China's tech crackdown - an excerpt from my new book, "China's Technology War: Why Beijing Took Down Its Tech Giants"
When Jack Ma, the billionaire founder of Chinese e-commerce company Alibaba, gave a speech on October 24, 2020 to the country’s political and financial elite, he set in motion a crackdown on China’s flourishing technology sector that will have long consequences on China’s economic growth. In my new book, "China's Technology War: Why Beijing Took Down Its Tech Giants", I explain the reasons behind this strong action by the Chinese government against the platform economy.
Almost three quarters of China’s population shop for goods online and pay for them on their phones. The services that companies like Alibaba, Ant Financial, Tencent, and others provided are as natural to Chinese citizens as cars to Americans and have formed an important part of China’s growth story. Their growth has been severely curtailed since Jack Ma’s speech.
Led by China’s leader, Xi Jinping, the government imposed a series of draconian rules on Alibaba and other technology firms. Alibaba was fined $2.8 billion for monopolistic practices. Didi Chuxing, the Chinese equivalent of Uber, was accused of going public before completing a review by the country’s internet watchdog, the Cybersecurity Administration of China (CAC). Didi was forced to take down more than 25 applications from its online store, and remove the “super-apps” that were the main interface for tens of millions of users, badly harming its business.
The policy reaction was the result of two forces, one economic and one political. On the economic side, there had been growing concern that the platform companies were detrimental to China’s economy. They were accumulating monopoly power at the expense of other companies and were seen as excessively wealthy in a country that prides itself on equality. More important were the politics. Whether the new policies had a regulatory function, all of them were designed to reinforce the power of the Communist Party. The government was intent on shrinking the power of the so-called “platform economy,” increasing government ownership or control of important sectors in the economy, and heightening the involvement of the Communist Party in the technology industry and the lives of the Chinese people in general.
The bigger problem is that, despite the broad reach of these policies and their disastrous impact on the companies’ finances and capital raising ability, they are unlikely to have much impact on the Chinese economy. The new rules have done little more than tinker around the edges of China’s vast political and economic system.
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