China’s ramping up of regulations in the tech and education sectors has made headlines around the world, and triggered a global sell-off of more than US$1 trillion in related stocks. In an unprecedented move, tutoring companies nationwide will be barred from profit-taking . Likewise, Didi Chuxing was banned from accepting new customers after it went ahead with a public listing in the United States in defiance of Beijing, which had cited concerns about data management. This ongoing transformation has roiled analysts, writers and investors alike. Last week, the Hang Seng Index fell to its lowest level this year , closing 8.75 per cent down in the year to date, and the Shanghai Composite Index has also languished. However, economic and legal history tells us we should not fear this crackdown, for three reasons. First, China will not jeopardise the channels of capital that flow between itself – through Hong Kong – and the West. These took decades to build and have created prosperity and stability in the region. Hong Kong’s status as a special administrative region and its Basic Law makes it the gateway for Chinese and global capital to reach each other. After Hong Kong and mainland China established the Closer Economic Partnership Arrangement (Cepa) in 2003, Hong Kong enjoyed priority entry into the mainland market with zero tariffs; by 2017, 44 per cent of Hong Kong exports were benefiting from this. The close integration that China has with the West through Hong Kong has also allowed the region to better weather shifts in the organisation of the world economy. In the 2000s, the mainland and Hong Kong economies were among the few able to shift their labour forces rapidly from manufacturing to services, amid a global transition among first-world cities into knowledge economies. Where even counterpart cities in the West suffered prolonged economic recessions and growing unemployment during this transition, Hong Kong and the mainland excelled. Not only did Hong Kong enjoy a shorter recession following the 2008 global financial crisis , its unemployment rate dropped from 7.9 per cent in 2003 to 3.6 per cent in 2008, and 2.9 per cent in 2019. Similar results have been documented on the mainland, with unemployment holding steady at around 4.5 per cent since 2003, following a 10-year rise. Continued integration with the Chinese economy has produced unrivalled market opportunities, growth and competition across many sectors. Second, a stable Chinese market is important for political peace. Pundits have suggested that Beijing is taking this opportunity to gain control of the big data that China’s tech companies have accumulated on the population, but this is not correct. The days of ‘wild west’ data collection are over in China This year, Charlie Munger, chairman of the Daily Journal Corporation and vice-chairman of Berkshire Hathaway, bought shares in Alibaba Group Holding (which owns the Post) . When asked, during a shareholder meeting, why he had done so, he replied that China’s phenomenal economic success was due to its embrace of capitalism, so it would “allow businesses to flourish” and not abandon its roots. China has come as far as it has by relying on a free market. Foreign direct investment in China from the US has been growing steadily and reached US$123.88 billion last year, rising by about 10 per cent a year. With US-China relation s already tense, Beijing will not want to rock the boat and scare away foreign investments that took decades to bring into China. China’s securities regulator and state media have said as much: that there is little systemic risk in the market and Beijing will “ create conditions ” to cooperate with US regulators in the future auditing of Chinese companies, including a Beijing-led proposal to “co-audit” Chinese-listed firms. Third, China is only doing what has already been done elsewhere. The European Union’s General Data Protection Regulation (GDPR), for example, stipulates seven protection and accountability principles for any company that processes the data of European civilians, and includes extra safeguards for health data. All data processing must be lawful and transparent to the subjects, data must be encrypted, data collection should be limited to the minimum, and the data must only be stored for however long it is being used. Strikingly, the GDPR is extraterritorial. Any company processing the personal data of European residents must obey the regulation, even if it is based outside Europe. How to understand China’s growing pains as it fine-tunes its economy In many ways, China’s new personal data privacy law mirrors the GDPR. Users will have new-found consent over whether to allow companies to record their personal data, and what kind of data they allow access to. Companies will no longer be able to extract data from citizens and sell it for profit without oversight. Any company that processes data from Chinese citizens must abide by the privacy law. This gives us a clear sense of what to expect. Essentially, China is essentially doing what the US has been trying to do with its own Big Tech sector: rein in companies that mistake profitability for power over the future direction of the nation. By curbing Big Tech, China’s ramping up of regulation will protect and strengthen its growing middle class, which will ultimately be a tailwind for a world economy that is becoming more integrated. Anson Au is a PhD candidate in sociology at the University of Toronto