- Cecilia Barria
- BBC News World
Chinese tycoon Jack Ma was all set for the party.
In November 2020, the Ant Group (“ant group” in literal translation), the financial arm of e-commerce giant Alibaba, would make its debut on the Hong Kong and Shanghai stock exchanges with an expectation of raising $34.4 billion , the biggest IPO (acronym for “Initial Public Offering“, or initial offering of shares) of history.
At the last minute, however, Chinese regulators suspended the transaction because of “competition concerns.” That is, they cut the power, turned off the music and sent the guests home.
As a result, they demanded a restructuring of what is now China’s largest digital financial and commercial conglomerate. Its co-founder, Jack Ma, who was once hailed as a symbol of the country’s success, has been out of the spotlight for months.
The unexpected decision had great international repercussions. At that point, few imagined that a government offensive to set limits on the Chinese tech giants had just begun there.
More recently, President Xi Jinping defended his campaign to impose greater control over technology companies at a meeting of the Committee of Directors of the Chinese Communist Party, according to information reported in the official press.
The goal, as the Chinese leader argues, is to “prevent the irrational expansion of capital” and “fight the wild growth” of technology companies.
Xi Jinping also said he would redouble scrutiny of these companies.
“The implementation of all these anti-monopoly regulations is absolutely necessary to improve the socialist market economy and promote common prosperity,” he declared.
The concept of “common prosperity” has become the government’s new emblem, under the logic that it is necessary to redistribute wealth in China and encourage greater competition between companies.
Following the suspension of the Ant Group’s IPO, the government has imposed a series of restrictions on other technology companies operating in areas ranging from e-commerce to transportation, video games, online education and fintechs.
Among them are internet services conglomerate Tencent, food delivery company Meituan, e-commerce Pinduoduo, Didi (owner of the 99 transport app in Brazil), the cargo transport app Full Truck Alliance, the platform Kanzhun recruitment companies and the distance education companies New Oriental Education and TAL Education.
Alibaba was fined $2.8 billion in April, the largest anti-monopoly fine in the country’s history, after an investigation determined that the company “abused its dominant market position.”
One of the latest episodes involved electric car maker BYD. The company planned to sell shares in its vehicle chip manufacturing company, but the transaction was suspended due to a “regulatory investigation”.
Although each case is different, the arguments used by the government to justify the decisions revolve around two axes: curbing monopolies and “protecting the security” of users’ information.
In this context, the country recently passed a law that could require the suspension or cancellation of applications that “illegally” process “sensitive” user data.
The so-called hunt for technological giants has unfolded into at least three strands: the anti-monopoly offensive, a review of the security of data collected by companies, and the containment of what the government has called “disorderly capital expansion”, the restriction of “growth to the detriment of the public interest”.
For some analysts, what is at stake is a question of control.
That’s what Michael Witt, professor of strategy and international business at the Insead Business School in Singapore, thinks.
He told BBC News Mundo, the BBC’s Spanish-language service, that the Chinese Communist Party “is putting the brakes on a technology sector that has recently given clear signs that it has forgotten who is in charge.”
That’s what happened to Jack Ma, he reckons, who criticized the Chinese regulator before the Ant Group’s failed IPO.
Or with Didi, which would not have followed the guidelines established by the government to the letter. “It couldn’t go unpunished either,” says Witt, referring to the government’s vision.
So, he points out, “the crux of the matter is control.”
the mystery of the offensive
Martin Chorzempa, a researcher at the Peterson Institute for International Economics in the United States, argues that, beyond control, government seeks to achieve certain specific goals.
Some would even be “reasonable”, he points out, such as, for example, the better protection of users’ personal data or the attempt to neutralize some of the negative effects that the advancement of technology ended up bringing to the world.
But “if we are talking about the use of data by the state, a greater imposition of the censorship regime and less space for private companies to develop”, says Chorzempa, “then it seems more problematic”.
“The problem is that it’s difficult to decipher this dubious image, with the good, the bad and the risky so intertwined.”
From a historical perspective, Angela Zhang, director of the Chinese Law Center at the University of Hong Kong, argues that the main reason behind the tightening of restrictions would be to try to address some of the longstanding concerns the government has regarding regulation. of the technology sector.
“Chinese technology companies used to operate in a very loose regulatory environment, and now we are going through the regulatory stage for these companies,” he says.
She further points out that, in the international context, countries like the United States or members of the European Union “are also increasing control over the technology sector in a similar way”.
But he points out that, in the case of China, the official campaign also gives the government an opening to pressure technology companies to invest more in areas that are of interest to them.
Experts such as Keyu Jin, an economist at the British London School of Economics, argue that the ultimate goal would be to achieve “technological supremacy” and put the country in a position to set global standards in this area and shape the future in key segments.
This would allow China to have even more influence over the global economy. Some analysts agree with the view that Beijing’s offensive is fundamentally about achieving this technological superiority.
In this sense, the government would be more interested in stimulating technological development in strategic areas, such as quantum computing, semiconductors and satellites, rather than segments such as electronic commerce or technologies aimed at consumer services.
Other experts believe the government’s crusade also envisages restricting outside investors’ access to information collected by Chinese companies.
Drew Bernstein, co-president of the Marcum Bernstein & Pinchuk (MBP) consultancy, which specializes in advising Asian companies, argues that the change in rules reflects China’s effort to consolidate itself as a technological power, after being known for a long time as a country that , in this sense, he copied more than he created.
It also reflects, adds the analyst, the “domino effect” that large technology companies may be subjected to in view of the pillars of the government plan aimed at 2025.
What is the 2025 plan?
The Chinese government has released a five-year plan outlining tighter regulation across much of the economy.
The BBC’s Singapore correspondent Peter Hoskins explains that the new rules go far beyond the technology sector and include aspects such as national security and commercial monopolies more broadly.
The ten-point plan establishes in a document that laws will be strengthened for “important areas” such as science, technological innovation, culture and education, with an update in the regulation that will reach segments such as “Internet finance, artificial intelligence, big data, computing in a cloud”.
These ideas, which in another country might seem like a generic declaration of intent, in China seem to be advancing by leaps and bounds, judging by what the offensive against the tech giants in recent months has revealed.
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