Can China Lead the World in Technology Without the New Jack Ma?
Some of Chinas most successful entrepreneurs have resigned from high-ranking jobs in the turmoil. TikTok owner ByteDance founder Zhang Yiming recently resigned as CEO at the age of 38 and joined the company. Announced that it will play a less noticeable role. In March, 41-year-old Colin Huang said he would resign as chairman of Pinduoduo (PDD), an emerging e-commerce company that competes with Alibaba and others. Meanwhile, Alibaba co-founder Jack Ma, Chinas most famous tech entrepreneur, has almost disappeared from the world. Both Zhang and Huang said they would set out to try something new, not mentioning the governments focus on technology in its announcement. A ByteDance spokeswoman said Mr Zhangs decision to resign had nothing to do with regulatory measures in China. Pinduoduo introduced CNN Business in Huangs public comments. But its hard to separate their exit from the growing government crackdown on technology. The air in Chinas technology industry is becoming more and more harmful, said Alex Capri, a research fellow at the Hinrich Foundation and a visiting senior fellow at the National University of Singapore. He described Zhangs move as evidence that fear outweighs ambition when threats of public humiliation and worse forms of punishment await those who challenge the system.  However, challenging this system is essential for private companies, which have played a key role in Chinas transition from a poor country to one of the worlds largest economies and technologies over the past few decades. Losing that power not only risks losing some of these achievements, but can also make it much more difficult for China to reach its ambitious goal of leading the world in future technology. ..  State-led economy  Cautious tech executives dont have to look at Beijings open humiliation of horses. He criticized Chinas state-owned banking system for having a pawnshop mindset last fall, accusing the government of using stale and outdated means to regulate the modern financial system. Flashy and candid entrepreneurs have almost disappeared. Its not just the horses personal reputation. The business he built also suffered. After blocking the initial public offering of Alibabas financial company Ant Group, the Chinese government was forced to reorganize and was placed under strict regulation. Alibaba was fined the highest ever in April on antitrust issues. Mas legacy is being attacked elsewhere where he was forced to withdraw from the elite business school he founded. Nicholas Raddy, a senior fellow at the Peterson Institute for International Economics (PIIE), who studies the Chinese economy, said, Some of the crackdowns on Internet technology companies want to mitigate financial risks, such as curtailing Ants lending activities. Its motivated by desire.  Last year, Ant held approximately RMB2.1 trillion ($ 333 billion) worth of consumer and small business loans. However, another reason may be due to the desire of Xi Jinping that want to reduce the alternative power source that could challenge the final domination of the world. [ruling Chinese Communist Party]Radi added. The desire of the Chinese government to exercise greater control over private companies is more effective in state-controlled planned economies than in economies that rely on free market economies, and more importantly, the party It comes from the governments belief that it is likely to be able to maintain its power. Xi Jinping Jintao and the Communist Party leaders of tech companies has become a too powerful to comfortably spend is because they are not allowed to challenge the monopoly of the overall power by the party, it is exposed to pressure There is, said Steve Tsang. Of SOAS China Institute, SOAS University of London. Therefore, they will hand over corporate leadership to Protog to reassure the party and President Xi, otherwise they will act individually.  Unstable power balance  Chinese internet companies are not always trying to rock their ships. Alibaba is working extensively with the government on the Rural Taobao Initiative, a program aimed at reducing poverty among farmers by allowing them to sell their products directly to urban consumers online. The company also app learning powers of government support to teach political philosophy of Xi Jinping was also developed. Despite its private nature, all of Chinas tech giants are getting closer to the government, which probably gave rise to the idea of a balanced power relationship. Moving to the private sector. Tech entrepreneurs are also widely represented within the party. Tencent (TCTZF) founder and CEO Ma Huateng and Xiaomi founder and CEO Lei Jun are both national. He is a member of the Chinese Rubber Stamp Council of the Peoples Congress. Robin Li, founder and CEO of Baidu (BIDU), and William Ding, founder and CEO of NetEase (NTES), are members of Chinas Supreme Political Advisory Board, the Peoples Political Consultative Conference of China. Jack Ma is a member of the Communist Party. The party raises rock stars like celebrities, [and] They have been hired as members of the National Peoples Congress, said Opper, adding that tech entrepreneurs began to feel safe, thanks to their financial strength and global recognition. ..  