What’s holding back China's data trading industry

January 17, 2019 13:21
Data trading is currently dominated by raw data, and transactions involving processed data and derivatives remain limited. Photo: Xinhua

Trade ministers of the United States, Japan and the European Union met in Washington last week to coordinate their efforts in promoting a new industry – the trading of data. 

The three parties are expected to take the lead in setting the international rules for such transactions. 

Cross-border data flows already contributed 3 percent of global GDP in 2014, according to data from McKinsey. Data flow and transfer are set to be a big trend in the coming years. 

The world’s first data trading center was established in southwestern China's Guizhou province in January 2015 on the central government’s active promotion. 

Following Guizhou, Beijing, Shanghai and several other Chinese cities also built similar data trading centers.  

It’s estimated that China’s big data-related market reached 3.39 billion yuan (US$500 million) in 2015, and is expected to spike to 54.5 billion yuan by 2020, according to the 2016 China Big Data Industry White Paper. 

However, China’s data trading business is still in its infant stage. There are several key hurdles. 

Currently, data trading is dominated by raw data; transactions involving processed data and derivatives remain limited. 

Governments and corporations have moved slowly in opening data access, leading to a mismatch between supply and demand, and, consequently, low transaction volume. 

Meanwhile, it’s difficult to control data flows. Insufficient protection for personal data in the collection process could lead to data leak and abuse, which may be hard to track down if the problem arises. 

So far there are no clear definitions for data ownership, right to use, and right to trade. Without clear definitions, it’s also hard to determine who should be responsible for data security. 

Data trading platforms rarely evaluate data quality, which makes it difficult to ensure the legitimacy and authenticity of data.  

Authorities have yet to set requirements such as the ability to determine data quality and ensure data security for all parties involved in data transfer, including the seller, the buyer and the exchange platform. 

Still, the future is bright. I strongly believe that data asset transactions will be a key element in the digital economy. 

Hong Kong, being global financial hub, should grab the opportunity. 

This article appeared in the Hong Kong Economic Journal on Jan 16 

Translation by Julie Zhu 

[Chinese version 中文版]

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Venture Partner of Sequoia Capital China, former head of the data committee and vice president at Alibaba Group.