China: The tech giants, increasingly subordinate to the regime and its leader

Antitrust and data security measures taken by the CCP under Xi Jinping since the end of 2020 have upset China’s IT giants, which have flourished for two decades in an overly regulated environment. As a result of these measures, the market value of Alibaba’s e-commerce platform, gaming, social media and artificial intelligence operator Tencent, and other Internet giants fell by $ 1.3 trillion. Despite this contraction, which also affects China’s economic growth, the communist regime in Beijing intends to go all the way with the application of antitrust measures, considered a priority until 2025, reports The Associated Press.

“These companies are world leaders in their innovation sectors. And yet the leadership (CCP) is willing to smash them, ”says Mark Williams, chief economist for Asia at Capital Economics, an economic consulting and analysis company.

This crackdown is part of Xi’s efforts to revive the CCP’s “original mission” to lead China’s economic and social development, said Steve Tsang, a Chinese policy specialist at the School of Oriental and African Studies in London.

Xi is expected to benefit politically from it, as he wants a third consecutive five-year term as leader of the CCP and, implicitly, China.

According to Lester Ross, director of the Beijing office of the WilmerHale law firm, the CCP does not want to give the impression that it is returning to direct control over the economy, but that firms, especially those in the IT field, are aligning with its plans.

“They are worried that the companies will become too big and too independent of the party,” says Ross.

Chinese internet companies and their billionaire founders, including Jack Ma with Alibaba and Pony Ma with Tencent Holdings, are among the world’s biggest success stories in two decades. Alibaba is the largest e-commerce company, while Tencent operates the popular WeChat messaging service. Now all they have to do is show their “loyalty” to the party.

Chinese officials acknowledge that Xi’s efforts to subordinate his IT giants come at a cost, but are reluctant to challenge him, Tsang said. “Who will stand up and tell Xi Jinping that his policy will be harmful to China?” The analyst asks.

In April, Alibaba was fined 18.3 billion yuan ($ 2.8 billion) for violating antitrust rules.

Tencent, the Kuaishou streaming platform, the Sina Weibo microblogging platform and the Xiaohongshu social networking site have also been fined for distributing sexual material to minors. Tencent’s music service has been ordered to terminate exclusive contracts with suppliers.

Thus, under pressure, Alibaba has pledged $ 1 billion for technology start-ups over the next three years. Meituan CEO Wang Xing has promised to donate $ 2.3 billion to social initiatives. Pony Ma has pledged $ 2 billion for charity.

Alibaba has promised to spend 100 billion yuan ($ 15.5 billion) to create new jobs, rural development and other initiatives to support Xi’s “common prosperity” campaign.

Such revenue redistribution plans are “reminiscent of the mass mobilization and populist strategies” of the 1950s and 1960s under the leadership of Mao Zedong, China’s leader at the time, Steve Zhang concludes.

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