The PIPL Is Out, What Does It Mean For Its Tech Giants?

China passed a major data protection law that sets out stricter rules for how companies gather and use their users' data.

A previous draft of the law said that tech companies must ask for the user's consent to collect its data and users can withdraw at any time. On top of this, companies can't refuse to serve users that do not opt in unless the data is necessary for the provision of the product or the service.

"The PIPL is regarded as the “Chinese GDPR” and widely believed to have significant influence on the development of many industries especially the digital business." Ken Dai, Jet Deng for JD Supra


The Chinese GDPR

The Chinese PIPL resembles the European GDPR and the California Consumer Privacy Act (CCPA) in many respects:

  1. Right of knowledge, decision, restriction and objection
  2. Right to access and copy
  3. Right to rectification
  4. Right to deletion

These provide users with the right to know how the data will be used in a clear and understandable way. Furthermore, users can also request to access their personal information with the data being delivered in a timely manner. Users also have the right to get their data corrected or deleted if asked.


BENCHMARK’S TAKE

  • China's tech champions have grown at a very fast pace and have amassed an unprecedented amount of power and information through the millions of transaction they process
  • China is at a pivotal moment in its history, as it tries to grow its middle class, increase its GPD per capita past the $ 10.000 mark while preserving control over its economy and limiting the damages of its ageing population and risky loans

"As China’s growth slows, authorities are looking to strike a better balance between maintaining control and allowing some market-driven forces into the economy in order to sustain growth in the long term." by Evelyn Cheng and Weizhen Tan for CNBC

  • We therefor believe that the past, current and future crackdowns will be aimed at preserving control and maintaining social order. This means, limiting the power of its tech giants, restricting the information they can gather and requiring these to act in the best interest of the state (e.g. by paying higher wages)
  • On the brighter side, we do not believe that the state aims to break down its economy and tech champions. It needs them to provide higher paying jobs, train its workforce, compete at a global scale and grow its influence over the world (e.g. the TikTok phenomenon)
  • We therefor believe that patient investors should be rewarded for holding TIER-1 Chinese stocks. However, cautious investors should also closely monitor what is happening in Chinese debt markets, certainly as state owned enterprises are at risk of default

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We have invested in over 45 stocks throughout North America, Latin America, Europe and Asia. Typically, we target fast-growing companies (U.S. and global) with a market cap between $ 1B and $ 100B.

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Credits

Photo by 天琦 王 on Unsplash.