16 China’s tech crackdown

China’s tech crackdown

A crackdown on technology is reshaping China’s economy and society.

Since late 2020, China has investigated and/or fined affiliates of its biggest tech companies Alibaba, Tencent, JD.com, Meituan and Didi Chuxing for monopolistic practices. A mega-IPO for Alibaba’s Ant Financial was halted at the eleventh hour. In April 2021, Alibaba incurred a record fine of $2.8 billion for imposing “forced exclusivity” rules on merchants.

The magnitude of the crackdown is unsurprising, considering that China is the world’s most digitized country. Chinese tech companies play an outsized role in almost every facet of citizens’ lives, collecting vast tracts of consumer data along the way.

Some 70% of China’s population—989 million people— were online at the end of 2020, almost all via their mobile phones. Of these, almost 80% were shopping online, 86% were using mobile payments, and 94% were consuming

online video, according to the China Internet Network Information Center. Initially focused on antitrust, data security and cybersecurity issues, the crackdown has spread to societal concerns, from too much homework for young kids (solution: banning for-profit online tutors) to excessive gaming (solution: strict time limits for minors) to obsessive fandoms.

“I think the issues that regulators in China are trying to address are clearly not unique,” Vey-Sern Ling, managing director of Union Bancaire Privée in Singapore and an expert on China’s Internet economy, tells Wunderman Thompson Intelligence. “But there is a lot more autonomy in China, much less time spent on discussion/consultation, and implementation is heavy-handed.” The US government and the European Union are also trying to curb the reach of Big Tech by suing the likes of Facebook, Amazon and Google for anti-trust issues, though these efforts will take longer to wind their way through courts.

Why it’s interesting For Chinese consumers as well as the brands that sell to them, the changes could mean more choice as rival tech ecosystems are forced to work with each other. For example, shoppers on Alibaba’s ecommerce platforms previously could not use WeChat Pay—owned by rival Tencent—for purchases. Similarly, shoppers on JD.com and Pinduoduo—part-owned by Tencent—could not use Alipay. These walled gardens are coming down.