Governments use data to help citizens with retirement planning, go green, and fight the pandemic. But much of it sits in fragments scattered across public and private sources. Countries and businesses could do a lot more if they had access to all this data.

China launched the Shanghai Data Exchange in November 2021 as an answer to open, efficient and accountable data trading. The Exchange will help businesses in China access data from other organisations easily and transparently, so they can use it to get loans, gain insights or build new tools.

Yong Lu, Vice President of the Shanghai Data Exchange, shares how the platform works, and how it could advance China’s digital economy.

What kinds of data will be available?

Companies want to grow but may not know what kind of data is helpful, or where to find it. “We try to link the data supplier and the data demand,” says Lu. Open trading also means these datasets don’t just sit with big companies; smaller firms get to grow too.

Data listed on the Exchange can be helpful in many ways. For example, banks can use power consumption data to assess a business’s credibility when giving out loans, Lu suggests.

How much power a business uses can be an indicator of its health. If its power usage is very stable or even increases, it can mean their business is good, he explains. One of the first transactions through the Exchange was between the Industrial and Commercial Bank of China and the State Grid Shanghai Municipal Electric Power Co.

Traffic flow information from telco service providers is another type of data that can benefit businesses. Business owners can use this to determine where the best location for a new shop would be.

What the Exchange could do for China

This platform could give businesses tailored help in the future, Lu shares.

Right now, data consumers can browse through a catalogue showing the kinds of data available, and what they might be useful for. In the future, the Exchange could provide “middlemen” who would source the most helpful data according to each buyer’s needs, he says.

This national platform will also help the government understand how much data resources are in China, Lu notes. One of the key goals of the data exchange is to encourage the opening up of China’s digital economy. “It’s a platform for the whole of China to build on their digital transformation,” he states.

The exchange will eventually become a hub which can allocate data resources in the market beyond buying and selling. Once the exchange can link up older data resources in China, or even globally, it can help visitors get data resources more easily to maintain their competitive edge, he says.

This is important as China believes that data in particular is able to improve the efficiency of other resources, such as land and labour, to boost economic growth. Eventually, data will not only be traded on the Exchange, it would also be recognised as an asset and written into businesses’ financial statements, he says.

Expanding the platform

To achieve this vision, Shanghai has to convince its businesses to put their data up on the platform. “There is more data demand than data supply,” Lu explains.

It helps that China’s tech development is state-led, which means the government has a larger say in where funds for research and innovation go. This gives the platform an edge over private sector data trading, such as those often found in Europe or the US, he says.

Shanghai’s strategy is to turn data into a sellable resource for companies, so they can increase their revenue when they put it up for sale on the Exchange. Businesses often “accumulate lots of data, but they don’t know how to sell them,” shares Lu. This platform saves them the trouble of navigating sticky data privacy policies, and allows them to sell their data in a legal, regulated manner.

3 issues to address

The Exchange has inherited many of the thorny issues that often surround data trading. The first is transparency.

China had previously launched provincial level data exchanges, but these never took off as hoped. There were no standards for defining data rights, pricing or regulation. Authorities struggled with “how to build trust between the data supplier and the data consumers”, Lu says.

“Those are the challenges we try to break through in setting up the new data exchange in Shanghai,” he adds.

Shanghai’s iteration is different in that it is backed by the government. Authorities can keep a closer eye on regulations, and exchanges can be more transparent.

“If it’s provided by a private company, the focus will be more on the efficiency,” he notes. Other countries including Japan and Colombia have set up similar data trading platforms, but the national government is less involved than in Shanghai, Lu adds.

Second comes privacy – a common concern every time data changes hands.

The actual sharing of dataset takes place outside of this Exchange, and only between parties who have been verified on the platform. “We didn’t put the data onto this data exchange platform,” Lu says.

There will also be different methods for sharing data. Depending on how sensitive the data is, suppliers could share it directly, or in a more secure sandbox environment, he explains.

The third issue is standardisation. Data formats can be tricky to standardise, so the Exchange enforces a common process instead. Suppliers have to go through an evaluation process to ensure their data is of good quality and complies with regulations.

The Shanghai Data Exchange is the first of its kind in the country. If successful, it will usher in a new age of the industrial revolution where data takes the lead in driving economic growth. The world will be watching as China takes this next step in establishing a data-driven economy.