China Looking to Regulate Artificial Intelligence Usage – OpenGov Asia

Last October, China’s central bank implemented the mandatory use of business QR Codes for all merchants starting March 1 QR Codes — in effect phasing out personal QR Codes which accounts for the majority of China’s total mobile payments.
But the new rules saw strong resistance as business versions meant filing paperwork and paying higher fees. In order to assess the feedback, China’s Payment and Clearing Association announced merchants can still entertain personal QR codes for business transactions.
Described as uncommon, the reversal of positions creates a dilemma. On one hand, the Chinese government wanted to clamp down on the use of personal QR codes to launder illegal money. On the other hand, the proposed plan will ban the use of personal QR codes for payment – a very popular means that millions of street vendors, small businesses and individuals rely on that uses a simple scanning of a bar code to receive or send money.
In response to the government’s reversal, payment processors confirmed consumers could continue to use personal QR codes to receive payments. The two largest processors, however, offered an enhanced option – upgrading personal QR codes to a business one.
These challenges and hiccups are to be expected as China has strong digital ambitions and is poised to be the world’s premier cashless society. The government has been steadily pushing for the adoption of the cashless yuan. Not surprisingly, the most populous nation’s digital payment systems and mobile wallets are among some of the most sophisticated and integrated systems in the world.
And right at the heart of it all is QR Codes. The convenience that comes with the scannable codes cannot be denied. In 2021, QR codes accounted for over 90% of China’s total mobile payments, a January survey done by state-owned UnionPay revealed.
As can be expected with anything new, not least of all new technologies, technical hitches became apparent over time. The government recognised loopholes that needed to be plugged. Addressing the public last October,  the Central Bank pointed out that while QR codes can boost the efficiency of the micro economy, often referred to as the “street vendor economy”, where the employment rate is boosted by people setting up open-air stalls, use of the technology without oversight carries inherent risks.
“Some criminals use high returns as bait to attract people to use their own personal payment receipt QR code to move gambling funds, which affects the traceability of gambling-related capital”.
In short, personal QR codes can be a virtual instrument for money laundering. There are no official statistics on how much money laundering is done using personal QR codes, but media reports show it could be huge. In one case from May 2020, Hangzhou police arrested an organised crime group that used personal QR codes to launder 50 billion yuan (almost USD 8 billion).
The move to clamp down on QR Codes could be drastic but it speaks volumes on the trust the Chinese government is maintaining these days. Even bigger regulations and policies by the Chinese government are in the offing.
A good example of these is the new rules to regulate deep synthesis technology or AI, as reported on OpenGov Asia. Artificial Intelligence has been playing a central role in the Chinese economy. Ride-hailing apps and thousands of websites make the most of AI’s superior algorithms to flesh out better user experiences for their patrons. But in some cases, AI has been used to take advantage of consumers.
Starting March 1 this year, such discriminatory algorithms will be outlawed. Under the new provisions, companies cannot use personal information to offer users different prices for the same service or product. Algorithms that set prices, control search results, recommend videos and filter content will be under scrutiny.
Both the AI and QR code regulations were set to be implemented on the first day of March this year. But it seems new developments have made the Chinese government do a reversal on its QR code policy.