China Moves to Regulate the Booming Market for AI-Powered Virtual Personas

China is intensifying its regulatory framework for the rapidly expanding “digital human” sector, as emotionally engaging AI avatars—some designed to resemble deceased relatives—become increasingly common nationwide. This regulatory push highlights the growing visibility of both the commercial opportunities and ethical dilemmas associated with the technology.

The Intersection of Loss, Tech, and a Thriving Sector

After her father passed away from cancer, Zhang Xinyu, a 47-year-old resident of Liaoning province, utilized artificial intelligence to create a digital replica. Partnering with the firm Super Brain, she developed an avatar that mimics his appearance and voice, enabling her to maintain online interactions with him. She shared with AFP that this process provided significant emotional support and aided her in processing her loss.

This personal narrative illustrates a wider phenomenon in China, where AI-created “digital humans” are seeing explosive growth. These highly realistic avatars are increasingly utilized on social platforms, particularly within digital retail and media production. Xinhua News Agency reports that the industry reached a valuation of approximately 4.1 billion yuan ($600 million) in 2024, marking an 85% increase from the previous year.

Despite the enthusiasm, the technology faces skepticism. Detractors caution that these digital replicas might foster unhealthy emotional attachments or provide what Zhang characterized as “illusory solace,” even when the user’s grief is authentic.

Policy Implementation Accelerates

Addressing these apprehensions, China’s Cyberspace Administration has released preliminary guidelines designed to enhance control over the sector. The draft legislation mandates explicit identification of AI-generated material and forbids the creation of digital copies without explicit permission from the subject.

Furthermore, the regulations aim to curb potential abuses, such as fraudulent activities, the spread of false information, and material that could endanger social harmony or national safety. Businesses found in breach of these standards may be subject to penalties between 10,000 yuan ($1,460) and 200,000 yuan ($29,300).

The need for oversight was highlighted by a widely circulated video of an elderly woman engaging with a hyper-realistic AI version of her late son without realizing it. The footage, which spread rapidly across Chinese social networks, ignited discussions about whether such AI applications offer genuine comfort or constitute a form of trickery.

Navigating Progress and Potential Dangers

Analysts note that China’s strategy follows a well-established trajectory: swift technological advancement followed by prompt regulatory action. Regulators are especially focused on safeguarding young users, with proposed measures that would outlaw AI platforms designed to foster emotional reliance or mimic romantic interactions for minors.

Concurrently, market participants recognize that oversight is unavoidable. The founder of Super Brain has characterized the proposed rules as a crucial measure to harmonize technological progress with ethical accountability.

Future Implications

The draft regulations remain open for public feedback through early May, with more rigorous enforcement anticipated afterward. The state’s overarching objective is to promote AI integration while exerting firm control over its social consequences.

As “digital humans” transition from a curiosity to a standard utility, China’s regulatory framework may serve as a template for other nations facing comparable ethical challenges—particularly concerning consent, identity, and the emotional influence of artificial intelligence.