Beijing has been busy in recent months. A flurry of regulatory crackdowns on everything from TV talent shows to after-school tutoring has demonstrated the willingness of the Chinese Communist Party (CCP) to assert its authoritarian tendencies in pursuit of what President Xi Jinping calls “common prosperity”. Most of these clampdowns have been related to social issues, such as a state-mandated limit on the amount of time children can spend on video games, but perhaps the most startling, and potentially consequential, target of ruthless new regulations has been China’s biggest tech firms.
How the clampdown came about
Technology firms have been a driving force of China’s explosive growth in the past few decades and have repeatedly been touted as the key to China’s future economic aspirations. However, beginning with the spectacular fall of entrepreneurial golden boy Jack Ma last year, Beijing has proceeded to wipe billions off the value of its biggest tech firms in recent months, amounting to what the Wall Street Journal estimates to be about 20% of their market capitalisation. This crackdown can easily be dismissed as an authoritarian attempt to curtail powerful tech entrepreneurs and ensure that they tow the party line. Nevertheless, ensuring China’s tech companies make the country’s interests their own may not be an entirely bad thing.
Lax regulation on businesses has been a key factor in China’s extraordinary economic ascension, particularly in tech circles. Throughout the course of their rise the biggest firms exploited legal grey areas, overworking employees, misclassifying their workers, and creating incredibly high-pressure work environments for delivery drivers and warehouse staff with aggressive targets and arbitrary fines or dismissals. These practices were accepted, as they have been in the West, in the interests of economic growth and innovation. Recent regulations aimed at reining in the worst impulses of these large tech companies, including the hijacking of user data, anti-competitive behaviour and dubious financial practices, have been largely successful at breaking up monopolies – providing space for mid-level companies to grow as well as ensuring that workers and consumers are protected. Companies have scrambled to donate billions to social causes and align themselves with policy direction, all to the widespread approval of the Chinese people.
The West is watching
In a time when a whistleblower is testifying before the American Congress on the alleged harm that Facebook, its biggest tech monopoly, is doing to children’s mental health and the foundations of democracy in the pursuit of astronomical profit, should Beijing’s ability to bring big tech companies to heel be condemned or applauded? The destructive practices that the CCP sought to outlaw are by no means exclusive to China’s former regulatory Wild West – they are a hallmark of big tech companies around the world. Commentators remark that Beijing’s recent regulatory activity, as well as its “controlled demolition” of debt-laden real estate giant Evergrande, is a sign that it is turning its focus towards making the Chinese economy more sustainable, rather than being a conduit of unstable growth.
The authoritarian communism that underpins China’s political system is, of course, worrying at best and abhorrent at worst, but that does not necessarily mean that the West cannot learn lessons from the way that CCP has successfully regulated its tech industry. It has, after all, managed to ensure that the largest tech companies are working towards a common good (or at the very least not actively working against the fabric of the society in which they operate), a stated goal of democracies across the world for many years. Could the West be taking notes?