Chinese Regime Tightens Political Control of Internet Giants

BEIJING—The Chinese Communist Party (CCP) is tightening political control over China’s internet giants and tapping their wealth to pay for its ambitions to reduce reliance on U.S. and European technology. Anti-monopoly and data security crackdowns starting in late 2020 have shaken the industry. Investor jitters have knocked more than $1.3 trillion off the total market value of e-commerce platform Alibaba, games and social media operator Tencent and other tech giants. The CCP says anti-monopoly enforcement will be a priority through 2025. It says competition will help create jobs and raise living standards. The CCP seems likely to stay the course even if economic growth suffers, say businesspeople, lawyers, and economists. Lester Ross, head of the Beijing office of law firm WilmerHale, said that Chinese leaders don’t want to reimpose direct control of the economy but want private sector companies to align with the CCP’s plans. “What they are worried about is companies getting too big and too independent of the party,” said Ross. Chinese internet companies and their billionaire founders, including Alibaba Group’s Jack Ma and Tencent Holdings’ Pony Ma, are among the biggest global success stories of the past two decades. Alibaba is the biggest e-commerce company, while Tencent operates the popular WeChat messaging service. But party plans emphasize robots, chips, and other hardware, so these companies are rushing to show their loyalty by shifting billions of dollars into those. The CCP’s campaign is prompting warnings the world might decouple, or split into separate markets with incompatible technology. Products from China wouldn’t function in the United States or Europe, and vice versa. Innovation and efficiency would suffer. U.S. curbs on Chinese access to telecom and other technology haven’t helped. Alibaba said it will invest $28 billion to develop operating system software, processor chips, and network technology. The company has pledged $1 billion to nurture 100,000 developers and tech startups over the next three years. Last year, Tencent promised to invest $70 billion in digital infrastructure. Meituan, an e-commerce, delivery and service platform, raised $10 billion to develop self-driving vehicles and robots. Investors, many burned by the drop in technology shares, are keeping their money on the sidelines. Tencent’s market capitalization of $575 billion is down $350 billion from its February peak, a decline equal to more than the total value of Nike Inc. or Pfizer Inc. CEO Masayoshi Son of Japan’s Softbank Group—an early investor in Alibaba—said on Aug. 11 he will put off new China deals. Softbank invested $11 billion in ride-hailing service Didi Global, whose share price has fallen by one-third since its U.S. stock market debut on July 30. The crackdown began in November when Beijing ordered Ant Group, which grew out of Alibaba’s Alipay online payments service, to postpone its stock market debut in Hong Kong and Shanghai. The company, which offers online savings and investment services, was told to scale back its plans and to install bank-style systems to vet borrowers and manage lending risks. Industry analysts cut forecasts of Ant’s expected stock market value. Meanwhile, the Chinese communist regime is tightening control over data gathered by private companies about the public—especially at Alibaba and Tencent, which have hundreds of millions of users. Chinese leaders see information about its 1.4 billion people as a tool for gaining insight into the public and economy—and a potential security risk in private hands. A law that takes effect Nov. 1 establishes security standards, prohibits companies from disclosing information without customer permission and tells them to limit how much they collect. Unlike data protection laws in Western countries, the Chinese rules say nothing about limiting government or the CCP access to personal information. Beijing also is accused of using its stockpile of data about the public in a campaign of repression against Uyghurs and other mostly Muslim minorities in China’s northwestern region of Xinjiang. “Very lax” until a few months ago, the CCP has become “one of the most active and forceful jurisdictions in regulating the digital economy,” wrote Angela Zhang, an anti-monopoly expert at the University of Hong Kong law school, in a paper this month. In April, Alibaba was fined 18.3 billion yuan ($2.8 billion) for offenses that included prohibiting vendors that wanted to use its platforms from dealing with Alibaba’s competitors. Units of Alibaba, Tencent, live-streaming site Kuaishou, microblogging platform Sina Weibo and social media site Xiaohongshu also have been fined for distributing sexually suggestive stickers or short videos of children. Tencent’s music service was ordered to end exclusive contracts with providers. Beijing is also using the crackdown to narrow China’s politically sensitive wealth gap by pushing tech giants to share their wealth with employe

Chinese Regime Tightens Political Control of Internet Giants

BEIJING—The Chinese Communist Party (CCP) is tightening political control over China’s internet giants and tapping their wealth to pay for its ambitions to reduce reliance on U.S. and European technology.

Anti-monopoly and data security crackdowns starting in late 2020 have shaken the industry. Investor jitters have knocked more than $1.3 trillion off the total market value of e-commerce platform Alibaba, games and social media operator Tencent and other tech giants.

