When Pony Ma, the head of Chinese internet conglomerate Tencent, attended a group meeting with Premier Li Keqiang in 2014, he complained that many local governments had banned car-sharing apps from being installed. on smartphone.
Mr. Lee immediately told several ministers to investigate the matter and report back to him. He then turned to Mr. Ma and said, “Your example vividly demonstrates the need to improve the relationship between government and the market.”
At the time, Tencent invested $45 million in a ride-sharing startup called Didi Chuxing, which later became a model in the government’s drive to digitize and modernize traditional industries. When President Xi Jinping met with global tech leaders in Seattle in 2015, Didi founder Cheng Wei, then 32, was joined by Amazon’s Jeff Bezos, Apple’s Tim Cook and Mr. .Ma at the meeting.
However, relations between Beijing and the tech sector have soured over the past year. Didi is now the target of outrage over government legislation. Days after the company’s initial public offering in New York last month, Chinese regulators pulled their apps from app stores, citing national data security. and public interest.
At the heart of Didi’s failure, and to a large extent China’s increasingly aggressive antitrust campaign, is the question of what Beijing expects from private businesses. The answer is a lot more complicated than in the United States or Europe.
China’s big tech wields as much power as America’s tech giants in the national economy. Like their American counterparts, Chinese companies appear to have engaged in anticompetitive practices that harm consumers, merchants and smaller businesses. That deserves consideration and regulation to prevent any abuse of power.
But it’s important to note that Chinese tech companies operate in a country ruled by an increasingly autocratic government that requires the private sector to surrender with absolute loyalty. So, unlike the antitrust campaigns that European and American officials are pursuing in their regions, China is using antitrust guise to consolidate the Communist Party’s monopoly on power. , with private businesses able to lose what was left of their independence and become a subsection of the state.
Benjamin Qiu, a partner at law firm Loeb & Loeb in Hong Kong, said the developments at Didi were seen as “a kind of shock therapy enforcement”. “We could see more state control, with the end result being data nationalization.”
Americans and Europeans, understandably, frustrated with their regulators’ lack of progress in controlling Big Tech shouldn’t be too impressed by how quickly Beijing has brought the giants to life. His technology arrived. Like many things in China, efficiency comes at the expense of law and due process.
Last year, the Communist Party made it clear that it needed “politically savvy people” in the private sector who would “resolutely listen to the party and follow the party”. They should contribute more to the longevity of the Communist Party and help make China great again, the party said.
The message, say industry insiders, is that businesses need to prove they are useful and helpful in advancing government goals while avoiding causing trouble.
Didi didn’t pay attention to the messages, the people said. They were surprised that Didi defied regulators’ objections and rushed for an IPO in the current regulatory environment.
To some government officials, Didi’s listing in the United States is “yin yang feng shui wei” – publicly compliant, but defiantly private. The word choice is revealing because this phrase is often used to describe a subordinate’s betrayal to his superior.
“At a time like this, ‘politically incorrect’ internet companies will only come to a dead end,” Li Chengdong, an internet investment and consultant, wrote of Didi in a social media post. .
For companies, it would be helpful to know Beijing’s priorities. Domestically, it is to reduce inequality and promote what the party calls “collective prosperity”. Internationally, it is managing geopolitical tensions with the United States.
As China’s economic growth slows and opportunities shrink, the country’s rising inequality is becoming a ticking time bomb in the eyes of the party, which is paranoid about social unrest. and any skepticism about its legitimacy. And tech companies are increasingly blamed for the gap between rich and poor, with their founders being criticized as villains who take advantage of consumers and force their employees to work long hours.
Last year, Beijing was displeased when several major internet companies invested heavily in apps that sell vegetables to locals. That’s because apps can replace mom-and-pop vegetable stalls, where many lower-income people make a living.
Beijing is also pursuing Ant Group, a financial technology giant controlled by billionaire Jack Ma, partly because it believes that Ant has made it too easy for young people to borrow personal loans, causing discontent in society. festival.
The government has also cracked down on the online education industry, which officials believe profits from worrying parents of students. That, in turn, has increased the cost of parenting, thus jeopardizing Beijing’s new policy of encouraging couples to have more than one child.
In April, a government official spent 12 hours as a meal delivery worker, only to earn about $6. That has sparked widespread discussions about how badly online platforms treat their employees.
Tencent, Didi and e-commerce giant Alibaba – known as “platform” companies – are now second-class citizens in the eyes of the government, a venture capitalist in Beijing told me. (First-class companies developing “real” technologies such as semiconductors and artificial intelligence can make China more technologically autonomous.) For the government, platforms have too many users, too much data, too much capital and too much power, he said.
Over the past six months, tech giants and several star entrepreneurs have pledged their allegiance and made cash gestures and resigned. In April, Tencent announced that it would spend $7.8 billion on green energy, education and village rehabilitation.
In April, four days after Mr. Xi visited his alma mater, Tsinghua University, in Beijing, Wang Xing, founder of food delivery company Meituan and also a graduate student in Tsinghua, established base at this university. In June, Mr. Wang donated more than $2 billion worth of stock to his own foundation.
After two of his employees died and drew much criticism online, Colin Huang, founder of e-commerce platform Pinduoduo, said in March that he would step down to make room for the next generation. He is 41 years old and has just been named the second richest man in China.
In May, 38-year-old Zhang Yiming, founder of ByteDance, TikTok’s parent company, announced that he would also step down as chief executive officer. A month later, he revealed a $77 million donation to establish an educational institution in his hometown. The Wall Street Journal also reported that he had shelved ByteDance’s planned IPO in March after a meeting with regulators.
A Tencent business unit last month said its employees must now leave the office by 6 p.m. Wednesday and 9 p.m. on other days of the week. This month, ByteDance announced that it would be removing the Saturday work requirement, a common practice at many Chinese companies.
After the Didi crackdown, similar announcements kept popping up. JD.com, an e-commerce platform, said Tuesday that it will increase its employees’ average annual salary from 14 months to 16 months. On Friday, Lei Jun, founder of smartphone maker Xiaomi, donated more than $2 billion worth of shares to two funds.
What do all these actions have to do with antitrust and curbing Big Tech’s power? Not much direct. But companies and entrepreneurs are effectively telling the government that they know who the boss is and that they need to do things that can at least reduce inequality and discontent in society.
The other “sin” Didi committed was that it went public in New York at a time when geopolitical tensions between China and the United States were growing and the two countries were fighting for technological supremacy. .
China is increasingly concerned that many technology companies, backed by Western venture capital firms and listed in New York, could become economic pawns if bilateral relations deteriorate. China has announced that it will require domestic tech companies to undergo cybersecurity checks before they list shares abroad, which will likely thwart most IPO plans.
“China needs to prepare for the worst case scenario,” one Weibo user, Xiong Weizhou, commented on his verified Weibo account. “It could be a war with Taiwan or US and European sanctions. Important Chinese companies should not become the country’s soft base.”