Policies to curb China’s incumbent technology giants’ market power will redistribute some of their profits to smaller merchants and app developers, and to their workers
THE VISION is becoming clear. In a decade or so China will, if the Communist Party has its way, become a techno-utopia with Chinese characteristics, replete with “deep tech” such as cloud-computing, artificial-intelligence , self-driving cars and home-made cutting-edge chips. Incumbent technology giants such as Alibaba in e-commerce or Tencent in payments and entertainment will be around but less overweening—and less lucrative.
The list of casualties is a Who’s Who of Chinese tech: Ant Group, an Alibaba affiliate whose $37bn initial public offering was suspended days before the listing; Didi Global, whose ride-hailing app was expelled from Chinese app stores days after its own $4.4bn IPO in New York; Tencent, fined by regulators for sexually explicit content and unfair practices, and told to end exclusive music-licensing deals; the online-tutoring industry, swathes of which were barred last month from making a profit.
China’s new data policy remains a work in progress. The Data Security Law will come into force on September 1st and the Personal Information Protection Law is due to be adopted by China’s rubber-stamp parliament soon. It is unclear how they will be enforced, though data specialists intuit that many types of data currently held by internet giants could eventually be traded on government-backed and private exchanges.
Workers will benefit from the wealth transfer, too. Companies like Didi and Meituan, which use armies of low-paid drivers or warehouse staff, are on the hook. The authorities are already going after Meituan for not providing adequate care to such employees. It will be forced to raise wages and give drivers better insurance. Meituan’s market value has fallen by a fifth, or $42bn, since the measures were announced in late July.
Yet the way China’s regime is going about its desired transition is far from guaranteed to work. One problem stems from who is doing the regulating. The Communist Party presents an image of a unified force with a single set of objectives. In fact, like any large bureaucracy, Chinese authorities are fragmented, and can act at cross-purposes.
Another worry is that the crackdown has spooked entrepreneurs and venture capitalists. It is true that some smaller firms view the tech giants as bullies that have strong-armed rivals and snuffed out competition. China’s most innovative startups have had the choice of selling out to big tech or facing a quick and brutal demise, says Mr Liu.
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