemployment was 21.3% in June, you looked at the survey methodology and calculated that the number on the ground was 6.5 million unemployed aged 16–24. How did you get that number and how does it feel different from the percentage?

I went to WeChat to look for articles and came across one that made sense o­­f the methodology. It said that the participating potential labor [in that age group] is about 32 million people. So, 20% of that is about 6.5 million. The whole article is talking about how he did the estimations. My first reaction to the government figure was, “Oh my God, one in five young people in China is unemployed? That doesn’t make sense. That sounds like a lot to me.”

As a data person, my intuition was to look at the official stats’ methodology. When I saw it wasn’t very clear, my second reaction was, “Okay, the press is reporting the eye-catching stuff, but let me try to see if anyone, any scholars, have done any research on the actual hard number.” So that’s how I came across this article. Then there were some other articles that talked about 9 million unemployed youth. So that’s the range: 6–9 million.

What does “participating” mean in this context?

Seeking a job. People from 16–24 are in college, or some of them are doing graduate work. So, you have to take those people out of the survey. Some others are doing a gap year, applying for associate degrees or grad school, so they spend a year studying for the exams. Even though these people are out of school, they’re still preparing for school. So you have to take them out of the survey pool, too.

Are most of the “participating” unemployed people who didn’t do well on the college entrance exams and rural Chinese?

I don’t have details on the demographic characteristics, but, yeah, maybe. We don’t have that granularity. So that’s what’s lacking in the official number and causing more questions than answers.

How are Chinese 16–24 today different from their counterparts in North America or North Africa? What are their unique challenges?

If I answer this question, I’m going to get attacked again. But anyway, when we look at the unemployment problem at a high level, what’s raising concerns is that the economy is not doing well. Secondly, the negative, explicit impact, when talked about in economic terms, has to be explained: in the United States, when you become unemployed, yes, maybe your parents will support you, but then there are drug problems and homelessness. The cultural difference, family support aside, emphasizes individualism, right? The family as a support system is weaker in the U.S. than it is in China, which is more influenced by Confucianism that emphasizes the family as the minimum social unit.

So, then these [American] kids do something bad and maybe get kicked out of the family. I’m not saying that’s a majority, but I’m assuming that the percentage of kids kicked out of the family is higher in the U.S., causing social instability, not to mention drug problems. You’re on your own once you pass 18 in the U.S. In China, there’s a moral obligation for parents to keep taking care of their kids. So that’s my thinking about the negative external impact of U.S. unemployment. In China, it’s more contained.

You asked about a lack of incentive to leave home. Being protected by your parents doesn’t mean that your parents are not going to push you to work. Think about the tiger moms and tiger dads we have. As much as parents will take care of their kids, they will push their kids so far, to where they’re annoyed. “Go find a job! Go take the civil service exam!” I don’t think they will be dis-incentivized and just keep staying at home. Family is a protection for them as they transition from unemployment to employment.

What does China’s gig economy look like? What are parents and the government saying about it?

One of the largest, more popular groups in the gig economy are the individual influencers. Livestreaming is happening in industrial parks where local governments actually give out office space to hundreds of professionals streaming and selling products. Talk about pragmatism: local governments are held accountable to KPIs — they have to develop the economy and provide employment opportunities — so, whatever fits into the framework, they will try to adopt it, and try to adopt it in line with the central government’s governing spirit.

It’s fascinating what the government is doing, encouraging this stuff on the one hand, while, on the other, introducing regulations—rules to avoid tax evasion, and handle content management so there’s no vulgar or bad content. It’s always green-light and red-light going hand-in-hand, which I appreciate. Nowadays, the government is mindful about the role of regulation in every new industry. For example, the AI industry: even though there was a lot of debate and controversy when the first draft of AI regulations came out — even negative feedback in society which openly criticized the draft — it was actually one of the first times that the government tried to move ahead of industry development, rather than lagging behind.

I think that shows the modernization of regulation and efficiency. Then, on the parents’ side, there’s a generation gap, right? I don’t know how you feel if your daughter is influenced on TikTok, but I cannot imagine a 20-year-old explaining to their 40- or 50-year old parents what they are doing, like, “Okay, I’m an influencer with a Little Red Book and I’m making 10,000–20,000 yuan [$1,367–$2,735] per month, right?”

