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Shanghai Data Exchange: How China is Set to Outpace US in Data Trade & Technological Competition

© AFP 2021 / Johannes EiseleТелебашная "Восточная жемчужина" в Шанхае в цветах французского флага в память о жертвах парижских терактов
Телебашная Восточная жемчужина в Шанхае в цветах французского флага в память о жертвах парижских терактов - Sputnik International, 1920, 29.11.2021
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The Shanghai Data Exchange (SDE) kicked off trading on 25 November, seeking to build nothing short of a new vast and well-regulated market for data. While the Western mainstream media appear to have largely overlooked the event, some American economists see it as a huge transformative development.
Last Thursday, the Shanghai Data Exchange offered 20 data products covering eight categories, such as finance, transportation, and communication, and including flight information from China Eastern Airlines, and various data from the nation's largest firms, including China Eastern Airlines and telecom operators China Mobile, China Unicom, China Telecom, according the SDE website.
About 100 data traders inked their first transactions during the SDE's first day online, while third-party law firms reached agreements with the exchange to ensure transaction safety. One of the first SDE transactions involved the Shanghai branch of the Industrial and Commercial Bank of China, which concluded a deal to instrumentalise data from the State Grid’s Shanghai Municipal Electric Power Co to help improve its financial products, the South China Morning Post detailed.
Meanwhile, the exchange is more than just a platform as it provides services including data compliance consulting, quality assessment, and asset valuation, with a support system to guarantee the whole process of data trading, according to Global Times.
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The launching of the SDE has prompted some buzz in the press and social media networks with Western MSM seeming to largely neglect the event. However, some netizens argued that the development is far more important than the fuss over the Omicron COVID variant:
"Trading of China Big Data that can have a massive impact on its markets and perhaps international financial markets in the future", tweeted Kevin Wong, a market analyst at CMC Markets SG.
For his part, David Paul Goldman, an American economist and author, suggested in his latest op-ed for Asia Times that the SDE's opening "might be one of the transformational events of the Fourth Industrial Revolution". He further predicts that in the future, efficient markets in data might play a role "as fundamental as markets in capital and land".

"The emergence of an efficient market in data has implications as profound as the founding of the Amsterdam Stock Exchange in 1601, the funding of America’s public debt in 1790, or the financing of the debt of the Napoleonic Wars", claimed the economist.

According to Goldman, China’s initiative is "the world’s first attempt to trade data under established regulations with transparent transactions", which comes in sharp contrast with the West's "questionable (and possibly illegal) data harvesting by tech giants".
The American economist bemoaned the fact that while there is an enormous market for data in the West, the regulatory environment for data "is almost nonexistent".
Meanwhile, China’s draft Data Security Law "signals an intent to create and regulate domestic markets for 'data transactions'", the National Bureau of Asian Research (NBR), a US think tank, noted in August 2021.
A Chinese yuan sign is seen at a currency exchange shop in Hong Kong, Tuesday, Aug. 11, 2015. China devalued its tightly controlled currency Tuesday following a slump in trade, allowing the yuan's biggest one-day decline in a decade. (AP Photo/Vincent Yu) - Sputnik International, 1920, 12.04.2021
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According to the think tank, the draft law introduces a national data classification system which categorises data "according to the degree of importance to economic and social development; and according to impact on national security, the public interest, or the lawful rights and interests of citizens or organisations".
Having added "data" to land, labour, capital, and technology as a new factor of production, the Chinese leadership demonstrated that it sees data as a main driver for the future economy.

"As the United States and China increasingly see technological competition as a defining feature of their relationship, the evolution of data in Chinese strategic planning provides a window into how China aims to win that contest", suggested the NBR's Lindsay Gorman.

However, the SDE is not the only data exchange in China: since 2015, the People's Republic has set up more than 10 data exchanges in many provinces, including Beijing, Southwest China's Guizhou, and Central China's Hubei, according to Global Times.
On 1 November 2021, China officially applied to join the Digital Economy Partnership Agreement, an international trade agreement to facilitate digital trade and create a framework for the digital economy. Global Times argues that the evolving international partnership will help promote global innovation and sustainable development with China emerging as "a leader in international data trading".
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