CHina’s suppression In late 2020, the evaluation of the best and brightest tech companies is fast approaching. Two years later, Beijing has moved quickly to more predictable policymaking. On Jan. 16, ride-hailing company Didi Global said it would soon be allowed to resume taking new customers after an 18-month pause by regulators that banned its growth. A week ago, Chinese payments and fintech giant Ant Group revealed that Jack Ma, China’s most prominent entrepreneur, no longer holds control of the company he co-founded. Ma’s relinquishment of control is rumored to be one of the final steps in the company’s bid to gain political approval. Shortly after, a senior Chinese technocrat said the tech crackdown was coming to an end.
Didi Chuxing and Ant Financial have been leading the way among China’s tech giants. Didi beat Uber to the punch, and eventually the Chinese company bought its rival’s China business in 2016, showing that local groups can compete with global groups. Ant Group’s staggering $300 billion valuation in 2020 suggests China will produce the world’s next dizzying generation of consumer internet champions. But the state’s suspension of Ant’s record-setting IPO later that year, followed by a damaging investigation into Didi days after its New York listing in June 2021, made clear that it wasn’t all plain sailing for China’s tech scene.
The authorities called it a “rectification,” indicating the extent to which regulators are willing to exert control over large tech platforms. Didi Chuxing was eventually forced by Chinese regulators to delist in New York — an unprecedented move by Beijing. A relisting in Hong Kong has also been blocked. Ma, who has been an outspoken critic of poor regulation, has stayed out of the public eye. Investors panicked in reaction to the tech purge. Over the past two years, Beijing’s heavy hand has wiped at least $2 trillion from global markets.
The end to the tech conflict is part of a concerted effort to restore confidence in China’s leadership, including Xi Jinping. Securities regulators have backed off in recent months by allowing U.S. accounting regulators to scrutinize the internal books of U.S.-listed Chinese companies, avoiding the delisting of about $900 billion worth of shares traded in New York. China has rapidly reversed its zero-coronavirus policy since November, a costly but failed effort to contain the pandemic within its borders. Leaders have also sharply eased financing restrictions for property developers in the past two weeks after attempts to rein in leverage pushed the industry toward collapse.
But the new age of tech will be very different from the ones that have characterized the past, which has been marked by rapid growth and unbridled expansion. Many companies have been selling businesses they have acquired in recent years. The entire Internet industry, such as online education, has been destroyed and will not come back.
State control will increase in the coming years. Many companies have sold small stakes to government investors. These “golden shares” typically require the state to buy only 1 percent of a company, yet give it the power to appoint board members and veto key decisions. Stakes in key subsidiaries of ByteDance (owner of TikTok) and Twitter-like platform Weibo are already held by state investors with ties to China’s cyberspace regulator. A similar arrangement was recently struck with e-commerce giant Alibaba, and there are rumors that the same fate could befall Tencent. Cherry Leung of brokerage Bernstein said investors can expect Didi to accept government-linked investors before it fully reverts to its original status. The new normal will be a strange new place.■
To stay on top of the most important news in business and technology, subscribe to The Bottom Line, our weekly newsletter for subscribers.