The Chinese Communist Party’s last-minute veto of Jack Ma’s Ant Financial stock market flotation last year called an abrupt halt to what had been billed as the biggest IPO in history, and sent shockwaves across the world. Global interest had been keen, and many possible explanations were proffered as to why the CCP should have so publicly undermined the country’s best-known and most successful entrepreneur. Ma’s story—from humble beginnings in Hangzhou to global tech industry superstar—was the stuff of dreams for millions of young Chinese, and he represented not only China’s private sector innovation but the Party’s support for commercial success.
At first the move was interpreted as the Party taking revenge on Ma for critical remarks he had made of the regime in a recent speech. But officials, in moving to bring Ant Financial’s brand of micro-lending under control, claimed the firm was operating without sufficient regulatory oversight. They pointed to apparent irregularities as well as monopoly abuses, and demanded greater information disclosure. Ant has pledged to comply with stricter rules.
For some observers, the Party’s move fitted a pattern in which the government helped companies grow rapidly, then sorted the regulation out retroactively. Still others read it as a crude reminder of who is boss—that the Party can always tug the chains of even China’s most successful entrepreneurs, and that under Xi Jinping, it will increasingly choose to do so.
Ma, it turned out, was not an isolated case. In rapid succession, the Party and regulatory authorities moved against Didi Chuxing, the ride-hailing app, days after it floated on the New York Stock Exchange. Regulators continue to crawl through its operations and new downloads of its app remain suspended. Meituan, a huge food delivery company, was publicly pilloried for its alleged working conditions. The e-commerce company Pinduoduo was accused of facilitating the sale of counterfeit goods. All have felt the chill of official disapproval and in some cases billions have been wiped off share prices, notwithstanding pledges from all three to rectify the problems.
In some ways they are fortunate still to be in business: the crackdown on China’s huge private tutoring companies, which promote the ruthless competition endemic in the country’s education system, turned them from cash cow to struggling non-profits overnight. China’s massive online gaming industry, labelled unhealthy and addictive by authorities, has been saddled with implementing drastic restrictions on the online hours of its young enthusiasts.
For the big-tech founders, the result has been an enormous loss of personal net worth, estimated by Bloomberg to amount to a total of $87bn. In addition, they have been “encouraged” to announce huge charitable donations to aid less well-off compatriots.
Almost a year after the first assault on Ant Financial, it is clear that the tech sector is caught in a bigger attempt to re-shape China’s priorities, values and resources—a move that reflects the regime’s anxieties as it moves into the tricky territory of slower growth and the challenges of the middle-income trap, and tries to reverse a number of potentially dangerous trends.
Xi Jinping has a series of ambitions for China’s economy: to move away from exports and investment-led growth, and instead seek growth in domestic consumption; to establish China as a technological leader in several key areas; and to deal with the accumulating debts of major companies, where a major default could trip a serious crisis.
With slower growth, China’s working population and its urban middle class can no longer take opportunity for granted, and China’s vast disparities in wealth look increasingly anomalous in a society led by a Party that proclaims its faith in communism. Xi’s response is to talk about building a society that is fairer and to demonstrate the Party’s communist credentials. The more recent targets of the Party’s wrath have been celebrities, film stars and successful businesspeople who display conspicuous wealth: embodiments of the gilded age that is now under fire.
For those who toil in the less well-remunerated sectors of the economy with little prospect of improvement, resentment of the fortunes made could easily spill over into resentment of the system that allows this. That presents a problem for China’s rulers and the superrich in equal measure. The large charitable donations that China’s tech billionaires have been making are signals to the government that they support the rebalancing: it is the price of survival.
Remedying the interrelated structural imbalances, including the demographic one, will be harder. After decades of strict birth control, the government now permits three-child families, anxious about the drag on the economy of the world’s most rapidly ageing population. But there has been no sudden uptick in the birthrate: urban middle-class couples face heavy costs in housing, health and education, and most seem happy to settle for just one child. The same cost factors underpin the Chinese habit of assiduous saving—something that suited a government looking for access to capital, but less helpful if it wants to stimulate consumer spending.
Resources all round—private and public—are tighter than they were, and the government is anxious that they be channeled into technologies that will underpin China’s future technology leadership, rather than the entertainment sector. Meanwhile, lots of young people have opted out of the relentless work pressure that has become the norm in many Chinese companies, reasoning that working brutal hours has got them nowhere and that they would prefer a less pressured life.
In response, the Party has stepped up its campaign of increasingly toxic ultra-nationalism that spills over into vicious online attacks on people whose lifestyles are considered un-patriotic or deviant. Caught in this backlash are feminists and LGBT activists, as well as “effeminate” TV celebrities who are now being purged from China’s screens. As the Party reasserts its control over every aspect of the economy and of its citizens’ lives, we may be just at the beginning of a new Cultural Revolution—one in which new generations of radical digital warriors play the role of Mao’s Red Guards.
