The Chinese government’s “common prosperity” policy is targeting large technology corporations with many strong measures.
During a meeting with the Office of the Central Economic and Financial Commission on August 17, 2021, President Xi Jinping emphasized efforts to ensure “common prosperity” for the people, regulating those with low incomes, too high, and encourage corporations and large businesses to give more back to society.
China’s senior leaders seem to have decided that after the late leader Deng Xiaoping’s “let some get rich first” policy, it’s time to prioritize ensuring “common prosperity,” in other words. Towards a more equitable economy and society.
Given the recent moves of the Chinese government and in particular the market and business regulators, it is clear that one of the big targets of this policy is the large technology corporations with strong power influence far beyond China.
The leaders who run major tech conglomerates are largely among the richest in China: Tencent’s chairman and CEO, Pony Ma, is worth $65.8 billion; Ma Van (Jack Ma), former Chairman of Alibaba, owns a net worth of 48.4 billion USD; and Truong Nhat Minh, CEO of ByteDance known for its TikTok app, has a fortune of $35.6 billion (according to Forbes’ most recent estimate).
On April 10, 2021, after a months-long investigation, China’s State Administration for Market Regulation (SAMR) imposed a record penalty of 18.2 billion yuan (equivalent to 2.8 billion yuan). billion) for e-commerce conglomerate world’s largest Alibaba for violating the law of antitrust.
After the decision to apply this fine, Mr. Truong Dung, Chairman and CEO of Alibaba shared in a letter to shareholders that the antitrust penalty has made the company “deeper concern” about the responsibility of an Internet-based business and “need to pay more attention to creating positive value for society”.
One of the moves in the antitrust trend targeting technology corporations is SAMR’s blocking of the merger of two live-streaming platforms Douyu and Huya. If successful, this deal will create a Livestream “giant” worth more than $ 10 billion, capture more than 70% of the market share and allow Tencent to take on Twitch (owned by Amazon). Some legal experts believe that more similar mergers will be canceled in the future on antitrust grounds.
A series of problems also came to DiDi Chuxing, a technology transportation business, when the company went public on the NYSE in June 2021. Just in July 2021, Chinese authorities ordered app stores to remove DiDi and many other apps owned by the company fined the company for violating antitrust laws, and ordered dispatched police and officials from various ministries to DiDi’s headquarters in Beijing under the pretext of serving a cyber security investigation.
In addition to measures aimed directly at large technology corporations, the Chinese government has also recently tightened regulations on personal information and thereby affecting technology businesses.
On August 20, the National People’s Congress of China passed the Personal Information Protection Law, which took effect on November 1, 2021. Although the full text of the law has not been made public, according to Xinhua, the law is designed to reduce “excessive collection and misuse of personal information” and “clarify the responsibilities of the parties involved in the collection of personal information.” Collect and process personal information”.
The law also requires technology corporations to set up an independent agency responsible for monitoring the use of personal information collected from users. This move caused the shares of some major technology companies to plummet immediately afterward and caused concern to the world investment.
The market value of Chinese companies has evaporated by nearly $1 trillion since February. The Nasdaq Golden Dragon Index, which tracks the 98 largest Chinese companies listed in the US, is down more than 50%. compared to the peak in February.
The aggressiveness of the state management in China is making technology companies and investors extremely cautious. Tencent warned investors that more regulations to control business activities on the Internet will be passed in the future, and announced an initiative to invest 50 billion yuan ($7.71 billion) to contribute to the goal. the goal of “common prosperity”.
Management risks in listing abroad also make many investors wait, especially when China and the US are still quietly arguing over regulations on auditing foreign companies listed in the US. Several major investors, including SoftBank CEO Masayoshi Son, have said they will be cautious about investing in Chinese startups until the effects of the new regulations become clearer.
Some foreign experts and researchers believe that this tightening of management by Chinese authorities on large technology corporations will hurt the business environment in the long term.
Yuen Yuen Ang, a professor of economics and politics at the University of Michigan, USA, said that the Chinese government’s goal of redistributing power and wealth in society is right, but the method is problematic and The Chinese entrepreneurial spirit may have declined as a result. Similarly, economist Stephen Roach argues that authorities are “strangling” the most dynamic part of the economy and dampening Chinese hopes for innovation.