ChinaThe economic boom is little secret. With 40 years of economic growth untouched by even a pandemic, new millionaires were added every 17 hours in 2020, and tech entrepreneurs dominated the newly created list.
The tech sector now accounts for almost one-third of China’s economy, but since the beginning of this year, Beijing has been at war with Big Tech and its millionaire owners, with some of the big companies Only six companies have lost $ 1.2 trillion in value. Several months.
Once the wealthiest in China, Jack Ma disappeared for three months and forced the company to restructure.Didi-China Uber -Obtained from the app store. Game developer Tencent has been accused of addicting a child with “mental opium.”
I have one big question. Why.
Jack Ma disappeared for three months, criticized China’s financial sector, and was hit by an investigation that wiped out more than $ 100 billion from the value of the empire.
At least in public, the Communist Party is fighting back on anti-competitive practices, wealth inequality, and a soul-breaking work culture at startups, where typical weeks run six days a week from 9am to 9pm. Claims-the so-called “996” routine.
It triggered a millennial movement called “tamping” or “lying.”
Almost all references to it on China’s tightly controlled Internet have been banned as a sign of party anxiety about “tampingism,” and state media have also blamed the movement. CNN Report.
However, other analysts believe that the CCP’s motives are less publicized and may stem from the old-fashioned jealousy of the emerging billionaire class.
Where Xi Jinping had once dominated the headlines about the success of China, in recent years he has name and face, was replaced by high-tech high-flyer, in particular, is the answer of the country for a is Jeff Bezos owner of online store Alibaba Jakkuma rice field.
It helps explain why Ma’s Ant Group suddenly disappeared the night before it went public on the stock market, which was expected to be the largest public offering in history at $ 37 billion last year.
Ma stayed for five months (absence not officially explained), during which time Ant’s stock market debut was canceled, the business model was forced to restructure, and its value was about $ 70 billion. Lost.
When Ma finally reappeared, his Alibaba web store (equivalent to Amazon in China) was fined $ 2.8 billion for anti-competitive practices.
It is widely believed that the Chinese Communist Party has criticized China’s financial system and acted against him after commenting on the meeting shortly before his disappearance.
In a conversation with the BBC earlier this year, Chinese analyst Christina Boutrup, who interviewed Ma, said Ma seemed to have crossed the “invisible red line.”
The message to other millionaires was clear: separate politics and business.
Following the disappearance of the horse, fellow entrepreneurs competed to protect themselves-Pony Ma, head of online gaming company Tencent, demanded further regulation of his own company to soften Beijing’s power I even did.
The Ride Hailing app DiDi has withdrawn from the Chinese app store and was banned from accepting new users just days after listing on the New York Stock Exchange.
Game developer Tencent has been accused by state media of corrupting children with “mental opium,” causing billions of people to sell out their value.
It rarely soothed power, and then in July of this year alone, $ 170 billion wiped out its value and struck the company in a spectacular anti-competitive lawsuit.
Also, following the punishment of the horse, Ant Group director Simon Fu resigned from his role, Colin Fan resigned as chairman of the online grocery company Pinduo Duo, and stock prices plummeted.
Talk to economist, A source close to Huang linked his departure directly to the horse’s public accusations. “He understands that being at the top or at the extreme is not safe,” sources said.
Another added: “He saw what was happening next door and decided to leave.”
The second theory is that China is punishing tech companies trying to raise capital in the West, and many targets are spending a fortune on foreign stock exchanges.
Perhaps the most famous example is Didi, a ride-hailing service company that raised $ 4.4 billion when it debuted in New York in July, but a few days later it withdrew from its home app store and was suspected of misusing data. We have been banned from accepting new users.
Two other companies (truck dispatch app Manbang and hiring company Kanzhun) faced similar investigations shortly after they arrived in New York and destroyed their value.
China claims to be tackling wealth inequality and big tech workers and data abuse, but observers believe Xi has other motives
Beijing then announced that it would tighten the rules for domestic companies seeking to go public, forcing them to conduct cybersecurity reviews in advance.
Officials said the review will investigate the impact of companies accepting foreign investment on national security. This is a clear indication of how the ruling party’s administration perceives the threat.
Another possibility is that China doesn’t really want a large tech sector. At the very least, we don’t want a tech sector full of companies that design games, sell cheap products, and distract people on high-profile social networks.
Instead, observers have funded the hard tekno sector, where Xi has a significant impact on China’s transition to power, including robotics and semiconductor manufacturing, which are key components of computer chips used in automotive, satellite and military technology. It suggests that you may be trying to put it in.
Evidence of this can be seen in the stock market: Alibaba and Tencent saw their value fall, but two of the country’s largest semiconductor makers saw their value skyrocket by more than 20 percent. ..
Indeed, China is investing in the creation of the domestic semiconductor industry to end its dependence on foreign imports.
As the Chinese army modernizes everything from nuclear weapons to tanks, planes, ships and guns, and to commemorate the 100th anniversary of the Chinese Communist Party, Xi vows to grow its army to “world-class standards”. It’s no coincidence that the push will come by.
A shortage of computer chips in a global shortage can have a devastating impact on these plans.
Most recently, Russian space agencies have begged the United States to send certain types of chips that were in short supply-without which satellites could not be placed in space.
And to further show Xi’s ideas, the president said at last year’s event that digitization is important, “We must recognize the fundamental importance of the real economy … and never de-industrialize.”
Whatever the reason, Beijing’s intervention in the free market has proven to be devastating to some of China’s largest companies.
Surprised by the declaration that Tencent is producing “spiritual opium,” Wall Street investors scrambled to move their money elsewhere.
China has been giving tech giants free rule to create value for years, but this year it has begun crackdowns and wiped out the $ 1.2 trillion value (pictured in Shenzhen, China’s tech capital).
Tencent fell 6% and was temporarily knocked out of the mantle as Asia’s most valuable company.
Gaming company NetEase’s stake fell almost 8% on Tuesday, game developer XD Inc fell 8%, and mobile game company GMGE Technology Group Ltd fell nearly 14%.
Investors believe that major changes are underway in China as the government actively pursues reforms in the technology sector.
Last week’s turmoil ended the worst month of Chinese stocks in almost three years, as investors worried about where their next target would be, triggered by a leak of details on the crackdown on the education sector.
China’s securities regulators were trying to ease concerns in a meeting with a foreign brokerage firm last week, promising steady reforms, but Tuesday’s news raised new concerns that nowhere was safe.
Ether Yin, a partner at Beijing-based consultancy Trivium, said:
“They don’t believe anything is off limits and will react and sometimes overreact to something on the state media that fits the story of tech crackdowns.”
Nervousness is in line with the slowdown in the Chinese economy, with factory activity growing at the slowest pace since February 2020 last month. Even among investors who say the crackdown is manageable, it adds widespread vigilance to the market.
Analysts at the BlackRock Investment Institute said, “Even if it could lead to market volatility, there is little global spillover risk from China’s stronger control claims over certain industries.” rice field.
“We remain tactically neutral to Chinese stocks and see further monetary and fiscal easing in favor of China’s circulating assets.”
Why is China at war with the big tech sector?
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