The logic driving China’s big tech clampdown

https://asiatimes.com/2021/07/the-logic-driving-chinas-big-tech-clampdown/

64 63 5 years ago

Shortani• 5 years ago

I find it interesting that the paper does not mention other potential motivations for the changes and seems to take the CCP's statements at face value. Maybe they are simply directly reporting on what has been stated, but it does make sense that the CCP is concerned about the shifting power of control. I think this has little to do with privacy and protections of peoples' rights and everything to do with a tug of war happening above the citizens heads.

not2b• 5 years ago

I think that the article is implying all of that without saying so directly (maybe trying not to be banned in China). They refer at several points to the government's fear of companies having more data on people than the government does, making clear that this is about maintaining control and power.

yorwba3• 5 years ago

It's hard to run a country if you make public policy announcements that don't reflect what you want. Even if you tell your inner circle not to take the policy seriously, there'll be a lot of outsiders taking it at face value, especially in a country with more than a billion people. Based on what they heard coming from the central government, various municipalities are working on stricter laws (e.g. Shenzhen's new data regulations http://www.szrd.gov.cn/szrd_zlda/szrd_zlda_flfg/flfg_szfg/co... ) and economic publications are talking about the potentially astronomic fines and steps compliance departments are taking to manage that risk https://mp.weixin.qq.com/s/bAbyNyg4FZSsbrY9he5BkA

Sure would be a bummer if the government didn't really mean it that way, but companies end up improving their data management practices anyway.

baybal26• 5 years ago

This website "Asiatimes" is, despite the name, almost wholly authored in US, and London.

I cannot understand the Western desire to always rationise, and overthink actions of "smart, sophisticated Asian regimes." It's now almost a trope of some kind.

Some times the Occam's Razor explanation of events is the one which is true, and in this case it's the extremely vindictive regime just ruining lives, and fortunes of people whom they think are good targets to attack today, and there is nothing "smart, and sophisticated" about it.

throwaway4good3• 5 years ago

Really sounds like you are just letting your prejudice guide you, instead of trying to find out what is going on.

nemothekid• 5 years ago

Some times the Occam's Razor explanation of events is the one which is true, and in this case it's the extremely vindictive regime just ruining lives, and fortunes of people whom they think are good targets to attack today, and there is nothing "smart, and sophisticated" about it.*

I don't understand how an explanation built up on tropes is the simplest one. One what basis is the CCP "extremely vidictive"? How is the simplest explanation that the government decided to blow up the economy "just because". Your explanation seems very counter intuitive - in some way you take the opposite view as your criticism; reducing the chinese to some barbaric government system, and not the world 2nd largest super power.

baybal26• 5 years ago

in some way you take the opposite view as your criticism; reducing the chinese to some barbaric government system, and not the world 2nd largest super power.

China became world's 2nd largest economic power because money were almost raining on them from the sky, and not because of any level of sophistication.

Were they actually trying to play a better role beyond basic technocratic guidance, China wouldn't be a 2nd largest economy today, but a 1st one, and by a large extend.

With them seeing that the West was willing to pour money on them even when they were failing as hard as they did, they had not a single incentive to not to blow up the economy "just because", as you said, every few years, and being anything else than this "barbaric government system."

The extend of economic mismanagement during the so called "China's golden decade" was just that bonkers. 10, 11 digits sums were going up in flames, or vanishing in Swiss bank accounts almost monthly back then.

It's only when it got so bad as it is now economically, did the CPC turn on the current crisis mode. It is now slowly reverting to its pre-199x state — the perpetual crisis. It will be becoming increasingly more paranoid as the situation deteriorates, and increasingly more panic prone. The history shows that's how it was with every marxist, communist, or hardcore socialist regime in the past.

throwaway4good3• 5 years ago

I think this short write up of the problems of consumer internet companies from a (Chinese) societal perspective is extremely on-point and obviously also applies from a western perspective:

https://insider.techbuzzchina.com/c/policies-and-regulations...

