The Chinese argue that the tech crackdown was just \u201cregulatory catchup\u201d by central government ministries worried about excessive market power. However, the start of the new policies occurred just days after Jack Ma gave a speech in Shanghai accusing the government of being out of touch and inept. There has been a real concern that wealthy companies with widespread popular appeal could pose a threat to the dominance of the Communist Party. Note how the other well-capitalised sector of the economy \u2013 real estate developers \u2013 have also been taken down. In both cases, there is a regulatory argument, but the implementation has been chaotic, and jobs have been lost at a time when China\u2019s economy is facing headwinds.<\/p>\n The common prosperity<\/a> slogan has been around for decades, but Xi Jinping has made it a central plank of his policies. In essence, it is a call to more equitably distribute income and withdraw from pell-mell economic growth. It also harkens back to the more hardcore days of Maoism when cultural signifiers were important, and ideology ruled. However, laudable as it might appear, attacking large corporations for excess profits and market dominance cannot alone achieve more equality. China needs to engage in a fundamental restructuring of its tax base and excessive reliance on infrastructure investment. China\u2019s consumption is 30% of GDP compared with 70% in the US. Giving consumers more power over the purse would require the partial dismantling of the state sector, which Xi Jinping appears reluctant to do. I view common prosperity as a populist slogan but no more.<\/p>\n The tech crackdown affected most sectors of what is termed the \u201cplatform economy.\u201d Online education<\/a>, transport (like Didi) and financial intermediation have all become targets of the crackdown. I would argue that the key issue for the Chinese leadership is size: how to allow the platform economy to grow \u2013 but not too much. \u00a0Ant Financial became a very successful lender of consumer funds to small businesses across China. The central bank accused Ant of engaging in risky practices, but the IMF published a paper showing that Ant had a bad loan rate about one-third the size of many of the country\u2019s brick-and-mortar banks. The real risk was that Ant was getting too large and was starting to siphon credit from the state banks, which are the source of cheap credit for China\u2019s giant state firms.<\/p>\n![\"launchpad](\"https:\/\/focus.cbbc.org\/wp-content\/uploads\/2021\/03\/lp-general.png\")
<\/a><\/p>\nWe often see the phrase \u201cChina\u2019s tech war\u201d in newspapers, but perhaps we could start with how the restrictions on the growth of China\u2019s technology sector and its major players came about and why?<\/h4>\n
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<\/p>\nThe restrictions on Chinese technology companies are often linked to the Party’s ‘common prosperity’ slogan. How does common prosperity impact tech?<\/h4>\n
Could you outline the major areas of heightened regulation affecting tech? The focus on data, financial risk, antitrust and Ant Financial offering loans for smaller banks seems to have created what you term \u2018an uneven regulatory environment\u2019. How disruptive is this for the sector right now?<\/h4>\n