What Is China Tech Crackdown?

Not so far ago – about the beginning of August 2021, the Chinese government undertook a series of initiatives designed to increase its influence and control over the tech sector of the country. The matter has been very represented in media nowadays, and if you would like to get a summary of the most crucial moments and facts then this article is for you. Enjoy the ride!

As noted previously, the processes described as “China tech crackdown” involve a series of initiatives by the Chinese Communist Party (CCP) to control the tech sector, arguably the most prominent and strategically vital sector in modern China. The Chinese government adopted three major arguments in favour of the crackdown.

One of the forms the crackdown imposed by the CCP hit the tech sector was antitrust charges. Concerning antitrust, dozens of Chinese companies were fined already. Speaking about big industry names, we can name Alibaba as one of the first Chinese companies suffering from those charges. Other famous Chinese companies such as Tencent, Baidu, New Oriental Education, and many other companies were fined as well. What is particularly interesting and shocking about the situation is that these companies were accused of things they allegedly conducted at the time when there were neither actual regulations on the matter nor the State Administration of Market Regulation itself – the government body the CPU employs to make the crackdown.?

Another alleged motivation for the crackdown was based on data security violations. The government body in charge of ensuring data protection – the Cyberspace Administration of China (CAC) – fined tech companies who it considered to be sending data of Chinese citizens out of the country. One of the biggest victims has been Didi (ride-hailing). What is interesting to mention, Didi went through the IPO in the US a couple of days before the CAC charged it with violation of data security protocols. Other victims of the state are Full Truck Alliance (digital freight platform) and an online recruiting solution from Kanzhun. They were removed from the Chinese app stores and thus are unavailable for new users. Existing users are still served, though. Both companies started trading on the US markets shortly before the crackdown. And again, the companies are accused of posing a threat to the cyber security of China and its citizens.

Official China claims that the crackdown is performed to protect China’s security from a supposed influence the US gained over them when they went public on the American markets. The logic is dictated by the cyber security law adopted in 2016 which does not enable to store large amounts of data related to Chinese citizens outside the country. To avoid acting partially and being biased, I have to say some words in support of China as well. Quite many people all over the globe think that China is getting control of its tech giants and this is not necessarily bad. For example, many US citizens voice concern over the increasing influence of American tech giants such as Amazon and Google. So according to the logic of some people, the CCP does what both many US citizens and the US government want to do over the two giants but cannot do at the moment. There are always two sides to one coin and this should be considered.

The third argument of the CCP for the attack of the Chinese state on the country’s tech sector may be described as a concern of “growth at the expense of the public interest”. The most prominent example of that is the suspension of the Ant Group’s?(tech and finance) IPO in 2020 where Chinese regulators said that the company could not go public due to compliance issues and security problems. Allegedly, the company would be harming Chinese society since it operates with large amounts of sensitive data and was, as a result, not yet ready to go public. As another example of that, China forced some education companies (after-school tutoring companies) to become registered as nonprofit entities. Tech-education companies such as Gaotu Techedu and TAL Education experienced a very substantial drop in their market capitalization amid the announcement. This may destroy the entire industry for private education according to some experts from China.

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