Many China-watchers find it quite difficult to interpret the economic policy of the country, dominated by the Communist Party of China (CPC), which has completed its centenary this year. China remains a communist state, where there is a thin dividing line between the party and the government. And in post-Mao China— especially with the economic reforms ushered in by Deng Xiaoping from 1998 onward, and sustained by his successors, Jiang Zemin, Hu Jintao and now Xi Jinping— a vibrant market economy has emerged. Private enterprises bloomed, and it also created the paradox of millionaires and billionaires emerging in the Chinese society. There was a time when Jiang Zemin had mooted the idea that the capitalist in China should be asked to join the communist party in the country.

In the last few months, the Chinese economy has taken a new turn with the government bringing in oversight of the private companies, especially the big ones, like Jack Ma’s Alibaba, the online retailer and Tencent, the gaming platform. The Chinese national legislature has passed a law which will come into effect from November 1 this year which places restrictions on online giants like Alibaba and Tencent gathering personal data about their millions of customers and selling it to others. The new law has placed restrictions on the collection of data, and it has also prohibited the data being passed on to a third party without the consent of the customer. It has been observed that the Chinese legislation is akin to Europe’s General Data Protection Regulation (GDPR).

The critics, especially in the western media, have pointed out that the state in China gathers all sorts of data about its citizens, especially in regions like Xinjiang where there is political and social unrest. The argument is that if private companies like Alibaba and Tencent misuse the data for commercial purposes, the state in China misuses it to intrude into the private lives of its citizens. The argument about political freedoms in China have been contentious, but it cannot be used to judge the fairness of legislation against private companies misusing data about their customers.

What is of crucial importance is the need for regulation in a free market, whether it is operating in liberal democracies in Europe and in the Americas, or in a communist party-ruled state like China. Free market can function effectively only when there are rules, and unfair trade practices are prohibited through legislation. China could have imposed restrictions empowering the state to impose restrictions and penalties. But China has chosen not to use arbitrary powers to regulate but it is following the norms of a market economy where rules are laid down where the companies and customers enjoy equal rights, and there is transparency. China has been creating free market conditions which conform to global norms because China is a big player in the global market. Its laws will protect not only the Chinese customers but also the global customers of the Chinese online companies.

Most critics of China fail to recognise the fact that China has played by the rules of the free market economy as they have evolved in the western world, and it has become a dominant player in the world economy because it has played by the rules. By legislating for the protection of data of the customers, in China and outside, the Chinese government is creating conductive conditions for further penetration of the world markets by Chinese companies. The Chinese leaders have realised that the trust of the customer is an essential aspect of the success of the free market economy. The new law is an enabler for China to increase its dominance in the global markets.