Techlash in China: A Unique Perspective

The Interplay of Technology and Global Politics

The TechCrunch Global Affairs Project investigates the increasingly complex connection between the technology industry and international political dynamics. This article is the second in a series, offering a comparative analysis of the effects of tech regulations in the U.S. and China.

China’s Tech Crackdown: A Domestic Affair

In November 2020, Chinese regulatory bodies unexpectedly halted the initial public offering of Ant Group in both Hong Kong and Shanghai. Subsequently, in July 2021, following Didi’s public listing on the New York Stock Exchange, Chinese authorities initiated extensive investigations into the company. This resulted in the removal of 25 of Didi’s applications from Chinese app stores, causing a significant decline in its stock value. Furthermore, state-controlled media outlets in China diminished Tencent’s market capitalization by $60 billion.

These companies are analogous to China’s versions of PayPal, Uber, and Facebook. They have become the primary targets of the Chinese Communist Party’s (CCP) efforts to regulate its large domestic technology firms. This regulatory shift is poised to reshape China’s commercial environment, with substantial repercussions for the global community, including the U.S. technology sector.

Misconceptions About Beijing’s Approach

Currently, the CCP’s tech crackdown is often misinterpreted. It is frequently perceived as an attempt to weaken the Chinese commercial sector, similar to anti-monopoly initiatives in Washington. Beijing has intentionally fostered this perception, framing its actions using antitrust and privacy language that mirrors U.S. and European rhetoric.

However, Beijing’s crackdown differs significantly from U.S. antitrust measures. The primary focus is not on fostering a competitive marketplace, but on suppressing any potential challenges to its authoritarian authority. This is done to bolster both its internal control and its position in global geopolitical competition.

Data Control and the CCP’s Objectives

Beijing is also establishing a distinct definition of privacy, one that diverges from European standards. This new definition grants the CCP comprehensive governance over all data. These objectives are the core drivers behind China’s “techlash.”

The overarching aim is to subordinate the Chinese technology sector to the CCP, ensuring it functions as an instrument of power projection. This renders Beijing’s actions fundamentally different from an anti-monopoly effort. China is curtailing the influence of its leading tech companies to reinforce a larger, more encompassing monopoly – the CCP itself.

The Impact on U.S. Antitrust Efforts

Ironically, the U.S.’s ongoing antitrust initiatives may inadvertently support Beijing’s ambitions. A breakup of large U.S. tech companies would amplify the imbalances of scale and centralization that currently favor China in the realm of technology competition.

The Regulatory Framework in China

The distinction between China’s crackdown and the U.S. approach is evident in the regulatory foundations guiding Beijing’s recent actions. The CCP’s measures are rooted in an evolving legal and regulatory framework for data governance, notably the Data Security Law (DSL) implemented in September. U.S. analyses often characterize this as a “data privacy law,” but this is inaccurate.

The DSL does not restrict data collection by companies, nor does it guarantee data anonymization. Instead, it limits the export of data outside of China and sharing it with entities not sanctioned by the Chinese government, including foreign governments. Simultaneously, the DSL secures Beijing’s access to companies’ information, granting the CCP domestic control over data.

Under the DSL, data cannot be freely bought, sold, or transferred. It remains private only if the CCP is considered a trusted entity.

The Didi Case as an Example

The case of Didi illustrates this point. Didi’s alleged offense was not collecting user data, but storing it outside of China and sharing it with overseas regulators during its IPO process. This contrasts sharply with proposals in Washington to enhance data portability and interoperability to increase consumer privacy and competition.

Data as a Factor of Production and Global Hegemony

The CCP views information technology as driving a new industrial revolution – the digital revolution. This revolution, characterized by data as a crucial factor of production, will reshape the global order. The entity that controls the production, distribution, and consumption of data will lead this transformation, potentially achieving global dominance. The CCP believes this is the path to unmatched Chinese military and economic strength, and a comprehensive international surveillance system.

To achieve this, Beijing is committed to building and expanding digital infrastructures, including 5G networks, the Industrial Internet of Things (IoT), and platforms like ride-sharing and e-commerce hubs. These systems require scale and integration, but must operate under government control to serve as geopolitical assets.

Beijing’s Vision for Tech Companies

While China will continue to encourage the growth of digital platforms, the CCP will ensure they operate under Beijing’s direction. Beijing does not desire companies like Apple, Facebook, or Google; it seeks a highly integrated equivalent that is intrinsically linked to the CCP.

This approach may manifest in actions resembling antitrust efforts, such as investigations into AliPay and WeChat. However, the primary goal is not increased competition, but rather to integrate these companies into the larger CCP monopoly.

The U.S. Response and Future Strategy

The U.S. will struggle to counter the rise of Beijing’s tech champions if it continues to assume that Beijing is simply mirroring the American approach. In fact, the U.S. may inadvertently facilitate Beijing’s ambitions. The viable alternatives to the CCP’s tech ambitions are firms like Apple, Facebook, and Google. However, instead of recognizing them as critical national assets in a crucial economic and geopolitical contest, the U.S. is focused on restricting their capabilities.

The CCP’s crackdown on Big Tech is about competition, but not fair competition. It is about strengthening Beijing’s position as it strives to shape the future world, creating an environment that is inherently unfair to any entity outside the Chinese Communist Party. Washington and Silicon Valley possess the tools to prevent this. A new dialogue between U.S. political leaders and the U.S. tech sector is needed, focusing on regulation informed by geopolitical realities and the importance of the private technology sector to national security.