1. Companies burning money in an effort to scale up and obtain a monopoly.

2. Using human weaknesses to design products and acquire traffic.

3. Monopolistic online platforms taking asymmetric measures to collect information from users and infringing on their privacy.

4. Discriminatory pricing.

Sometimes I wonder whether we in the west are capable of doing a similar crackdown? Or we have past the point of no return and companies like Facebook, Google, Amazon etc. are simply too powerful and too politically influental?

refenestrator• 5 years ago

Worth noting that we have different incentives in the US even accounting for different philosophies.

US big tech is globally influential, clipping their wings would reduce that influence. Chinese big tech is generally more about the large Chinese market and diaspora.

zozbot234• 5 years ago

TikTok has quite a bit of influence outside China. So it seems that Chinese big tech can compete quite effectively in a global market.

yaitsyaboi• 5 years ago

It's not like this crackdown is about the CCP's concern for protecting user data and preventing monopolies. It's just a turf war over the data and in a larger sense over control of the direction of the country.

Same reason Jack Ma went (extremely) conspicuously missing last fall.

CCP wants the economic growth and international prestige that a burgeoning tech sector provides, but does not want anything resembling the system we have where facebook can tell the White House to take a hike. https://www.nytimes.com/2021/07/17/technology/facebook-vacci...

pjc50• 5 years ago

Would we want a similar crackdown from the duopolistic political side?

The Chinese government can move quickly and decisively because it doesn't have any checks or balances. The US would benefit from a system in which (a) there are clear rules for competition and (b) those rules are enforced, even-handedly; but it's harder than you think to get to that point.

wwarner• 5 years ago

I was mystified by the Ant crackdown until recently. Charlie Munger (Berkshire Hathaway VP) thinks it makes a lot of sense. https://www.reuters.com/business/finance/berkshires-munger-s...

refurb3• 5 years ago

That’s article has zero content other than a couple quotes from Munger that say nothing more than “I agree”.

Agree with what?

fmajid12• 5 years ago

It's clear Xi Jinping considers the platform companies to be middlemen that are not actually adding value, and not "real" tech companies unlike those that actually make physical goods like chips or devices. He does not want the platforms to be able to extract monopoly rents from the real tech companies as they have in the US, and he categorically does not want China's industrial base to be hollowed out. Same goes for the financial sector.

He is, of course, absolutely correct. Lax antitrust enforcement in the US (nonexistent, really) is leading to concentration and stagnation.

As for EdTech, it's an arms race of tutoring to get into a limited places in good universities, with diminishing results leading to a stalemate since everyone gets tutored, and just a parasitic drain on the economy, hence efforts to clip its wings. Nonprofits like Khan Academy that are genuinely interested in improving education would continue to operate. Much the same could be said of political contributions in the US.

I would expect the residential property business bubble to be next, since it's another huge misallocation of resources (although it's already started with Wanda and Vanke).

https://www.aljazeera.com/economy/2021/7/28/in-its-latest-cr...

ozzythecat• 5 years ago

It's clear Xi Jinping considers the platform companies to be middlemen that are not actually adding value, and not "real" tech companies

I’m not sure how you arrived at this conclusion. My take away was the Chinese government fears tech companies that might take power away from the Chinese government. This is more about the Chinese government maintaining its own power and full control, and less about the value add or anti trust stance for keeping a competitive market.

smhost• 5 years ago

It's all of the above. A large, unproductive rentier class creating a barrier to capitalist dynamics contributes to a stagnant economy, which generates popular discontent and erodes government authority.

baybal26• 5 years ago

I’m not sure how you arrived at this conclusion. My take away was the Chinese government fears tech companies that might take power away from the Chinese government. This is more about the Chinese government maintaining its own power and full control, and less about the value add or anti trust stance for keeping a competitive market.

I keep the claim that the explanation is even more simpler: whomever becomes a big man in a country like China eventually goes down, and that's the whole story.

There can only be one "big man" in such system, and he tolerates no competition.

