Commentary: China's tech firms were supposed to help achieve the Chinese Dream
Several developments point to a huge shift in the regulation of China’s digital space, says a media professor.
BRISBANE: China’s state-run anti-monopoly bureau has tightened its regulations on Big Tech players, as shown by its recent move against the country’s largest e-commerce company, Alibaba Group.
Alibaba was hit with a record antitrust fine of 18.2 billion yuan (US$2.8 billion) over the weekend for supposedly abusing its market dominance. The company, which operates the digital payment platform Alipay and offers bank loans to entrepreneurs, issued a public apology:
Alibaba accepts the penalty with sincerity and will ensure its compliance with determination. To serve its responsibility to society, Alibaba will operate in accordance with the law with utmost diligence, continue to strengthen its compliance systems, and build on growth through innovation.
READ: Commentary: Why China’s US$2.8 billion fine is a huge relief for Alibaba
Meanwhile, questions have been asked about the whereabouts of Alibaba’s founder Jack Ma. In October last year, Ma lashed out at China’s financial watchdogs and banks.
Among other complaints, he criticised the state-managed financial sector and was subsequently hauled into a meeting with regulators. After that, the always-visible Ma was not seen in public for months.
Ma’s sudden withdrawal is just one of several developments that point to a huge shift in the regulation of China’s digital space. The lenience once accorded to tech companies by the state no longer holds true.
And recent actions against Alibaba may signal the beginning of the end of the romance between Chinese Big Tech and the government.
READ: Commentary: Jack Ma brought the wrath of Chinese regulators down on Alibaba
A FAWNING APOLOGY
The first real test for this relationship came late last year. China’s State Administration for Market Regulation charged Alibaba’s affiliate Ant Group (also owned by Ma) with anti-competitive behaviour.
Some of Ma’s comments around that time were not received well in Beijing. In October, he claimed China’s banks operated with a “pawn-shop mentality”.
According to reports, President Xi Jinping himself authorised the subsequent withdrawal of Ant Group’s initial public offering launch on the Shanghai and Hong Kong stock exchanges.
The company was then forced to incorporate itself as a financial institution and subject itself to supervision by China’s state-controlled central bank.
The anti-monopoly ruling dealt out to Ant Group last year, and Alibaba more recently, aren’t incompatible with corporate governance in Western democracies. However, the chief executives of Western tech companies generally don’t make fawning apologies to government following accusations of anti-competitive behaviour.
READ: Commentary: Imagine a world with more than one Facebook. Here’s why you can’t
WHEN CHINESE BIG TECH LIVED THE DREAM
There was a time in China when Big Tech firms lived the dream. Historically, China’s regulators have given its internet companies much more latitude than afforded to the tightly controlled state-owned media.
In 2000, when Alibaba was just one year old, only 1.8 per cent of the Chinese population was online. This number now exceeds 50 per cent of the population.
As my colleagues and I explain in our book, the Chinese government’s decision in 2007 to require all video-sharing platforms to be licensed led to the rapid market dominance of Baidu, Alibaba and Tencent. These were followed by Bytedance (which owns TikTok), Kuaishou and Meituan.
READ: Commentary: Will the TikTok saga in the US lead to the break-up of the Internet industry?
The licensing requirement was a response to pressure from international copyright holders, including the Motion Picture Association of America. It eliminated less financially robust operators, many of whom were breaching copyright.
Aware of their social responsibility, many big tech leaders espoused the Chinese Dream: Xi Jinping’s roadmap for national rejuvenation. And Alibaba led the way.
Over the past decade it set up rural e-commerce hubs called Taobao villages to play to the government’s tune of “rural revitalisation”.
In 2015, when the central government announced a campaign to activate grassroots entrepreneurship, Alibaba partnered with the local provincial government in Zhejiang. The resulting project was aptly named “Dream Town”, which the governor of Zhejiang described as:
A new type of mass entrepreneurial space, a giant incubator, a young entrepreneurial community, a new information economy motor, an internet start-up ecosystem.
All the while, Alibaba had been adding several enterprises to its war chest, mostly acquisitions of smaller companies. It took the major share of popular video site Youku Tudou and bought into the film business, getting closer to younger audiences.
READ: Commentary: Alibaba makes a whopping US$28 billion bet on its next breakthrough act
THE STATE STEPS IN
China’s internet companies have built the infrastructure of China’s digital economy, which is now estimated to account for 36.2 per cent of GDP. This growth is largely due to the forces unleashed by China’s new breed of digital capitalists.
Alibaba has invested heavily in research and development over the years. It has a modern campus in the Yuhang district in Hangzhou, recruiting foreign talent. Other tech giants aren’t far behind. Tencent has similar campuses in Guangzhou and Shenzhen, and Huawei has one in Dongguan.
As Stephen Barthlomeusz of the Sydney Morning Herald notes, the state regulator’s recent targeting of Alibaba (and other major tech companies) doesn’t come without cost.
READ: Commentary: Why did China wait so long to crack down on Alibaba?
China’s tech market has driven growth and innovation. In fact, China’s anti-monopoly laws have existed since at least 2007. But their enforcement was lacking, as the state opted for innovation by nationalising the tech sector and letting it develop.
Putting a squeeze on activities now runs the risk of slowing down China’s economy. At the same time, the Chinese public is growing disillusioned with the predatory practices of Big Tech. Sound familiar?
THE VISIBLE HAND
At the same time, China’s tech companies owe a great deal of their success to the government. The state allowed them to benefit from policies designed to keep foreign competitors at bay, and to attract human capital back to China to work in these enterprises.
In return, the companies have helped the Chinese state further its technocratic model of surveillance, through investing in the social credit system and facial recognition.
But the market no longer offers the pretense of distance from government intervention. And new laws allow the Chinese government to access information about the users of China’s tech platforms.
This is the status of the relationship going forward. The question now is whether this will lead to a permanent chill.
READ: Commentary: Maybe Jack Ma became too powerful for China's liking
In the year celebrating the 100th anniversary of the Chinese Communist Party, perhaps it would be more expedient for China’s tech companies to toe the party line.
With the state’s propaganda apparatus reminding people of its victory over capitalism, it’s in the interest of incumbent players to adopt the principles of socialism, rather than play to their shareholders.
Michael Keane is Professor of Chinese Digital Media and Culture at Queensland University of Technology. This commentary first appeared on The Conversation.