At present, digitalization and the digital economy have brought about profound changes in both production and lifestyle, influencing the socioeconomic development of countries worldwide. To fully implement the spirit of the 20th National Congress of the Communist Party of China (CPC) and the Central Economic Work Conference (CEWC), as well as to promote a high-quality digital economy, achieve the Long-Range Objectives Through the Year 2035, and build new national competitive strengths, it is imperative to accelerate the development of a basic data system, effectively utilize the vast amounts of data and diverse application scenarios, unlock the potential of data factors, and foster the growth of the digital economy.

Multiple challenges

As policies on market-oriented development of data factors continue to evolve and investment in data factor market cultivation increases, China’s market-oriented pattern for data factors has begun to take shape. However, there are a series of practical constraints that must be addressed. Firstly, defining data property rights remains a challenge. Secondly, effective market trading mechanisms are still sub-optimal. Thirdly, there is room for improvement in data security supervision and privacy protection capabilities.

Existing explorations

At present, some developed countries have developed market-oriented pathways for the development of data factors based on their national digital industries. However, they are still in the exploratory and improvement phase. In addition, due to differences in political and legal foundations, market-based levels, and industrial foundations related to the digital economy, there are variations in strategic priorities and comparative advantages in the process of constructing data factor markets among countries.

Overall, the construction of the data factor market requires government guidance and normative support from policies and regulations, as well as the effective operation of professional service institutions and the active participation of market entities. In the process of building a data factor market, attention should be paid to forming diversified trading models, clarifying data ownership, and implementing dynamic tracking. These steps are necessary for breaking down regional market barriers for digital factors, promoting the construction of a unified market, and facilitating the free circulation of data factors and efficient allocation of market resources. This will provide strong support for the development of the digital economy. 

Path finding

To meet the practical needs of high-quality development in the data factor market, China should increase the market’s effective supply by cultivating a strong market foundation, utilize the advantages of market-oriented resource allocation efficiency through improving institutional mechanisms, and enhance security capabilities.

To cultivate a strong market foundation, it is suggested to increase the efficient supply of data market factors. Firstly, to increase the supply capacity of data factors, it is advised to adhere to the opening and sharing of public data and to build a standardized system for data sharing, exchanges, cooperation and opening up. Secondly, it is crucial to build and improve high-quality data trading platforms. While integrating and optimizing the existing data trading platform framework and clarifying the platform’s trading service functions, we encourage the platform to actively expand its data brokerage service business, play its role as a data trading hub, and expand business areas to form economies of scale. 

In terms of building a robust market system and mechanism, it is suggested that the efficiency of market-oriented allocation be improved. Firstly, due to the potential for disputes over the rights and interests of multiple entities in the market-oriented allocation of data factors, it is necessary to clarify the “rights and interests” of data factors. In the process of increasing the value of data factors, multi-dimensional data rights systems such as common and limited property rights are currently in the exploratory stage, and market allocation needs to be dynamically adjusted.

Secondly, attention should be paid to the diversity of data factor market trading methods, and trading models should be enriched. It is essential to actively guide and cultivate intermediary service institutions and establish a sound data factor market intermediary service system. Thirdly, it is advised to build a unified market system for data factors and improve the pricing mechanisms for data factor valuation. 

To ensure market security, it is suggested that data security capabilities should be enhanced. To coordinate the development and security of the data factor market, it is necessary to accelerate the application of the rule of law and technological innovation. Firstly, a sound legal framework for data security should be established, and relevant laws, regulations, and guidelines should be introduced or improved. Data processing activities must be regulated and data security ensured. Secondly, it is suggested to strengthen data factor market compliance supervision, and establish and improve market supervision systems and work standards. Also, a data factor market supervision system with collaborative governance among multiple departments should be created. Finally, we will strengthen innovation and breakthroughs in data security technology by encouraging research, development and application of cutting-edge technologies such as data encryption. This can be achieved by supporting research on data security technology and the development of related industries, continuing to strengthen the innovation of data security technology, promoting the design of data security standardized programs, and effectively addressing the risks and challenges of digital security.

Chen Lei (professor) and Xue Qinyuan are from the School of Public Finance and Taxation at Capital University of Economics and Business.