A ‘techlash’ with Chinese characteristics

The TechCrunch Global Affairs Project examines the increasingly intertwined relationship between the tech sector and global politics.

This is the second in a pair of articles comparing the impact of the U.S. and Chinese tech crackdowns. Special Series Editor Scott Bade wrote about the geopolitical consequences of each country’s respective approaches. In this piece, Nathan Picarsic and Emily de La Bruyère examine how China’s “techlash” is driven by domestic politics.

In November 2020, Chinese regulators abruptly suspended Ant Group’s IPO in Hong Kong and Shanghai. In July 2021, immediately after ride-hailing service Didi went public on the New York Stock Exchange, Chinese authorities announced sweeping investigations into the company, removing 25 of its apps from China’s app stores — and sending share prices plummeting. The next month, Chinese state media attacks slashed Tencent’s valuation by $60 billion.

These companies effectively represent China’s PayPal, Uber and Facebook. They constitute the highest-profile targets of the Chinese Communist Party’s crackdown on its domestic Big Tech companies. That crackdown stands to transform the Chinese commercial landscape, and thus has huge implications for the wider world, including the U.S. tech sector.

Yet right now, the CCP’s tech crackdown is being misunderstood. Framed as an effort to cripple the Chinese commercial sector, it is being seen as an anti-monopoly effort similar to that underway in Washington. Beijing has deliberately encouraged this interpretation, couching its effort in antitrust language that resembles U.S. rhetoric as well as privacy language that echoes that of Europe.
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But Beijing’s crackdown is not akin to U.S. antitrust efforts. Beijing is focused not on creating a competitive marketplace, but rather on quashing any challenge to its authoritarian power — in order to strengthen both its domestic control and its standing in geopolitical competition. Beijing is also focused on asserting a new definition of privacy, decidedly unlike that of European regulators; one in which the CCP has private governance over all data. These are the objectives driving China’s techlash.

The goal is to subjugate the domestic Chinese technology landscape to the CCP — and to ensure that the former serves as a vehicle of power projection for the latter. This makes Beijing’s actions the opposite of an anti-monopoly effort. China is reining in its leading tech players in order to support a bigger, more controlling monopoly: the CCP.

Perversely, Washington’s ongoing antitrust push risks playing directly into Beijing’s ambition. Any U.S. break up of Big Tech would exacerbate the asymmetries of scale and centralization that skew today’s tech competition in China’s favor.

The gulf between China’s crackdown and that underway in the United States is evident in the regulatory foundation underpinning Beijing’s latest moves. The CCP’s actions draw on an emerging legal and regulatory architecture for the governance of data — including, most recently, the Data Security Law (DSL) formally implemented in September. U.S. analyses tend to describe it as a “data privacy law.” However, the DSL does not foster “privacy” the way U.S. conceptions — or the European Union’s GDPR — might interpret the term.

The DSL neither restricts companies’ ability to collect data nor ensures the anonymization of information. Rather, the law restricts their ability to export data outside of China or share it with entities that are not the Chinese government (including, notably, foreign governments). At the same time, the DSL locks in Beijing’s access to companies’ information. In doing so, it provides the CCP domestic control over data.

Under the DSL, private data cannot be bought, sold or shipped at will. It is not private — unless, of course, you consider the CCP to be a member of your inner circle of trust.

The Didi case is instructive. Did’s crime was not collecting user information, but allegedly storing that data outside of China and sharing it with overseas regulators as a part of its IPO process. This is worlds apart from proposals in Washington to introduce sweeping data portability and interoperability requirements aimed at increasing consumer privacy and competition.

As the CCP sees it, information technology is catalyzing a new industrial revolution: the digital revolution. This revolution, which is characterized by data as a new factor of production, will reshape the global system. The player, whether government or industry, that can control the production, distribution and consumption of data will be able to lead that reshaping, in effect claiming global hegemony. The CCP believes this is the path to unmatched Chinese military and economic power — and an unrivaled international surveillance state.

To get there, Beijing has committed to building and internationalizing digital architectures, including networks like 5G and the industrial Internet of Things (IoT), as well as platforms like ride-share apps and e-commerce hubs. These systems demand scale: Their integration and growth are to be encouraged. But to deliver competitive returns to China as geopolitical assets, these systems must exist under government control.

So, while China will continue to promote the growth of digital platforms and networks, the CCP will make sure that they do so at Beijing’s behest. Beijing doesn’t want an Apple, Facebook or Google. It wants a super integrated Apple-Facebook-Google that is part and parcel of the CCP.

This approach might manifest in tactical moves that look like antitrust efforts, such as investigations into AliPay and WeChat. But the operative objective is not increased competition. Rather, Beijing seeks to wrap these players into the larger monopoly that is the CCP. Should, as Didi founder reportedly suggested will happen, the Chinese government take over the company, Didi will become part of a far larger and more pernicious platform than Apple, Facebook or Google.

The U.S. will fail to prevent the relative rise and unrivaled influence of Beijing’s tech champions as long as it assumes Beijing is mirror-imaging the American approach. In fact, the U.S. will facilitate Beijing’s ambitions: The only real, credible alternatives to the CCP’s tech ambitions are firms like Apple, Facebook and Google. But instead of turning to them as critical national assets in waging a determinative economic and geopolitical contest, the United States is focused on kneecapping them. Instead of paying attention to China’s global tech offensive and the domestic agenda that propels it, the United States is fixated on overly broad regulation of its own tech sector.

The CCP’s crackdown on Big Tech is about competition, but not fair competition. It’s about strengthening Beijing’s hand as it competes to shape tomorrow’s world — and make it, for any player that is not the Chinese Communist Party, perfectly unfair. Washington and Silicon Valley have the tools to prevent this: It’s time for U.S. political leaders to engage the U.S. tech ecosystem in a new kind of conversation about regulation. What we need now is competitive strategy informed by geopolitical realities and the importance of the private technology sector to national security.
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