I don’t think their parents will understand what’s called tàndiàn 探店, and dài huò 带货, and dá rén dài huò 达人带货 — influence broadcasting. From my perspective, there’s a higher percentage of parents supporting their children going into new opportunities now compared with 20 years ago. Twenty years ago, we saw press reports about computer addiction correction school. You’d send your kids there because you thought your kids played computer games too much. They’d go to different sorts of interventional therapists that were horrible. Now those schools are a marginal thing and are being criticized. Parents are more open-minded.

If the CCP’s social contract is “We will help you grow your financial well-being if you sacrifice certain cultural and political freedoms, including access of information and free exchange of information,” doesn’t that seem increasingly risky in the era of livestreaming?

The idea of a social contract is a Western idea. I understand it because I studied Chinese politics at UVA with Professor Brantly Womack, who taught me about social contracts as means to preserve the legitimacy of governing powers. But that’s a foreign idea. So, if we force ourselves into looking through this lens, then, of course, we have to first construct a contract between the government and the people, and then think about the terms of the contract. I went through reconstructing myself, right? The social contract may not completely explain Chinese society. It’s a simplistic construct. If you really want to construct a social contract, then there’s the relationship between the central government and the local government. They actually have a relationship, right? A sort of contract of power, economic dynamics, and political dynamics.

Then there’s provincial versus city level, and city versus district level, and district level versus community level. What you see as an individual in China is your day-to-day work, day-to-day life, and you hear what the central government says, but do you really care that much? No. I care about what my community talks about. If I’m a business owner, if I’m in a restaurant, then I care about the local department of commerce, whoever’s regulating me. Then I construct a quote-unquote “contract” with these people, with this team. In some ways, if you’re a business owner in China, it’s very business oriented—working with your direct counterpart in the government, or the directly relevant people in the government.

As a business owner, when I think about government and regulators, I have a specific person in mind. I try to emphasize KPI when I assign contracts, for incentives and subsidies and things like that. I have in my mind where they stand, their goals and their priorities. If we extrapolate that upwards we cannot ever get to that very central level. It doesn’t work. That’s because you don’t have a centralized voting system. You don’t have to vote for the central government, so what you care about, your interested parties, are the local people.

When you look at that, it’s a more complicated system. There’s a contract — maybe a social contract, maybe a political contract — between the local people, layer by layer, and the government, and there’s an internal political contract between different layers of the government. I’m not a great scholar to come up with terms around it, but it definitely is more complicated than just one simplistic social contract that justifies legitimacy.

If China is walling in academic and commercial data from CNKI, Qichacha, Tianyancha, and Wind Information, blocking outside users from access, how is the cooperation that has enabled China’s growth around the world for the last several decades able to continue?

Within China, we’re seeing the government developing data as a production factor. They categorized it as a production factor in 2019, which elevated data, or information, to a very key element of the economy. They are building a market around it. That means that there’s more and more data out there in China, at least for domestic Chinese. Then, earlier this year, we saw the stoppage of offering data overseas. I’m not going to comment too much on it, but my speculation as to the reason, or my observation, is that most of the data that got stopped was not that, quote-unquote “clean,” or didn’t necessarily fit the regulatory framework.

The regulations are not stopping you from sending data overseas but you’ve got to, you know, anonymize them, desensitize them, and things like that. One piece of basic logic I can share regards company registration data, which show shareholding data of private companies in China provided by Tianyancha and Qichacha. The level of transparency is very high. In the U.S., you can go to Dun & Bradstreet and pay some money to get certain information about a private company, but the content within that report is less abundant. On that level, China’s data is quite transparent. You can see the shareholding, and that is provided by the government.

These data companies collect their data from the government, aggregate it, clean it, and definitely add value in the way they make the data more user-friendly. But to my knowledge, they have never paid much money, or any money, to the government for that data for making profit out of it. They pay taxes, of course, but they didn’t pay for licensing that data. They’re collecting data from the government’s public websites and then privately selling it, making money overseas. That doesn’t sound right. You’re not paying the government anything. In the U.S. if you want to get your Department of Motor Vehicles record, you’ve got to actually pay the DMV some money.

