A ‘techlash’ with Chinese characteristics

This is the second of two essays contrasting the effects of US and Chinese tech crackdowns. Special Series Editor Scott Bade wrote yesterday about the geopolitical implications of each country’s strategy. Nathan Picarsic and Emily de La Bruyère investigate how China’s “techlash” is fueled by internal politics in this article. Chinese regulators unexpectedly halted Ant Group’s IPO in Hong Kong and Shanghai in November 2020. Chinese authorities started extensive investigations against Didi in July 2021, soon after the ride-hailing service went public on the New York Stock Exchange, pulling 25 of its applications from China’s app stores – and share values plunging. Tencent’s value was cut by $60 billion the following month because of Chinese official media accusations.

These firms effectively represent PayPal, Uber, and Facebook in China. They are the most visible victims of the Chinese Communist Party’s onslaught on homegrown Big Tech firms. This campaign has the potential to change China’s business environment, with far-reaching ramifications for the rest of the globe, including the US IT industry. However, the CCP’s tech crackdown is now misinterpreted. It is framed as an anti-monopoly operation similar to the one ongoing in Washington, with the goal of crippling the Chinese business sector. Beijing has purposefully aided this interpretation by using antitrust terminology that is similar to that used in the United States, as well as privacy language that is similar to that used in Europe.

However, Beijing’s campaign is not comparable to antitrust enforcement in the United States. Beijing is more concerned with quashing any threat to its autocratic rule than with building a competitive marketplace, in order to improve both its internal control and its position in geopolitical rivalry. 

Beijing is also working to establish a new notion of privacy, one that differs significantly from that of European authorities and in which the CCP has private jurisdiction overall data. These goals are driving China’s technological upheaval.

The objective is to subordinate China’s domestic technology landscape to the CCP, ensuring that the former serves, as a vehicle for the latter is power projection. As a result, Beijing’s efforts are the polar opposite of an anti-monopoly campaign. China is squeezing its most powerful IT companies in order to sustain a larger, more powerful monopoly: the Communist Party of China (CCP). Surprisingly, Washington’s current antitrust campaign may be aiding Beijing’s ambitions. Any breakup of Big Tech in the United States will worsen the scale and centralization imbalances that benefit China in today’s tech rivalry.

The regulatory framework supporting Beijing’s new steps demonstrates the disparity between China’s crackdown and that now unfolding in the United States, the CCP’s efforts based on a developing legislative and regulatory framework for data governance that includes the Data Security Law (DSL) that fully enacted in September. It is sometimes referred to as a “data privacy law” in US assessments. The DSL, on the other hand, does not promote “privacy” in the manner that the United States — or the European Union is GDPR — could define the phrase.

The DSL does not limit corporations’ capacity to acquire data or guarantee that data is anonymized. Rather, the regulation limits their ability to export data outside of China or share it with non-government organizations (including, notably, foreign governments). At the same time, the DSL restricts Beijing’s access to corporate data. As a result, it gives the CCP domestic data control.