What is the Chinese government looking for with the offensive against the country’s tech giants – BBC News World

The result was that the authorities demanded a restructuring of China’s largest digital commerce and finance conglomerate, and Jack Ma, which used to be the symbol of the country’s entrepreneurial success, was out of the public eye for several months.

The unexpected decision caused a great international impact. But what probably few imagined at the time is that it was only the beginning of a government offensive for mark the limits to the tech giants.

Recently the president Xi Jinping He defended his campaign to impose greater control over firms in the technology sector at a meeting of the Steering Committee of the Chinese Communist Party, according to the official press.

Its goal, argued the Chinese leader, is “to prevent irrational capital expansion” and “tackle wild growth” of technology companies.

He also issued a clear warning: he will redouble his scrutiny on these companies.

“The implementation of all these antitrust regulations is absolutely necessary to improve the socialist market economy and promote common prosperity,” Xi said.

The concept of the “common prosperity” It has become the new emblem of the government, arguing that it is necessary to redistribute wealth in China and encourage greater competition between firms.

After the suspension of Grupo Hormiga’s IPO, the government promoted a series of restrictions on other technology giants in areas as different as electronic commerce, transportation, fintech, video games or online education companies.

The e-commerce giant Alibaba (which is also part of the empire founded by Jack Ma) received a $ 2.8 billion fine in April, the largest antitrust fine in the country’s history, after an investigation determined that the firm “abused its dominant position in the market”.

Other giants that have been part of this new wave of government-imposed restrictions include: Tencent (internet conglomerate), Meituan (food distribution), Pinduoduo (electronic commerce), Didi (equivalent to Uber), Full Truck Alliance (cargo transportation application), Kanzhun (recruitment), online education companies like New Oriental Education or TAL Education.

In three separate public statements, Alibaba, Didi and Meituan have said that they will cooperate with the authorities.

One of the last known cases was that of the electric car manufacturer WORLD. The company planned to sell shares of its vehicle chip manufacturing unit, but the operation was suspended due to a “regulatory investigation.”

Although each case is different, the arguments used by Beijing to justify its decisions revolve around two axes: curbing monopolies and “protecting the security” of user information.

In this context, a law was recently passed that may require the suspension or cancellation of applications that “illegally” process “sensitive” personal data.

In the so-called hunt for the technological giants, an antitrust offensive, a review of data security and other elements such as control of the “disorderly expansion of capital”, an expression coined by the government in December last year that basically refers to restricting “growth at the expense of the public interest.”

For some analysts, the underlying issue is the premise of maintaining control.

This is how he puts it Michael Witt, Professor of Strategy and International Business at Insead Business School in Singapore.

The Chinese Communist Party “is putting a brake on a technology sector that has recently shown clear signs of forgetting who is in charge,” he explained in a dialogue with BBC Mundo.

This is what happened with Jack Ma, he explains, when he criticized the regulator before the failed IPO of Grupo Hormiga.

And this also happened to the Didi firm when it did not follow the guidelines established to the letter. “That couldn’t go unpunished either,” says Witt, according to the government’s view.

This is how things are, he points out, “The crux of the matter is control.”

Martin Chorzempa, a researcher at the Peterson Institute for International Economics think tank in the United States, argues that apart from control, the government seeks to achieve certain specific objectives.

Some of them may be “eminently reasonable,” he explains to BBC Mundo, such as, for example, better protecting the privacy of people’s data or counteracting some of the negative effects that the rise of technology has had on societies around the world. the world.

But “if we are talking about the data nationalization, a greater imposition of the censorship regime and less space for private companies to prosper, “says Chorzempa,” then it seems more problematic. “

“The problem is that this mixed image, with the good, the bad and the risky so interconnected, does not lend itself to an easy characterization.”

From a historical perspective, Angela Zhang, director of the Chinese Law Center at the University of Hong Kong, argues that the government’s main reason behind the increase in restrictions is to address some of the long-standing regulatory concerns in the tech sector.

“Chinese tech companies used to operate in a very lax regulatory environment, and now we are going through the rulemaking stage for these firms,” ​​he says.

In the international context, he argues in dialogue with BBC Mundo, countries such as United States or members of the European Union “They are also similarly increasing control over the tech sector.”

However, he adds, the official campaign also gives the Chinese government great leverage to push tech companies to invest more in applied technology, and allows it to stimulate massive support with the idea of ​​improving “social welfare.”

Some experts like Keyu Jin, an economist at the London School of Economics, argue that the bottom line is to have “technological supremacy” to define global standards and shape the future in key areas.

This would allow it to have a greater influence on the international economy.

Some analysts agree with this view that the Beijing offensive fundamentally revolves around the idea of ​​achieving this technological superiority.

In this sense, what would interest the government the most is to encourage technological development in much more strategic areas, such as quantum computers, semiconductors and satellites, instead of developments in electronic commerce or technologies focused on services for consumers.

Other specialists believe that the government’s crusade has a strong accent on restrict access of external investors to the information handled by Chinese companies.

Drew Bernstein, co-chairman of the consultancy Marcum Bernstein & Pinchuk (MBP), which specializes in advising Asian companies, argues that the transformation of the rules “reflects China’s change from being a technological imitator to becoming a technological tiger.”

It also reflects, adds the analyst, the “domino effect” that large technology companies can have on the pillars of the government plan focused on 2025.

The Chinese government has unveiled a five-year plan outlining stricter regulation across much of its economy.

The BBC’s Singapore Business Correspondent Peter Hoskins explains that the new rules go far beyond the technology sector, also including aspects such as national security and trade monopolies.

The ten-point plan promoted by Beijing establishes in a document that the laws will be strengthened for “important fields” such as science and technological innovation, culture and education.

According to the government, this new route will implement new regulations that will include areas such as “Internet finance, artificial intelligence, big data, cloud computing.”

Those ideas that in another country might seem like a general declaration of intentions, in China seem to advance by leaps and bounds, at least based on what the offensive against the tech giants in recent months has revealed.

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