As information and communication technologies and digital data technologies continue to innovate and merge, data has become an essential innovative factor of production. It is a key driver of total-factor innovation in the digital economy.

Unlocking the value of massive amounts of data and activating the potential for innovation of data factors is critical to building new competitive advantages for the country.

Status quo

The current basic laws in China have not clearly defined the classification of data and the ownership of data rights. The design of the data property rights system is sub-optimal, making it difficult to effectively solve related disputes in practice. Meanwhile, China has not yet formed a national unified data trading market.

A relatively mature mechanism for income distribution pertaining to data factors does not yet exist, and the labor and profit rights of data collectors and processors have not been effectively guaranteed by the system. As a result, some data entities have low enthusiasm for sharing and trading data resources, which hinders the free flow and efficient allocation of data factors in the market. Currently, legal support should be provided for building a data market system that is consistent with China’s institutional advantages.

Data property rights system

Efforts are needed to establish a dynamic property rights system for protecting rights and compliant use of data. Open sharing is becoming a trend in the healthy development of the digital platform economy. Currently, the static protection paradigm based on private law empowerment objectively increases the institutional cost of data factor circulation, which is not conducive to the further flow and sharing of data factors.

Therefore, a dynamic property rights system for data should be established through legislation. It is necessary to reasonably allocate the ownership of various rights and interests generated by data in the economic circulation process.

It is significant to clarify the dynamic attribution mechanism and rights allocation rules for data so that data-related rights holders can harmoniously enjoy those rights. This will help to fully release data potential and achieve the coordination of rights protection and compliant use for data factors.

Data flow and trading system

A compliant and efficient data factor circulation and trading system should be established, both on and off the market.

At present, Beijing, Shanghai, Guangzhou, Shenzhen, Tianjin, and other places have begun constructing data trading centers. However, there are still issues such as a lack of overall planning during the construction process, which pose significant data security risks.

Therefore, it is necessary for the central government to take the lead in establishing a national unified and standardized data trading platform, and provide interfaces for local data trading centers, break through the physical barriers of local data trading centers, and smooth the channels for data factor circulation and trading.

Meanwhile, it is essential to standardize the orderly operation of national data trading platforms through legislation and clarify the responsibilities and operating mechanisms of data trading platforms.

On the one hand, data security standards need to be based on a data classification and grading protection system, as well as a dynamic property rights system, clarifying the scope of tradable data and the security standards that data transactions should meet.

On the other hand, it is necessary to improve the pricing and evaluation system for data factors, evaluate the data via the data trading center system, and evaluate the data according to unified standards based on the degree of data processing and market supply and demand.

Meanwhile, it is also necessary to improve the security assessment system for outbound data transfers and allow its role in supervision in advance to be leveraged.

Data income distribution system

A data factor income distribution system that reflects efficiency and promotes fairness should be established. At present, data factors are key production factors related to national development, enterprise innovation and consumer welfare.

In order to promote high-quality development of the digital platform economy and common prosperity, it is also necessary to clarify the three-level income distribution mechanism of data factors through legislation.

In the initial allocation stage of data factors, the allocation of data benefits should be determined by contribution based on market evaluations to fully highlight the incentive orientation based on data value creation.

In the stage of data factor redistribution, it is necessary to fully leverage the government’s guiding and regulatory role in the distribution of data factor benefits, emphasizing the principle of fairness, especially in adjusting the data income gap between large platform enterprises and small and medium-sized enterprises (SMEs), to prevent market polarization. In the third allocation stage of data factors, it is necessary for all social entities to actively participate.

Platform enterprises with a large amount of data resources, especially large platform enterprises, should bear more social responsibilities and open certain data resources to SMEs and to society.

Data governance system

A secure, controllable, elastic and inclusive data factor governance system should be established. In order to create a secure, trustworthy, inclusive, innovative, fair, open, and effectively regulated data factor market environment, it is crucial to establish a data classification and governance mechanism through legislation.

To balance industry specificity and institutional uniformity requirements, it is recommended to, firstly, set the basic classification of data by law. On top of this, different industries can further subdivide data types according to industry and business characteristics through industry regulations. Data grading can be based on the value of the data to the data rights entities and the degree of harm to data entities if the data is tampered with or destroyed.

Establishing a legal protection mechanism for a sound data factor market provides a legal basis and guarantee for the construction of a fundamental data system. This will help further promote the implementation of a unified legal system for the data factor market, accelerate its cultivation, protect the legitimate property rights and interests of market entities, promote the construction of a data factor market system for data collection, processing, sharing, opening, trading, and application, and promote the orderly and efficient flow and utilization of data resources to fully unleash the value of data sharing.

Chen Bing is a professor from the School of Law at Nankai University.