The Big Ideas

Why Beijing Is Bringing Big Tech to Heel
Why Beijing Is Bringing Big Tech to Heel
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February 4, 2021
BIG IDEA | ‘Beijing’s recent antitrust efforts are motivated less by worries about the tyrannical nature of monopoly power than by the belief that China’s tech giants are insufficiently committed to promoting the goal advanced by the Chinese Communist Party (CCP) of transformative technological innovation—and thus may be undermining the effectiveness of Chinese industrial policy.’

‘It was supposed to be the world’s largest initial public offering.’

  • ‘Ant Group, the Internet finance firm affiliated with Chinese tech giant Alibaba, planned to list on the Shanghai and Hong Kong stock exchanges in early November.’
  • ‘But just days before the company’s highly anticipated market debut, Chinese regulators intervened to block the offering.’
  • ‘Then, in December, the Chinese government fined several homegrown technology behemoths—including Alibaba and the Tencent subsidiary China Literature—for violating antimonopoly laws, and top leaders pledged to further strengthen antimonopoly efforts in 2021.’

‘In less than six weeks, the unexpected crackdown had decisively upended the conventional wisdom about Beijing’s attitude toward domestic corporate monopolies, which had long held that major Chinese technology companies were “immune” from antitrust rules.’  ‘Many observers have interpreted China’s sudden zeal for trustbusting as a belated attempt to join a growing global push to limit the power of Big Tech.’

  • ‘Analysts in both China and the West have drawn explicit comparisons between China’s confrontation with Alibaba and recent U.S. and European efforts to rein in Google, Facebook, Amazon, and Apple, which share a concern about the abusive practices of “platform monopolies.” ’

‘But China’s antimonopoly actions have very different intellectual foundations than those underway in the West.’

  • ‘Beijing’s recent antitrust efforts are motivated less by worries about the tyrannical nature of monopoly power than by the belief that China’s tech giants are insufficiently committed to promoting the goal advanced by the Chinese Communist Party (CCP) of transformative technological innovation—and thus may be undermining the effectiveness of Chinese industrial policy.’

‘China’s recent antitrust moves are best understood less as a sudden ideological shift toward fearing monopolies than as a warning shot across the bow of Big Tech.’

  • ‘As top leaders reiterated since the crackdown on Ant Group and others in November, the party does not want to stop the development of platform companies or the growth of globally competitive private brands as long as they are expanding in an “orderly” direction.’
  • ‘This could mean that the more obvious first target of Beijing’s antitrust efforts is to change companies’ behavior or implement a few regulatory safeguards against financial or systemic risks, rather than fundamentally breaking up their institutional structure.’

‘Under the CCP, the enemy is not capital but its disorderly expansion.’

  • ‘Because the CCP’s monopoly on political power gives it sole authority to define the public good, there is no reason why companies ought to be able to pursue private gains rather than the party’s goals.’

‘The recent antimonopoly actions in China are a forceful reminder to any large company that may have forgotten its proper place in the nation’s economic system:’

  • ‘to follow the innovation direction of the party, not to use its own power to make money by navigating a different course.’

My Take

This is just one of several factors. Yes, China wants fintech companies to know who is boss. But it also wants to reduce risk in the financial system. And don't discount that China might be caught up in the global trend of better regulating social media and fintech companies.