Mainland China regulators and tech giants should work together
- Future growth depends on the tech sector, but if the tech giants are allowed to run wild, it will defeat the purpose of propelling the economy forward
Major world economies are waking up to the dominance and monopolistic practices of tech giants and are starting a crackdown. China is no exception. Having given the tech field freedom to expand more than most other private sectors, Chinese authorities are right to play catchup with an overhaul of the regulatory regime that can match the rapidly evolving domestic tech landscape for the 21st century.
After mothballing the highly anticipated US$35 billion initial public offering of Ant Group, the country’s largest online payment platform and an affiliate of Alibaba, authorities have published a slew of draft regulations targeting the tech giants to curb their monopolistic powers, anticompetitive behaviour and unfair pricing.
The proposed antitrust laws aim to lay down the rules of the game, which may range from being benign to draconian. We have a year to find out. Predictably, tech companies’ share prices such as those of Tencent, Alibaba, Meituan, Xiaomi and JD.com have been pummelled, though they have recovered some lost ground. Alibaba, which owns this newspaper, sells almost one-fifth of all Chinese consumer goods.
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Under new proposed rules, for example, fintech companies such as Ant are expected to function more like traditional lenders and need to prepare for higher provisions for loans comparable to those of normal banks. Though fintech loans have had much lower default rates than banks, thanks partly to the predictive power of big data, the large user base means millions of small customers could still be defaulting. Regulators are rightly concerned about systemic risk.
Given the complexity of the issues, both regulators and tech bosses need to be level-headed and open-minded. It will be an educational process. Technology is evolving at an exponential rate, leaving behind regulators.
The genius of China’s online businesses is not that they invented the core technologies, but that they were able to develop a highly profitable model that has iterated at scale and monetised a hi-tech ecosystem of interlocking and symbiotic businesses based on those same technologies. However, regulators still operate around individual segments such as 5G, artificial intelligence and robotics.
A dialogue will not be easy; acrimonies are inevitable. But the future of the economy is at stake. Last year, the digital economy expanded at an annual clip of 13.1 per cent to 17 trillion yuan (US$2.57 trillion). Regulators and tech businesses must work together to determine what the competitive landscape needs to be in a tech-driven world. Future growth depends on the tech sector. However, if the tech giants are allowed to run wild, it would defeat the purpose of propelling the economy forward.
