Why is Beijing Cracking Down on China’s Tech Sector?

Early in 2021, Chinese President Xi Xingping oversaw unprecedented antitrust action against several of China’s largest technology companies, an action that breaks from the Chinese Communist Party’s lenient treatment of tech companies in recent years. Beijing’s crackdown on the tech sector is largely driven by political culture and tensions with the West.

Chinese Politics

China is a self-described socialist state where, in theory, there’s greater state control of market activity to ensure a more equal society. In reality, China hosts many entrepreneurial activities and profit-driven businesses. However, these are in a delicate limbo with the government, as activities not deemed to align with the interests of the state can attract regulation and intervention.

A key industry caught in the political crossfire is tech. China and its government know that they are reliant on many core technologies from the US, such as semiconductors – indeed, China imports $300 billion worth of American integrated circuits annually. The West pioneered many high-growth technologies that now benefit Beijing, but reliance on the West for core technologies that power Chinese economic growth leaves Beijing vulnerable to hostile foreign policy.

For example, Alibaba’s leader Jack Ma was judged last year to be engaging in antitrust monopolistic practices, and also promoting the westernization of Chinese economic policy. This earned him the wrath of regulators and ultimately his power and company took damage for it. With the freedoms of citizens and technology being increasingly restricted, those wanting to experience China’s rich cultural heritage, tradition, and unique attractions may wish to start planning a visit soon.

American Politics

China is also embroiled in a tech race with the West, primarily the US. This has intensified since the Republican Party victory of 2016 catalyzed a move towards isolationist foreign policy, where the US seeks to protect its economic interests with tariffs, quotas, trade restrictions and more, by protecting domestic business from intense foreign competition. For example, Huawei was at the center of disputes over the 5G wireless network rollout in the US, where Chinese hardware was being imported and therefore weakening America in the eyes of the GOP. This foreign tech importation gave power to Beijing. With the Chinese bottom line suffering the consequences, Beijing has a direct interest in controlling its tech production, where it can anticipate geopolitical frustrations unforeseen by market forces.

Comparisons to Western Tech Crackdowns

The West and its governments have a very different relationship to tech. Generally, Western governments are more subservient to the interests of private capital, where capitalist theory posits that the greatest utility will be achieved via the independent pursuits of profit. Many are alarmed that negative social consequences are arising from the hesitation to regulate more stringently. However, in recent years, Washington has attempted its tech crackdowns, primarily due to antitrust concerns. But this may have come too late, as extremely powerful tech companies like Google and Facebook weathered the storm and remain able to command monopolistic market shares and face little regulation in their activities.

As a result of the CCP’s politics and market intervention, China is due to see significant changes to its tech sector, which will likely affect all aspects of life due to the ubiquity of technology. Uncertain times lay ahead.

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