China Turns Up Warmth on Nation’s Tech Giants | Voice of America
TAIPEI – In the past few weeks, Chinese regulators have cracked down on some of the largest and most powerful tech companies in the country, demonstrating the immense market power of these companies that has worried the government.
On Monday, the State Market Regulator (SAMR), China’s premier market regulator, fined three of the country’s largest tech companies, including e-commerce giant Alibaba Group and social media juggernaut Tencent, for failing to disclose acquisitions of smaller competitors had.
Last month, the China Securities Regulatory Commission halted the IPO of Ant Group, one of China’s dominant digital payment platforms, backed by Alibaba. Subsequently, new draft regulations for monopoly practices on the country’s digital platforms were announced.
FILE – Alibaba Group and Ant Group signs are seen during the World Internet Conference in Wuzhen, Zhejiang Province, China on Nov 23, 2020.
Analysts speaking with VOA said these moves reflect growing concerns from the Chinese government over financial technology and e-commerce companies using unfair competitive practices to undermine traditional payment and financial services companies. There is also concern that companies could pose a systemic risk to the economy.
Good at first
On Monday, a subsidiary of Alibaba Group, a unit of Tencent Holdings, and a subsidiary of express delivery company SF Holding were fined $ 75,000 (RMB 500,000) each for violating China’s antimonopoly law.
SAMR said in a statement that the online economy is increasingly controlled by a few companies. “Complaints about the platform monopoly have increased, which points to competition risks and problems in the online economy,” it said.
FILE – Zhang Mao, Minister of the Chinese State Administration for Market Regulation, attends a press conference on the sidelines of the National People’s Congress in Beijing, China on March 11, 2019.
This marks the first fine against the country’s internet giants since the antimonopoly law was enforced in 2008.
Lu Suiqi, associate professor of finance at Peking University, says the government has turned a blind eye to monopoly issues for the past decade because the development of the digital economy has been an important part of Chinese industrial policy.
“Now these companies have gotten too strong and used inappropriate means to drive their competitors out of the market,” said Lu. “They have got an excessively high market share and there is a lack of healthy competition, which is bad for the economy as a whole.”
Around 70% of the top 30 apps in China are owned by either Alibaba or Tencent. The two companies are believed to each oversee a payment and financial ecosystem with a market value of around $ 1.5 trillion (RMB 10 trillion).
Li Chengdong, founder of Beijing-based Dolphin Think Tank, says the explosive growth of internet companies has made governments around the world vigilant. In the US earlier this month, attorneys general from 48 states sued Google and Facebook, accusing them of illegally conspiring to shut out smaller rivals. Analysts say there is a similar dynamic in China.
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“It is very common in China for big internet giants to crack down on small and medium-sized startups,” he said. Only tighter regulation and enforcement can get the economy going again.
Away from technology?
Experts recommend China to realign its economy between e-commerce and brick and mortar stores in order to achieve more sustainable growth.
“The guidelines and regulations could not keep up with the speed with which e-commerce develops. This includes systematic problems with questions about the monopoly, which is bad for the real economy,” he told VOA.
However, he said the digital economy is a key element for China to maintain macroeconomic momentum in the future. The government must apply regulations to ensure that the market opportunities created are open to all participants and cannot be monopolized by a few large companies.
Beijing’s antitrust watchdogs last month announced draft regulations for monopoly practices on the country’s digital platforms, which analysts say will have a negative impact on large internet companies with cross-market dominant positions.
Paul Triolo, a Chinese digital economy scholar at Washington-based think tank New America, says tech giants may have to comply with tightened regulations, but they may be able to negotiate with the authorities to enforce the regulations.
Tang predicts that in the next two to three years, China will set up a national digital economy bureau to oversee all internet businesses.
“Without such authority to oversee, coordinate and enforce regulations, it would be difficult to understand the financial data and structure of these internet giants, which affects the implementation of the new antimonopoly law,” he said.