China needs to focus on transparency in data economy

February 12, 2019 13:22
We are in a world where data can be faked very easily, leading to wrong decisions costing millions of dollars or worse. Photo: Xinhua

China’s statistics agency is clamping down on fake data – the first step should be ensuring transparency in the data supply chain. 

Following the publication of a list of 14 areas in seven cities which were found to have been massaging their data in early 2018, China is starting to get serious about its fake data problem. As the government’s statistics agency starts developing regulations and weeding out organizations that have submitted false data, it will find the issue is a lot more pervasive than first thought. 

China has a problem with fake data. Last year, serious fake data scandals in China’s vaccine production and distribution system were exposed in which companies would routinely forge data on the effectiveness of their vaccines and falsify expiry dates. Poor quality data from individual provinces has masked economic performance and underestimated China’s carbon emissions. These are just a few examples of falsified data that have come to light in recent months. 

Poor quality data can have serious consequences. Children’s health can be put at risk due to out-of-date vaccinations, entire nations’ economic and political policies are based on economic growth data coming out of China. The government is right to start focusing on fake data, but it should look at the wider problem of a murky data economy if it really wants to root out this problem. 

Broadly put, the data economy is the production, flow, buying and selling of data. Data producers (such as ride-sharing apps which emit data on the movements of passengers and drivers) create data, which is then stored and often purchased by a third party. The third parties who purchase this data then use it for their own, separate business purposes. 

The global data economy is huge. At our current pace we are creating 2.5 quintillion bytes of data each day and over the last two years alone we have generated 90 percent of all the data that exists in the world. 

Data is produced, and used by, almost everything you can think of from smartphones to social media, GPS systems to the stock markets, and it is big money with big data and business analytics solutions forecast to reach US$260 billion in 2022. 

Yet the problem is – and this is the problem China is facing – that the data economy lacks transparency. There are layers upon layers of middlemen who buy and sell data from each other and then sell up to the end-consumer – be that a large fast-moving consumer goods company wanting to know how many of its products are sold, or governments wanting to know travel patterns of citizens in a certain area. 

Many of these middlemen, though, try to hide their sources and make it non-transparent. They do not want to show where this data comes from for either malicious reasons (data could be false, replicated) or non-malicious reasons (they either don’t know or want to protect their own sources). By not knowing the original source of the data it is hard for companies to know its quality and accuracy. Additionally, we are in a world where data can be faked very easily, leading to wrong decisions costing millions of dollars or worse.

 If this is the state of the global data economy, it may not be a surprise if local Chinese firms choose to falsify their data. But this has knock-on effects for local and international firms doing business in China. Firms with long-term deals with a local Chinese province, for example, may suddenly see their relationship end as the province is forced to reveal its GDP numbers were inflated (by 23.3 percent as in the case of Liaoning province) and has to cut spending. 

Companies using location data surrounding shopping habits in Beijing may invest millions in a new store only to find underwhelming – and unexplained – sales figures. The list goes on but the risk of operating in China is much larger thanks to fake data.

The Chinese government can choose to regulate its way out of this problem as it is doing for the vaccine industry, seeking to impose the toughest regulatory system to date. Or the government could turn to technology to solve the problem

Data authentication technology exists that can track data from its source and uses blockchain to stamp an indelible signature to it. This guarantees that, from the time of stamping, any change in the data will result in a misalignment to the unique signature, signaling to the buyer that the data has been changed. 

The result is more accountability, as poor-quality data can immediately be traced back to its source (that would curtail click farms and other bad actors), and more trust as users would know that the data they have received is accurate as of the time of creation. For Chinese businesses and governments to best serve their stakeholders – be they customers or citizens – they need to have real, accurate and authentic data that will lead to better quality, more effective decision-making. 

Burdensome regulations often stifle innovation and growth, rather than address the underlying issue. Innovations in technology and blockchain can provide a better way to regain trust in Chinese statistics. Ultimately though, governments and industry the world over need to focus on bringing trust and transparency to the data economy. 

Blockchain-enabled data authentication technology will not only result in better quality data but also encourage innovation as data sources can be mapped and organized better.

Technology has caused some of these problems, and technology can solve these problems.

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CEO and Founder of Quadrant, a platform that maps and authenticates data