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Reading List: Why is China cracking down on tech companies?

China has been cracking down on tech companies for several months now, launching investigations into and reprimanding large companies like Alibaba, Tencent, Didi, ByteDance, and others. But the reasons behind this are varied and complex. The following reading list will help you get a deeper understanding of the issue at hand.

Why it matters? China’s crackdown not only has repercussions within the country but throughout the world. Its approach to regulating the tech industry will shape how other countries approach the same. Understanding what China is doing and why it is doing this is therefore important.

Reading list

Each of these articles is worth reading in their entirety. We’ve excerpted some points for your reference, but do read them:

  1. Why is China smashing its tech industry? by Noah Smith (Read here)
    • “It’s possible that the Chinese government has decided that the profits of companies like Alibaba and Tencent come more from rents than from actual value-added — that they’re simply squatting on unproductive digital land, by exploiting first-mover advantage to capture strong network effects, or that the IP system is biased to favor these companies, or something like that.”
    • “China’s top leaders are now trying to direct the country’s industrial mix toward what they think will serve the nation as a whole. And what do they think will serve the nation as a whole? My guess is: Power.”
    • “They probably took a look at their consumer internet sector and decided that the link between that sector and geopolitical power had simply become too tenuous to keep throwing capital and high-skilled labor at it. And so, in classic CCP fashion, it was time to smash.”
  2. Let the bullets fly for a while by Lillian Li (Read here)
    • “Tech platforms pose significant challenges to nation states’ legitimacy. They are becoming de facto institutions, not just providing crucial utilities that are central to the lives of citizens but setting the rules of the game in which society operates.”
    • “When big tech does not innovate but instead copy or acquire competitors, the ecosystem suffers.”
    • “The intent with regulation is not to kill innovation but to redraw the boundaries within which private companies can operate to maximise their profits.”
  3. China’s New Power Play: More Control of Tech Companies’ Troves of Data by Lingling Wei for WSJ (Read here)
    • “Behind China’s moves is a growing sense among leaders that data accumulated by the private sector should in essence be considered a national asset, which can be tapped or restricted according to the state’s needs.”
    • “Beijing’s latest economic blueprint for the next five years, released in March, emphasized the need to strengthen government sway over private firms’ data—the first time a five-year plan has done so.”
    • “The new Data Security Law, which will take effect on Sept. 1, includes a goal of classifying private-sector data according to its importance to state interests. The vaguely worded clause, analysts and legal experts say, gives authorities considerably more leeway to control data deemed essential to the state, while making it harder for businesses, both Chinese and foreign, to say no.”
    • “The proposed Personal Information Protection Law”…”lacks restrictions on government entities.”
  4. A Twitter thread by Cathy Gao (Read here)
    • Domestically, the Chinese government is cracking down on the “three burdens” of modern middle class Chinese citizens: (1) Education costs (2) Healthcare costs (3) Real estate.”
    • “Cutting cost burdens & predatory practices for consumers at the expense of billionaire founders & VCs signals massive acceleration of a key part of China’s (meticulous) 5 year plan”
  5. Why China Is Going After Its Tech Giants by Charles Mok for China File (Read here)
    • “The first message sent by the recent investigations should be understood as targeted toward an audience of Chinese global Internet firms—essentially making sure they know who’s boss.”
    • “There is also a more indirect message intended for Western policymakers, especially American. Strict regulatory control over China’s tech companies not only serves its own domestic agenda, but China also would not mind to be seen as an example for a playbook for the West, as the U.S. contemplates what to do about its own big tech.”
  6. The Crackdown in China Is a Hot Mess, and It’s Coming for Us by Kara Swisher for NYT (Read here)
    • “As with all things in the authoritarian country, the reason for this is shrouded in doublespeak about privacy, cybersecurity and sensitive-location information — particularly rich, coming from a place that has essentially turned itself into a surveillance economy.”
    • “They send a stark message to Chinese businesses about the government’s authority over them, even if they operate globally and their stock trades overseas. And they are a reminder to international investors in Chinese companies about the regulatory curveballs that can sometimes come hurtling their way.”