They started to be critical and seemed to be able to challenge their current thinking, she said. What we are seeing now is how volatile this balance is and its control remains a major government concern.  High-risk strategy  Beijings strategy is inherently risky. Chinas long-standing economic miracle and rapid rise as a technology leader are rooted in Beijings visionary decision to abandon economic dominance in the late 1970s and adopt a free market approach in many areas. For example, Chinas high-tech industry was free to solicit capital oversight. Early bets about 20 years ago by Japans Softbank (SFTBF) (Alibaba) and South Africas Naspers (NAPRF) (Tencent) paid off brilliantly in every round. Restoring a high degree of state control could limit the freedom these private companies must innovate and keep up with their major global competitors. Opper said investors could lose the incentive to pour money into Chinese private companies if they were concerned about undesirable government intervention. And there is evidence that may already be happening. Alibaba has lost more than $ 240 billion in market capitalization since Ant Groups IPO was lifted in November. Tencent has seen the $ 173 billion market value disappear since its peak in January. Meanwhile, e-commerce firm Pinduo Duo, JD.com (JD), and food delivery giant Meituan have lost a total of $ 231 billion since their peak in February. Chinas policy makers do not want to eliminate the private sector, which accounts for nearly two-thirds of the countrys GDP and employs 80% of its workers. However, it is clear that President Xi wants the state-owned sector to take the lead, and he wants private companies to play a supporting role. Its a paradox, said PIIEs Radi. President Xi wants the country to play a big role, which is clear from what he has said in the last decade. He tells the government bigger to get things done faster. I want to play a role.   But Xis ambition to make China a leader in innovation by 2035 and the worlds high-tech superpower by 2050 will require more reliance on private sector than expected. Chinese leaders are increasingly emphasizing the need for China to break its dependence on technology over the past few years, especially as Washington has curtailed the ability of Chinese companies to access U.S. technology. However, the companies that drive innovation and development in China are not state-owned companies. Rather, private companies are in control. For example, Huawei and Alibaba accounted for more R & D spending than any other Chinese company last year, the China Enterprise Confederation said. In retrospect, there is a reason why Chinese tech companies have been able to develop, Opper said. They had the freedom they were allowed. [them] Unleash productivity and innovation not found in Chinese state-owned enterprises.   Overconfidence  This doesnt seem to be a lesson that Chinese policymakers want to be aware of right now. The Covid-19 pandemic convinced China that a large-scale planned economy that tightly regulates many aspects of life is the best approach to running the country. Last year, the country implemented some of the worlds toughest steps to contain the virus. It then emerged as the only major economy to avoid a recession, surpassing Western nations. Our greatest advantage is that the socialist system allows us to focus our resources on achieving large-scale businesses, Xi said earlier this year in the Communist Partys spokesman, the Peoples Daily. Quoted as stated in the editorial. The editorial won in 2020 in a long-standing campaign to eliminate extreme poverty by raising all people above the set poverty line of 4000 yuan. Cited the alleged claim. For example, at $ 626 a year, Only our party and our country can achieve this. This is a perfect indication of our political and institutional benefits.  But skeptics warn that the Chinese government may be confident in its top-down economic strategy. This is a strategy that prioritizes the short-term goal of political control over the medium-term growth and development goals, Opper said. State-owned enterprises will not be able to fill that gap as incentives for profits are weakened and control structures are strengthened.  State-owned enterprises, despite being an important tool for party control, are notorious for their inefficiencies in both resource allocation and competition with private sectors. They contribute much less to overall employment than private companies, accounting for 70% of Chinas corporate debt outside the financial sector. This poses a threat to financial stability and economic growth. However, it is clear that President Xi is pushing the state-owned sector and supporting such companies to take the lead. In a previous crackdown in 2017, this time against flying financial tycoons, President Xi talked about the importance of the Communist Party as the center of everything in China, including economic policies focused on the development of the state-owned sector. I spoke frankly. Xi is leading China to a more risky path than other options, said Tsang of SOAS. 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