So, if I were a boss or a manager at one of those companies, I would stop providing that sort of data first, then find out what the regulations are.

Right now, within China, you’re seeing more and more data being privatized and commercialized. There’s a green light. That’s why the Data Bureau is under the National Development and Reform Commission (发改委 fāgǎiwěi) not under the Cyberspace Administration of China, which is more a regulatory tightening body. So that’s a green light. And then there’s normalization of data sovereignty. I think that’s the question: how do you regulate your data domestically? Again, I’m not an expert, but if you compare data sovereignty regulation, China is getting more advanced than the U.S.

I’m going to get attacked again. Look at how the U.S. is handling TikTok’s data transmission. They are running it on a case-by-case basis. There’s no overall framework, no overarching framework. U.S. regulators are not treating data as an asset.

Previously, you had the Cambridge Analytica leak of Facebook profiles, a few years ago, when the U.S. had not yet constructed an overarching framework. It’s actually a concern for the government. You cannot say that China is doing something wrong just because they are building an overarching data sovereignty framework. That, again, is pragmatism versus transparency. The data supply focuses more on domestic buyers and domestic consumers, so they’re not doing a really good job in making it foreigner-friendly, just like China is not yet that integrated with Visa and MasterCard and we have a hard time getting visiting foreigners’ payments done. There’s a rumor that you cannot live in China without WeChat Pay. It’s frustrating. I definitely empathize with that. It’s just like, “Come on, just build an English site already!”

It’s a prioritization question. If I have a market of 1.2 billion and a B2B market facing 20-40 million potential corporate clients, I should focus on that first while the transmission of data overseas undergoes new regulation. Overseas there’s more risk and we don’t know how many people will buy, anyway. The people who really care about China are not a big amount. I am not saying there’s not a problem, but if I’m making a business decision I will prioritize the market of 1.2 billion over a few hundred thousand potential users.

If China keeps CNKI shut to outsiders, scientists at the World Health Organization and the Centers for Disease Control can’t access Chinese research crucial to virus hunting. Isn’t that dangerous?

With the stoppage of CNKI, we are missing the intention or the cause. China is definitely not trying to shut down foreign access. That doesn’t make sense. In a September 6 news story, we saw that CNKI got punished for 15 million RMB, because they didn’t handle personal identity data well. That’s a valid perspective. They have their own reason to shut it down. We just didn’t understand it. One of the largest academic paper websites, accessed by millions of foreigners globally, was leaking personal information. What to do?

What’s Beijing’s motive in raising data’s importance? Is it control? Is it profit? Will it all be commercialized?

We’ve got to separate intellectual property and scholarly research data from the government’s move to categorize data as a production factor. It’s pretty pragmatic. They see what’s going on in the West, with Cambridge Analytica using data to help campaigning. Data is an asset, for sure. When China categorized data as a production factor, that means it’s a big asset. They’re trying to build regulation about rights, prohibitions, commercialization, security, and things like that around their assets. On the ground, there’s commercialization efforts, and market-making efforts, around data promoted by the government. There’s some innovation going on around data-asset-based loans that are just being released in Suzhou, where some banks have a data set that they use as collateral to borrow money from lenders.

At the end of the day, it’s recognizing data as assets that have value you don’t want to flow around. If you can recognize that, and create a market around it, the economy will benefit and people will generate profits. Someone in Guizhou is experimenting with commercializing individual data. At the Guizhou data exchange there’s a case study in its early days.

Commercializing the data of one in five humans on the planet offers immense power, but what about collateral damage caused by shutting off data that should be free for the betterment of all?

Maybe sometime in the future you’ll see an English-language website with some data in China, but they are going to charge a fee. Maybe that’s what’s going to happen.

Is that website going to come from the government?

I don’t know. Maybe a private-public initiative or a joint-venture. I know about a cross-border data exchange initiative that’s being viewed in Shenzhen and Hong Kong, but it’s still early-stage. They’re starting to build that. That might be the official channel right. They’re trying to get unofficial transmissions and interactions under the official channel.