China is taking action against its own technology sector with ever new measures.
It's about social issues - but also about control.
The primacy of politics has returned under Xi Jinping.
Beijing / Munich - Tencent got away with one more black eye. China's * gaming and Internet giant suffered a dramatic drop in share price after a state-run newspaper recently described video games as "intellectual opium" in an online article. Some investors saw this as a harbinger of a crackdown by the government against the booming gaming industry. After all, Beijing had cracked down on pretty much every segment of the tech industry in the past few weeks: online retailers, service platform companies, online education companies. The authorities had imposed fines of millions on companies, de facto stopped international IPOs through high hurdles or forced companies through strict rules to more labor and data protection.
Tencent * vowed to limit the gaming times for underage users in the settings of its games.
The newspaper's mail disappeared - and reappeared a few hours later without the opium reference.
The Tencent price on the New York Stock Exchange recovered somewhat.
Within a few months, China has moved from a very lax and tolerant approach to regulating the technology sector to a very strict and aggressive one
Angela Zhang, an expert in Chinese law at the University of Hong Kong
China: Nervousness is spreading among the technology giants
The incident shows the tremendous nervousness that has gripped China's tech sector since Beijing began brutalizing the sector a few weeks ago. It also shows how much politics and propaganda are currently influencing China's private sector and stock markets. Since President Xi Jinping * took office, politics has been pushing back into the economy, and above all into the private sector, which is characterized by successful entrepreneurs. For some time now, every private company has had to set up KP cells in the company again. The tech companies have been the figurehead for booming, innovative China for years; the authorities gave the companies a great deal of freedom. No more.
"Within a few months, China has moved from a very lax and tolerant approach to regulating the technology sector to a very strict and aggressive approach," wrote Angela Zhang, an expert on Chinese law at the University of Hong Kong, in a recent essay. Efforts to contain the tech companies are now also being made in the EU * and in the USA. In China, however, the power of individual authorities is much greater, says Zhang in an interview with Merkur.de *. “In addition, the companies are more docile. They obey and adapt. It's very different from the West. "
According to the Hong Kong
South China Morning Post,
China's digital economy accounted for
39.2 trillion yuan (a good 5.1 trillion euros)
in 2020,
almost 40 percent of China's gross domestic product. Hundreds of millions of Chinese use the apps of the big tech companies. More than 900 million people chat, pay and post with Tencent's all-rounder Wechat. The video games of the company and its international subsidiaries (“Honor of Kings”, “Clash Royale”) are among the most played in the country. Alibaba * dominates online shopping with various platforms. Alibaba and Tencent share the market for mobile payment services with their apps Alipay and Wechat Wallet and have therefore been at war for years. "These platforms are powerful and have an immense impact on our lives," says Zhang.
China's Campaign Against Tech Giants: Consumer Protection and State Control
The corporations are therefore mainly accused of abusing a dominant market position - for example by tampering with smaller competitors or, in the case of Alibaba, smaller online shops on their own platforms. There are also allegations that tech giants are charging loyal customers with higher prices for their data collections. Meituan was pilloried because the company's algorithm evaluated the speed of meal delivery in a way that put drivers under too much time pressure to deliver them. At the end of July, Beijing banned such algorithms, as did low wages for drivers. At the end of July, the government announced that private online tutoring companies would no longer be allowed to make profits with immediate effect. The prices of the previously extremely successful companies collapsed by 90 percent in some cases. The official reason:Children should not be tortured with private lessons outside of the already stressful school system.
"Some of the things the government does make perfect sense," says Angela Zhang.
But at the same time she sees risks: abuse of power by authorities, excessive enforcement of rules, uncertainty in the market and among investors.
The authorities always act only on instructions from above - and then usually prefer to meet the requirements too eagerly than to expose themselves to the accusation of inaction.
China: tech crackdown also politically motivated - control and data security
And so some measures seem politically and ideologically motivated. Shortly after Alibaba company founder Jack Ma criticized China's banking regulator as an innovation inhibitor in a speech in autumn 2020, authorities canceled the IPO of his financial subsidiary Ant Group in Shanghai. This was followed by a record fine by the cartel authority for monopoly behavior against Alibaba amounting to 18 billion yuan (2.3 billion euros) against Alibaba. Coincidence? Behavior worthy of criticism at the limit of what is permitted is certainly to be found in most tech companies in China - as well as those in the USA. But action is not always taken against it.
In the summer, China then increased its control over big data - and generally made it more difficult to transfer data abroad, among other things. In July, Beijing enacted rules that require Chinese tech firms with large amounts of sensitive data to obtain approval before going public abroad *. Almost every Chinese internet company holds sensitive data. Several companies canceled their planned US IPO within days.
In the United States, the stock exchange regulators are now demanding more transparency - especially from Chinese companies.
From Beijing's point of view, listed companies could therefore be forced to disclose data that China considers sensitive.
So geopolitics plays more of a role here than the behavior of individual entrepreneurs.
The fact that the government is cutting off its own companies from the important procurement of capital from abroad with the new rule is accepted as collateral damage.
Wu Zhenguo, director of the antimonopoly office of the competition watchdog, however, stressed that China will never turn the enforcement of the antitrust law into an instrument of geopolitics.
"In the future, we will strengthen the antimonopoly compliance of Chinese companies abroad and offer them the necessary guidance and support," said Wu in a recent interview.
China: No end of the tech campaign in sight
How does it go from here?
Experts don't expect the reins to loosen anytime soon.
In late July, China's Ministry of Industry and Information Technology announced a new "six-month campaign" aimed at eliminating "problems in the Internet industry".
In today's China, control and stability take precedence over innovation and the disorder that a bustling tech world can create.
Pessimists therefore fear that hardly anyone will want to found a tech startup in the future.
On the
other hand,
Lillian Li, founder of the
Chinese Characteristics
newsletter
, believes that Beijing is simply about redefining the limits. After decades of the go-anywhere ethos, China wants to remind its technology industry "what they can and cannot do," she
told Bloomberg
news agency
.
The fight against the top dogs could, in the best case, also give more space for start-ups. So far, the giants have tended to bite or swallow every climber who comes dangerously close.
Bloomberg also
quotes unnamed insiders as saying that China's future tech world will focus more on success in China itself, given the ongoing tensions with the US *. The sector will also be less characterized by strong founding figures who could be a thorn in the side of Beijing. This can already be observed at Alibaba. Jack Ma, one of the most colorful founders of his time, has largely disappeared from the public eye since the scandal surrounding his speech. Others have long been taking care of Alibaba's fate.
(ck)
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