Building platforms that balance governance and market efficiency
State-owned smart city investment companies promote the centralized construction and sharing of infrastructure and the decentralized collection of data to contribute to a shared pool of resources, all of which are conducive to good governance. We should be cautious, however, about the inertia of state-owned investment platforms in traditional infrastructure investment, construction and operations. For example, an investment platform may monopolize the downstream data market, which could discourage MSMEs (micro, small and medium enterprises) from innovating in various fields, including law, finance, consulting and technology, thus weakening market efficiency. To prevent this, the government should proactively coordinate planning, allowing intermediaries to focus on other opportunities and their businesses in the data market. It is also necessary to establish a cross-regional intellectual property protection and dispute resolution mechanism, as well as a regulatory anti-monopoly mechanism to keep competition in check and protect digital intermediaries.
On the other hand, we should be cautious about the risk of information infrastructure turning into real estate investment trusts (REITs). Most infrastructure such as urban wireless networks, data centers or urban big data platforms are public facilities that tend to have low profitability and lose their values within three to 10 years, which is much shorter than the depreciation of traditional infrastructure. State-owned investment platforms may therefore accumulate many low-profit assets, which will increase debt risk.
Adjusting administrative structures to facilitate data governance
In general, China enjoys a wealth of experience with data governance systems applied in cities, districts, streets, communities and buildings, as well as popularizing the use of mobile terminals at different levels and decision-making systems. The next important task would be to make the governing structures and rapidly changing technology adapt to each other.
The Chinese government acts according to three considerations: responsibilities, organization and staffing. “Data” should also be included to allow the execution of pilot projects in certain cities. The Economy and Information Technology Bureau and its big data centers can provide regular and standardized guidance and supervision during the whole life cycle of the data.
Second, the state should establish interdepartmental and cross-regional virtual organizations to promote collaboration. At the municipal level, for example, cross-departmental virtual platforms can improve the efficiency of governance without burdening individual government departments. In addition, towns and communities can also build cross-regional virtual platforms to address the challenges of cross-regional governance.
Third, a supervisory mechanism should be put in place to ensure fair competition and strict oversight. Regulatory bodies such as the Market Supervision Administration should establish an integrated and comprehensive credit supervision mechanism for enterprises and the government. In addition, regulatory sandboxes can be enforced annually or on a departmental basis. The items on the regulation list could be adjusted based on effectiveness.