This consistently held true through the whole 40 years of modern China: whomever attains too much of the social, political, economical, cultural, moral, or even genealogical prominence consistently gets taken down. This is why most mainland Chinese have that fear of publicity, and standing out almost bordering on panic disorder. And this is why people attaining any level of prominence there keep leaving the country for the West.

fmajid12• 5 years ago

By reading coverage in Nikkei and analysts that are on the ground in China. Notably Dan Wang, who totally called it 8 months ago:

https://danwang.co/2020-letter/

While promoting the status of science and technology with one hand, the Chinese government has with its other hand reined in the activities of consumer internet companies. I’ve never stopped lamenting the marketing trick that California pulled off to situate consumer internet as the highest form of technology, as if Tencent and Facebook are the surest signs that we live a technologically-accelerating civilization. The “tech” giants are highly-capable companies that print cash. But they’re barely engaged in the creation of intellectual property, excelling instead on business-model innovation and the exploitation of network effects. It’s become apparent in the last few months that the Chinese leadership has moved towards the view that hard tech is more valuable than products that take us more deeply into the digital world. Xi declared this year that while digitization is important, “we must recognize the fundamental importance of the real economy… and never deindustrialize.” This expression preceded the passage of securities and antitrust regulations, thus also pummeling finance, which along with tech make up the most glamorous sectors today. The optimistic scenario is that these actions compress the wage and status premia of the internet and finance sectors, such that we’ll see fewer CVs that read: “BS Microelectronics, Peking; software engineer, Airbnb” or “PhD Applied Mathematics, Princeton; VP, Citibank.”

Read the whole letter, it is very informative, unlike most coverage in the Western business press that leans towards the caricatural. Xi may be evil and ruthless, but that does not mean he is stupid, or insincere in his nationalism. It would be a grave mistake to underestimate him and think of him as just another Putin.

beaunative5• 5 years ago

I tried to take your comment seriously, but 'tech companies that might take power away' part made me laugh. What do you think those tech companies are? Their most advanced technology is a chat app and an online mall.

pankajdoharey• 5 years ago

The treatment of Alibaba and Ant group is enough to reach the conclusion that Xhi Jing Ping doesnt think highly of these companies. They do add value but these are middlemen companies that part is correct, but that isnt the reason for this clampdown. I think that with the rise of Charismatic Entrepreneurs who have millions of followers both nationally and internationally they command a lot of followign and respect which directly threatens and undermines the Supreme leader. That may not be acceptable to CCP, as it poses a threat to long term viability of CCP, the future is technology driven and thus would be more and more important to the future of the nation and of its people, such decisions in CCP's mind cannot be left to the private sector. If they do China may turn into Oligarchy like Russia or a seemingly democratic Oligarchy like US.

lumost• 5 years ago

While I disagree with the methods and objectives outlined above. It’s incredibly refreshing to hear an honest take on Chinese economic and political policy that doesn’t boil down to “CCP wants control”.

Tech has greatly empowered rent seeking activities in the western world. It’s not implausible that the Chinese government is simply curtailing this activity using the mechanisms that they have traditionally used for other political objectives.

drcode• 5 years ago

The argument that middlemen are parasites who provide no value is a claim with a pretty dark history.

fmajid12• 5 years ago

Of course they provide some value by reducing friction, the problem is when they use their market power or network effects to seek rents and distort the economy.

jollybean2• 5 years ago

This is just not true.

Not only is the premise that 'DiDi' etc. do not create 'real value' simply false, the notion this is Xi's primary concern is isn't true either.

Xi's #1 concern is power and control. It's ridiculous that they're talking about 'protecting people's rights and warding off monopoly' when they're literally doing the opposite in Orwellian terms.

There's no 'hollowing' of the economy due to any of giant's usage of data. While competition is a concern, it would be really bad industrial policy to consider 'chips' somehow more important than the things you can do with them.

Ant is consumer credit where there was none before, and that's a huge, huge pillar of economic growth especially on the domestic consumption side where Xi wants to push the economy.

The notion that Google et. al. are 'middlemen' is beyond wrong.

Xi has also stopped these companies from listing in the US, which isn't good for anyone but the CCP.

