(Drivebycuriosity) - China is performing a massive crackdown of her leading tech companies ( reuters). Beijing is imposing more and more strict regulations and is taking over control over the businesses of Alibaba, Tencent and many other technology companies.
The crackdown started last November when Beijing called off the IPO (dual listing in Shanghai and Hong Kong) of the online payment platform Ant Group, an affiliate of Alibaba, which should have been the biggest IPO in history.
In April, China hit Alibaba, China`s Amazon, with a $2.8 billion fine, claiming the company behaves like a monopoly. The government also forced Tencent, operator of the hyper-popular
messaging platform WeChat, to suspend all new user registrations
temporary. Later Beijing restricted businesses of online food deliverer Meituan and ride-hailing firm Did and they turned the booming online education firms into nonprofits. Recently the government announced that they may ban internet companies, whose data poses potential security risks from listing outside the country, including in the United States. Almost every day we read about new regulations for China`s Big Tech.
Apparently Alibaba & Co. got too big and too powerful for the communist government, who wants to defend their monopoly power. Xi Jinping, leader of the Communist party and life time president of China, is not happy with so much capitalism and dislikes that Alibaba founder Jack Ma and other high tech billionaires got so much power. China´s leaders don´t accept other gods beside them.
The
new crack down looks like a soft version of the cultural revolution in
the 1960s. Then the Red Guards, the followers of Mao`s widow, attacked
anybody who could be accused being a "capitalist". The cultural revolution threw the
country back into a deep a depression. Since then there has been a tug of war
between pro-business thinkers and old guard communists, who don`t care
about the economy and don`t understand it. Apparently the stone
age communists - led by President Xi - are gaining ground again.
It looks like that Xi is killing the goose who lays the golden egg. Alibaba, Tencent, Baidu & Co became so big because they are doing a great service for the consumers. The Chinese like to use the free messaging services, they welcome cheap & fast online deliveries and many more offers by the big tech companies.
China`s phenomenal growth in the recent decades was fueled by (partly) opening the economy and allowing more capitalism. China`s rise was also driven by internet-focused technology companies like Alibaba (e-commerce, cloud) & Tencent (entertainment, WeChat with over 1.2 billion users ) & Baidu (search, artificial intelligence). In the recent years Beijing had accepted that these companies grew fast and reached market capitalizations
of hundred billion dollars and more on the stock market. Alibaba &
Co. became the engines of China`s growth and modernization because they
are are driving e-commerce, AI, digital communication and much more,
reducing costs and are making China`s economy more efficient. Without their services the Chinese would suffer even more in the ongoing Covid-19 pandemic with lockdowns and quarantines.
The
crackdown is slowing China`s progress because the regulatory overkill creates it more bureaucracy which " is the death of any
achievement” according to Einstein. New regulations and restrictions
reduce the productivity & efficiency of Big Tech companies; they
shrink their abilities to further innovate, making business more
complicated and costly. Many services will not be available any more or
for much higher prices. The crackdown is endangering China´s technological progress and might hamper the development of cloud services, artificial intelligence and other growth engines.
It is an open question if President Xi is intelligent enough to see that he is sabotaging China´s success story. Will he notice that his politics imperil China´s ability to compete with the US?
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