Facial Recognition Loses Face in China
Skinny readers who've been with us for a while may remember when we hypothesised how retailers would be able to tap into China's facial recognition with consumer scenarios in 2019 and beyond. The anticipated opportunities were the result of China's leadership in facial recognition tech, coupled with its liberal policies and consumer attitudes towards the privacy. While cities such as San Francisco and Portland have banned the use of facial recognition, the technology has flourished in China with numerous marketing applications. Unfortunately many have been unscrupulous.
On CCTV's popular consumer rights broadcast, the "315 show" on Monday, illegal use of facial recognition in commercial property including shopping malls, auto dealer shops, and property sales offices was called out. Businesses have been using facial recognition to track consumers' gender, age, mood, and whether they had visited their stores before. This breached China's recently implemented Civil Code for using personal information without consent.
We started to see fledging resistance to China's lax privacy data in 2017, but it has only been in the past few months that we have seen real, decisive action. Late last year there were some relatively high profile cases from a safari park to real estate companies being forced by authorities to remove their facial recognition systems. This week, makers of 136 mobile apps from companies including Tencent and AI giant iFlyTek were called out for not rectifying privacy violations in a timely manner amid China's ongoing efforts to improve the protection of data privacy.
President Xi has called for efforts to build China into the world's major science centre by 2035. The country will increase research and development spending by more than 7% each year over the next five years, and increase expenditure on basic scientific research by more than 10% this year. Unlike in the past, this innovation will not be driven through unbridled growth of its private sector tech giants. Beijing is aiming to control more of it from the state and making steps to arrest some of the control from China's all-powerful tech giants.
We saw it with Ant Group's last-minute IPO suspension and subsequent tempering. As a result, the poster-child of China's tech revolution, the formerly Teflon-clad Jack Ma, has rapidly fallen from grace for his 'capitalist ways' in many Chinese consumers' eyes, including the liberal youth. And the authorities haven't finished with him yet. Officials are reportedly appalled at how expansive Alibaba’s media interests have become and are concerned about the technology giant’s hold over public opinion in the country. They have asked the company to come up with a plan to substantially curtail its media holdings. The authorities are also considering slapping Alibaba with a fine that could surpass a billion dollars for antitrust behaviour.
Beijing has already imposed administrative penalties on 12 companies, including Tencent and Baidu, for violating the anti-monopoly law. In addition to the regulators' penalties, tech companies are using the legislation against each other, with ByteDance and Tencent having hundreds of lawsuits and strategic incursions into each other’s turf, including those for anti-monopolistic behaviour.
Expect to see China's big businesses aligning with government directives more than ever before. Even smaller businesses operating in China should pay close attention to government strategies as it impacts everything from market regulation to consumer behaviour. Another 'P' should be factored into every marketing mix in China, that is Policy. It's something that China Skinny follows closely and incorporates into every marketing-related project we do for our clients.
Last week saw China's week-long Two Session's meetings take place, where the National People’s Congress (NPC) formalised the outline for the 14th Five Year Plan and long-term targets for 2035. Here's a comprehensive summary China's 14th Five Year Plan. It's a long read, but a helpful way to understand Beijing's directives, and how they could impact the market and where your brands fit into it all.
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