This is mostly a game of power, not industrial policy.

beaunative5• 5 years ago

Obviously the the reason that the CCP is able to do these things is because they HAVE control. Do you think the taxi app, mall app, or a chat app is a threat to their control? Their firewall is notorious.

I don't even get it why you bothered to mention Ant, I wouldn't feel sorry for comsumer loan companies in another lifetime. You claim it to have pushed economic growth, that's the same as saying the pre-2008 housing market in the US is a huge pillar of economic growth, and look at where that lead us.

fmajid12• 5 years ago

Google is an advertising company, with some hobby businesses in cloud or self-driving cars. It doesn't get much more middleman than that.

Didi committed the sin of going ahead with a US listing against explicit orders from the government, in the context of an economic cold war with the US. China has plenty of capital, it's not as if we're in the 1970s and the US is the only way to go. You can bet that if JP Morgan Chase wanted to shift its headquarters to Hong Kong, the US would also take swift action. What the Chinese are doing with foreign listings is not all that different from what the US does with CFIUS.

Wanting to preserve privacy from private companies is not at all inconsistent with wanting the government to have total surveillance power. There are many domains where government has a monopoly, from issuing currency to the exercise of violence.

You will note Xi is cracking down in other areas that are not a plausible threat to the CCP, like bitcoin miners or the educational tutoring arms race. Sometimes, the stated agenda is the actual agenda.

dirtyid2• 5 years ago

Maybe CCP/Xi is genuinely interested in sensible governance and is in a (reluctant) position to pioneer now that models which PRC previously emulated has either failed or became paralyzed with dysfunction. We're in the post end of history era. CCP conducted thorough analysis on the collapse of USSR, while the luster of western governance and economic management faded post GFC, and more so now after Trump. On Xi, we have early CIA testimony that he's incorruptible by money. LKY likened him to Nelson Mandela type of individual. Unlike all the other "interests" his speech writers and publicist feigns, he seems to be incredibly fixated with governance and bureaucracy on an intellectual, bordline autistic level. IMO this is just government governing in system based on performance legitimacy, improving comprehensive national power, instead of vetocracy (or equivalent) politics. Lot's people out there projecting other motives because they can't recognize proper governance anymore.

fmajid12• 5 years ago

Let's not put Xi on a pedestal. His family is certainly corrupt as heck (like all the princeling families of Mao's companions that dominate Chinese politics), as the NYT investigated (and this led to it being banned by the Great Firewall) and his anti-corruption drive is highly selective.

He has also done tremendous institutional damage to the PRC by rolling back Deng's reforms and going back to the Mao model of, ahem, governance. That Xi himself is a relatively competent leader does not guarantee his successors will also be, and you have to consider how Mao killed more people than Hitler and Stalin combined through sheer incompetence to understand how dire the consequences could be.

It's interesting given his family history: his father was purged by Mao, rehabilitated by Deng, but eventually also fired by Deng. Xi Jinping had a very hard time after his father's fall from favor, and some have compared his adoption of Maoism as a form of Stockholm Syndrome.

Xi also overreached by challenging the US too soon rather than bide his time and wait another couple of decades by which point China could have weaned itself from dependence on the US for tech like semiconductor fabrication and been much less vulnerable.

Xi's model of governance is essentially the traditional Chinese model of an Emperor aided by a mandarinal bureaucracy, just with engineering substituting for study of the Confucian classics as training mode for the mandarins. Chinese politicians' advancement is conditional on them meeting GDP growth objectives (now also environmental indicators), essentially it's run just like Google with its OKRs.

arodyginc• 5 years ago

Clearly China wants to use other markets but tries to avoid becoming a market be it education or social platforms. Very clever strategy I'd say

fmajid12• 5 years ago

It's called mercantilism, and is a well-worn strategy. The US used it against the UK, who had used it against the Dutch before them, and the Germans had also used it against the UK.

kaycebasques• 5 years ago

The CCP is obsessed with data – so much so that it was recently dubbed a “factor of production” alongside land, labor, capital, and technology

I've never thought of data in these terms. Makes a lot of sense for the 21st century.

The logic driving China’s big tech clampdown

Related Stories