The CCP says anti-monopoly enforcement will be a priority through 2025. It says competition will help create jobs and raise living standards.

The CCP seems likely to stay the course even if economic growth suffers, say businesspeople, lawyers, and economists.

Lester Ross, head of the Beijing office of law firm WilmerHale, said that Chinese leaders don’t want to reimpose direct control of the economy but want private sector companies to align with the CCP’s plans.

“What they are worried about is companies getting too big and too independent of the party,” said Ross.

Chinese internet companies and their billionaire founders, including Alibaba Group’s Jack Ma and Tencent Holdings’ Pony Ma, are among the biggest global success stories of the past two decades. Alibaba is the biggest e-commerce company, while Tencent operates the popular WeChat messaging service.

But party plans emphasize robots, chips, and other hardware, so these companies are rushing to show their loyalty by shifting billions of dollars into those.

The CCP’s campaign is prompting warnings the world might decouple, or split into separate markets with incompatible technology. Products from China wouldn’t function in the United States or Europe, and vice versa. Innovation and efficiency would suffer.

U.S. curbs on Chinese access to telecom and other technology haven’t helped.

Alibaba said it will invest $28 billion to develop operating system software, processor chips, and network technology. The company has pledged $1 billion to nurture 100,000 developers and tech startups over the next three years.

Last year, Tencent promised to invest $70 billion in digital infrastructure. Meituan, an e-commerce, delivery and service platform, raised $10 billion to develop self-driving vehicles and robots.

Investors, many burned by the drop in technology shares, are keeping their money on the sidelines. Tencent’s market capitalization of $575 billion is down $350 billion from its February peak, a decline equal to more than the total value of Nike Inc. or Pfizer Inc.

CEO Masayoshi Son of Japan’s Softbank Group—an early investor in Alibaba—said on Aug. 11 he will put off new China deals. Softbank invested $11 billion in ride-hailing service Didi Global, whose share price has fallen by one-third since its U.S. stock market debut on July 30.

The crackdown began in November when Beijing ordered Ant Group, which grew out of Alibaba’s Alipay online payments service, to postpone its stock market debut in Hong Kong and Shanghai. The company, which offers online savings and investment services, was told to scale back its plans and to install bank-style systems to vet borrowers and manage lending risks. Industry analysts cut forecasts of Ant’s expected stock market value.

Meanwhile, the Chinese communist regime is tightening control over data gathered by private companies about the public—especially at Alibaba and Tencent, which have hundreds of millions of users. Chinese leaders see information about its 1.4 billion people as a tool for gaining insight into the public and economy—and a potential security risk in private hands.

A law that takes effect Nov. 1 establishes security standards, prohibits companies from disclosing information without customer permission and tells them to limit how much they collect. Unlike data protection laws in Western countries, the Chinese rules say nothing about limiting government or the CCP access to personal information.

Beijing also is accused of using its stockpile of data about the public in a campaign of repression against Uyghurs and other mostly Muslim minorities in China’s northwestern region of Xinjiang.

“Very lax” until a few months ago, the CCP has become “one of the most active and forceful jurisdictions in regulating the digital economy,” wrote Angela Zhang, an anti-monopoly expert at the University of Hong Kong law school, in a paper this month.

In April, Alibaba was fined 18.3 billion yuan ($2.8 billion) for offenses that included prohibiting vendors that wanted to use its platforms from dealing with Alibaba’s competitors.

Units of Alibaba, Tencent, live-streaming site Kuaishou, microblogging platform Sina Weibo and social media site Xiaohongshu also have been fined for distributing sexually suggestive stickers or short videos of children. Tencent’s music service was ordered to end exclusive contracts with providers.

Beijing is also using the crackdown to narrow China’s politically sensitive wealth gap by pushing tech giants to share their wealth with employees and consumers.

Didi, Meituan and other delivery and ride-hailing businesses were ordered in May to cut fees charged to drivers and improve their benefits and security. Meituan CEO Wang Xing promised to donate $2.3 billion to environmental and social initiatives. Tencent’s Ma pledged $2 billion to charity.

Alibaba has promised to spend 100 billion yuan ($15.5 billion) on job creation, rural development, and other initiatives to support Chinese leader Xi Jinping’s “common prosperity” campaign.

Such income redistribution plans are “reminiscent of the mass mobilization and populist strategies” of the 1950s and ’60s under then-leader Mao Zedong, Zhang wrote.

The Associated Press

The Associated Press

Follow