China’s clampdown on its best and brightest tech companies came quickly in late 2020. Two years later authorities in Beijing are swerving rapidly back towards more predictable policymaking. On January 16th DiDi Global, a ride-hailing firm, said it would soon be allowed to resume taking on new customers after an 18-month pause during which regulators banned it from growing. A week earlier Ant Group, China’s payments and fintech giant, revealed that Jack Ma, the country’s most prominent entrepreneur, no longer held controlling rights in the company which he co-founded. Mr Ma’s ceding of control was rumoured to be one of the final steps toward political approval of the company. Shortly afterwards a senior Chinese technocrat said the tech crackdown was drawing to a close.
DiDi and Ant have been bellwethers for big tech in China. DiDi’s trouncing of Uber, which ended in the Chinese firm buying its rival’s operations in the country in 2016, showed that local groups could compete with global ones. Ant’s eye-watering valuation of $300bn in 2020 suggested that China would produce the world’s next generation of dazzling consumer-internet champions. But the state’s suspension of Ant’s record-breaking initial public offering later that year, followed by a damaging probe into DiDi just days after its flotation in New York in June 2021, made it clear that all was not well in the world of Chinese tech.
The “rectification”, as the authorities dubbed it, demonstrated the extent to which regulators were willing to exert control over large technology platforms. DiDi was eventually forced by Chinese regulators to delist in New York—an unprecedented move by authorities in Beijing. A relisting in Hong Kong was also blocked. Jack Ma, once an outspoken critic of bad regulation, has kept out of the public eye. Investors reacted to the tech purge with panic. Over the past two years, Beijing’s heavy hand wiped out at least $2trn from global markets.
The end of the techlash is part of a concerted effort to revive confidence in China’s leadership, including that of Xi Jinping. Securities regulators have made concessions in recent months by allowing America’s accounting watchdog to review the internal books of American-listed Chinese firms, avoiding the delisting of some $900bn-worth of shares traded in New York. Since November China has rapidly shifted away from its zero-covid policy, a costly but failed effort to suppress the pandemic within its borders. In the past two weeks leaders have also drastically loosened restrictions on financing for property developers after an attempt to rein in leverage pushed the industry towards collapse.
But the new era for tech will be vastly different from the previous one, which was defined by rapid growth and unbridled expansion. Many companies have been selling businesses they bought in recent years. Entire internet-enabled industries, such as online education, have been destroyed and will not be coming back.
State control is set to increase in the coming years. Many firms have already sold small stakes to government investors. These “golden shares” often require the state to buy only 1% of a company and yet confer the right to appoint board members and veto important decisions. Shares in important subsidiaries of ByteDance, the owner of TikTok, and Weibo, a Twitter-like platform, are already held by a state investor linked to China’s cyberspace regulator. A similar arrangement has recently been made with Alibaba, an e-commerce giant, and there are rumours that the same fate might befall Tencent. Investors can expect DiDi to take on government-linked investors before it is fully rehabilitated, says Cherry Leung of Bernstein, a broker. The new normal will be a strange new place.■
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