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The Chinese Effort to clamp down on its tech industry is beginning to have tangible effects on profits. More than tangible, in fact, as Tencent’s stock price fell by nearly a quarter, wiping out about $170 billion in market value. Such a free fall makes Tencent the biggest loser of the Chinese crackdown.

In recent years, the Chinese tech industry has grown to become one of the most valuable in the world. Companies like Tencent Holdings Ltd., AliBaba Holding Ltd., and Didi Global Inc., have minted billionaires and as a result powerful individuals within China. The companies themselves, which offer services ranging from music streaming to food delivery and e-commerce, have become an integral part of Chinese life, especially given the fact that companies like Facebook and YouTube are banned in the country.

Xi Jinping’s era of leadership thus far can be characterised by its desire to retain supremacy above all else. Xi has been successful when it comes to eliminating points of view that differ from the vision of his own. Much like the founding chairman of the CCP, Mao Zedong, Xi is wary of the influence of dissent within China and what that could mean for the longevity of his party.

The 2010’s in particular have seen the rise of tech companies around the world with regards to their influence on public life. The Arab Spring at the start of the decade, the Indian General Elections in 2014, Brexit, the rise and fall of Donald Trump, along with numerous other political movements over the last decade have been deeply swayed by opinions and news circulated on social media.

Such events seem to have caught the attention of Xi Jinping, who now looks upon the growth of China’s tech industry as something of a threat. To maintain social stability, the Chinese government is now targeting anyone it perceives as a threat. Such a generalised description means that just about anyone can be persecuted. By going after the most wealthy companies in China, Xi is flexing the power that he currently holds and is showing that the status quo will not be disturbed.

The crackdown has so far been in the form of fines, forced restructuring, and regulatory orders. Alibaba was fined a massive $2.8 billion earlier and even had the launch of its IPO blocked. Didi had to remove most of its apps from the app stores and is still subject to a host of penalties. Tencent most recently has been ordered to give up its exclusive music streaming rights which is what caused the massive sell-off and loss in value. It was also forced to temporarily stop accepting new users for its super-app WeChat as it prepared for the impending regulatory orders. TAL Education Group, which is an edtech platform that offers tutoring services to help students taking China’s notoriously competitive entrance exams, was being given billion-dollar valuations by various observers until the authorities stepped in and barred them from making profits, raising capital, and even limiting what they are allowed to teach.

The losses to the Chinese tech industry are estimated to be above $300 billion thus far. The leading firms have grown to become more valuable than the biggest state-owned enterprises in the country, such as the Industrial and Commercial Bank of China Ltd. The main threat that the government has identified has to do with the massive amounts of data that these tech firms have access to. As the tech industry is private, there is little direct control that the government itself has over how these companies are run.

To some analysts, China’s crackdown on its tech industry comes as a bit of a surprise as the government itself has been responsible for the tech industry flourishing as it has. The ban of Facebook, Twitter, etc. has meant that counterparts within China had to emerge to serve its population, and the government took an active part in encouraging the growth of the industry. However, the CCP in China does have a history of stepping in whenever it sees fit.

Thus far, all of the major firms in China have agreed to comply with the government’s demands. Growing inequality as a result of the tech boom was also one of the reasons why the government decided to crackdown on this industry. This has resulted in a number of wealthy founders donating vast sums to charitable organisations. Another indication that within China, the CCPs rule and authority is unquestionable and certainly without challenge.

The losses to the Chinese tech industry are estimated to be above $300 billion thus far. The leading firms have grown to become more valuable than the biggest state-owned enterprises in the country, such as the Industrial and Commercial Bank of China Ltd. The main threat that the government has identified has to do with the massive amounts of data that these tech firms have access to. As the tech industry is private, there is little direct control that the government itself has over how these companies are run.

For feedback write to pavan@bclindia.in

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