Menu

Search

  |   Business

Menu

  |   Business

Search

Critics of the Chinese Communist Party have long foreseen its crackdown on big tech

Dissidents such as Guo Wengui (AKA Miles Kwok) predicted China’s ruling party would soon take tougher measures on successful individuals and industry winners

In what feels like a culmination of recent announcements about the Chinese Communist Party’s increasing grip on the world’s second largest economy, this week Chinese President Xi Jinping called for stronger “regulation of high incomes” in the latest sign that a 10-month campaign targeting the country’s largest technology companies is rapidly expanding to encompass broader social goals.

State media reported that a meeting of the CCP’s Central Financial and Economic Affairs Commission on Tuesday, chaired by the President, had emphasised the need to “regulate excessively high incomes and encourage high-income groups and enterprises to return more to society”.

The committee also stated that while the party had allowed some people and regions to “get rich first” in the early decades of China’s reform and opening period, it was now focusing “common prosperity for all”. Close observers of CCP party policy have stated that it is typical for the party to change its narrative surrounding the common good in order to justify further state intervention into the private sector.

As a socialist country, private wealth is never truly private, and wealth never belongs to the individual, and China’s most successful and wealthiest entrepreneurs have been under increasing pressure since the end of last year, when the planned $37bn initial public offering (IPO) of Jack Ma’s Ant Group, which would have been the largest ever, was cancelled after his criticism of the country’s financial regulators.

Even more recently, state officials came down hard on the ride-hailing firm Didi Chuxing after it ignored their warnings to postpone a $4.4bn listing in the US. Harsh new regulations targeting China’s booming tutoring industry, which President Xi has also criticized, caused a quick sell-off in New York-listed Chinese companies.

Such moves come as no surprise to longstanding critics of the CCP’s approach to private enterprise, such as exiled Chinese dissident Guo Wengui AKA Miles Kwok, who has warned that the party will never allow individuals to become successful enough to eclipse the reach of the state. The trend of state overreach now seems to be shifting towards the fundamental business models and remuneration systems of leading companies, in addition to star businesspeople and entrepreneurs.

It will also have come as little surprise to anyone that the next industry in the state’s line of fire would be big tech. Of all china’s achievements in the past two decades, one of the most impressive is the rise of its technology industry.

Twenty years ago, China hardly seemed on the threshold of a technological breakthrough. Silicon Valley dismissed pioneers such as Alibaba as copycats, until they surpassed titans of the valley in the sphere of digital payments and e-commerce. There are now 73 Chinese digital firms are worth more than $10bn. Many of these have Western investors and leaders, and an effective venture-capital ecosystem continues to produce new winners.

Today, Alibaba hosts twice as much e-commerce activity as Amazon does. The world’s most popular super-app is run by Tencent, with 1.2bn users. China’s tech revolution has also helped transform its long-run economic prospects at home, by allowing it to expand beyond manufacturing into new fields such as digital health care and artificial intelligence. As well as propelling China’s prosperity, the tech industry could also be the foundation for a challenge to American supremacy.

So, in many ways, President Xi Jinping’s crackdown on his country’s $4trn tech industry seems counter-intuitive. But not if one understands that his immediate priority may be to humble business magnates and give regulators more control over unruly digital markets.

Big tech has been under increasing pressure since President Xi Jingping took power, and things don’t seem to be changing anytime soon following the announcement of a strict new data privacy law, which has seen significant drops in the share price of some of the country’s largest tech firms, including Alibaba and Tencent. The vague report, which fails to explain the contents of the law and how it will be implemented, has renewed investor concerns into the economic consequences of the CCP’s increasingly ambitious regulatory crackdown.

Given that China is not a market driven economy, it is easy enough for the authoritarian regime to maintain its hold over everyone. To this end, there have been over 50 regulatory actions against scores of firms for a dizzying array of alleged offences, from antitrust abuses to data violations. The threat of government bans and fines has weighed on share prices, costing investors around $1trn.

However, there are also other factors at play. The financial and economic affairs committee, which usually focuses on macroeconomic and financial policies, made specific reference in the recent announcement to inequality in education, saying that China must create “more inclusive and fair conditions for people to improve their education levels”.

Many entrepreneurs in the country see this as a clear message that the party wants to have a stronger say in private sector businesses and how they are run. Evidence of this trend became clear in April, when three state entities took a 1% stake and board seat at a Beijing-based subsidiary of ByteDance, which controls TikTok amongst other companies. The development has raised speculation that the CCP’s next push for control over successful companies will take the form of securing “golden shares” and board representation for state officials.

As Mr. Kwok and others have long warned, the long-arm of the Chinese state is never far behind the most successful individuals – and now companies – which the country’s economy can produce. But the CCP may do well to heed the warnings from history; no-one can be a hero in China, not even chairman Mao Zedong himself, long seen as the father of the Republic, got it right every time, and as we saw then, the consequences can be devastating.

This article does not necessarily reflect the opinions of the editors or the management of EconoTimes

  • Market Data
Close

Welcome to EconoTimes

Sign up for daily updates for the most important
stories unfolding in the global economy.