    • “As the Chinese- and Western-controlled internets splinter, it will lead to further problematic compromises by big U.S. tech players there like Apple.”
  7. What Is Behind China’s Crackdown on Its Tech Giants by Washington Post (Read here)
    • “If the government follows through on creating a single entity to manage — and share — data accumulated by the likes of Alibaba, Ant and Tencent, that could set a global precedent for governments concerned about the enormous leverage that internet giants wield over the economy and public discourse.”
  8. China’s Tech Clampdown Is Spreading Like Wildfire by Stephanie Yang for WSJ (Read here)
    • “China has one of the thinnest histories of antitrust regulation among major global economies and has historically used antimonopoly rules to curb the market influence of foreign firms. Domestic internet companies were largely left alone as China sought to nurture its own tech industry.”
  9. China’s Big Tech Crackdown is Not a Model for the U.S. by Yaqiu Wang (Read here)
    • “Don’t mistake the party’s move as a defense of free speech.”
    • “The message is clear: Only the party can censor and manipulate public opinion.”
  10. Here’s What the Crackdown on China’s Big Tech Firms Is Really About by Charlie Campbell for Time (Read here)
    • “In April 2020, China released a policy document that significantly listed data as a “factor of production” alongside the four traditional factors of socialist economic policy: land, labor, capital and technology.”
  11. China Uses ‘Digital Leninism’ to Manage Economy and Monitor Citizens by Andrew Browne for WSJ (Read here)
    • “For all his talk about giving markets a “decisive” role, Xi Jinping ultimately believes the state should lead. On the cusp of his elevation to Mao-like status, he aspires to use big data and artificial intelligence to correct the planning errors of the past and micromanage the Chinese economy while keeping tabs on its citizens.”
    • “Ultimately, Mr. Xi’s draconian approach takes the notion of “Big Brother” to a new level.”
  12. China Joins Global Push to Rein in Tech Companies by Sam Schechner, Liza Lin and Chong Koh Pingin for WSJ (Read here)
    • “China’s involvement in what has until now been a largely Europe-led push for tech regulation is a new twist. Chinese internet companies had been mostly spared antitrust scrutiny because of an overriding national policy to groom domestic technology champions.”
  13. How China Is Cracking Down on Its Once Untouchable Tech Titans by Charlie Cambell for Time (Read here)
    • “The Chinese Communist Party’s drive for greater regulation dovetails with growing public dissatisfaction with income disparity and the immense wealth tycoons accumulate in what remains, in name at least, a socialist state.”
  14. The China Model: What the Country’s Tech Crackdown Is Really About by Austin Carr and Coco Liu for Bloomberg (Read here)
    • “The government’s clampdown signals a new era of harsher oversight that companies won’t be able to avoid by registering in the Caymans or hiring in California.”
    • “China’s biggest tech companies periodically forced smaller competitors to integrate with their platforms or pressured them to sell out.”
    • “The case against Alibaba took the Chinese antitrust authority only four months to complete, whereas it will take years for U.S. and EU regulators to go after tech firms such as Facebook, Google, and Amazon, who are ready to fight tooth and nail.”
  15. China widens big tech crackdown on Contention (Read here)
    • “Why is the party pursuing this campaign with its wave of breakups, executive resignations, and sweeping new regulations now? Because China’s new “dual circulation” development strategy depends on consumer strength, and Beijing fears that predatory business practices and runaway financial risks from megacorporate financial shenanigans could undermine the plan.”
    • “China has never claimed that its system is perfect, but it does have very clear strategic priorities set outside of corporate boardrooms.”
    • “There is certain to be pushback and stumbles along the way. But if the country succeeds, it will reflect a type of growth the world has not seen before.”

MediaNama Coverage

  1. China’s Crackdown On Tech Companies Continues As WeChat Suspends New User Registration: Report
  2. Ride-Hailing App Didi Removed From Chinese App Stores Over Data Collection Violations: Report
  3. China Expands Control Over Data Collected By Tech Companies With New Laws: Report
  4. China Increases Scrutiny Over Internet-Based Companies: Reports
  5. Jack Ma’s Ant Group And Chinese Regulators Agree To Restructuring Terms: Report
  6. Summary: China’s Draft Personal Information Protection Law
  7. China Passes New Export Control Law To Counter American Aggression Against Its Tech Companies

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