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China’s regulatory crackdown on its most powerful businesses appears far from over, said Christian Shepherd at the Financial Times. Over the past several months, the world’s second-largest economy has “knocked tens of billions of dollars off the valuations of some of the country’s biggest tech groups,” including Alibaba, Tencent, and Didi, with several “sudden interventions” aimed at curtailing the size and influence of corporate behemoths. But newer restrictions have reached beyond dominant tech firms. China recently prohibited online schools — a big business in China — “from making profits, raising capital, or listing on stock exchanges.” Increased regulations have also led to an exodus of almost half of the world’s Bitcoin miners. And the effort to “assert Communist Party supremacy” seems to be only beginning.
This is an opportune time for Xi to launch a long-planned effort, said Bloomberg News. Though there is little doubt that he will be able to extend his rule to a third five-year term after the politically sensitive party congress in 2022, he likely still wants to “stave off any criticism the party has been captured by the wealthy.” Until recently, “external events have tied Xi’s hands,” as he contended with a U.S. trade war and the Covid pandemic. But now he has a chance to rein in China’s tycoons and push for technological “self-reliance.” Xi may be cutting down China’s superstar tech firms, said Greg Ip at The Wall Street Journal, but he’s not abandoning the country’s tech ambitions. He has been showering “subsidies, protection, and ‘buy-Chinese’ mandates” on manufacturers such as those turning out semiconductors, EV batteries, commercial aircraft, and telecommunications equipment. In Xi’s view, “national greatness doesn’t depend on having the world’s finest group chats or ride-sharing.” It depends on “being able to make the most advanced technology.”
There is a Chinese saying that means “picking up a stone to smash one’s foot,” said Nathaniel Taplin, also at the Journal. That’s what China is doing if it thinks “it can snap its fingers and create — or destroy — whole industries at will.” The impact on the country’s growth, employment, and debt could be significant. “If the global economy were a zero-sum game, Xi’s sabotaging China’s boldest innovators might cheer Washington,” said William Pesek at Nikkei Asian Review. But if Xi’s strategy “is to wall off Asia’s biggest economy” from the U.S., Japan, and Europe, that’s -nothing for anyone to celebrate.
The crackdown “is likely to prove self-defeating,” said The Economist. Xi’s assault on his own country’s $4 trillion tech industry is startling because the rise of that industry is “one of the most impressive of all China’s achievements in the past two decades.” Stronger regulation of China’s internet industry was probably overdue. “In contrast to Vladimir Putin’s war on Russia’s oligarchs in the 2000s, China’s crackdown is not about insiders fighting over the spoils.” But the way that Xi has gone about this has set off a battle in which “an unaccountable state wrestles with the world’s biggest firms for control of the 21st century’s essential infrastructure.” There’s a lot that can go wrong.
This article was first published in the latest issue of The Week magazine. If you want to read more like it, you can try six risk-free issues of the magazine here.