What Happened: In a surprise move, Beijing has begun to regulate big tech — and the ramifications are already being felt. Domestic conglomerates such as Alibaba, Tencent, and Meituan have had billions wiped-out in light of these new antitrust guidelines. The crackdown will address transparent pricing of products, unfair competition, and could include the uses of online data and algorithms. This comes at a crucial time, with tech giants flying high during China’s biggest online event, 11.11. More importantly, it follows an unexpected intervention by market regulator’s into the impending IPO of Alibaba’s Ant Group, which was projected to be the biggest of all time.
The Jing Take: This latest intervention puts the digital economy firmly in the government’s eyeline. The sector has experienced dramatic growth post-pandemic and, as such, has been subject to a number of regulations, guidelines, and discussions across areas from online lending to personal data protection. The impact of this on luxury brands, however, will likely be positive, with brands free to sell goods from a variety of marketplaces in China. Moreover, as China continues to encourage domestic consumption, it is good news for consumers too, who are often, “prisoners to algorithms.”
This can also be viewed as a gesture to the US too. For decades, companies in America have been allowed to create monopolies that have only recently come under investigation, with the leaders of the US tech giants testifying before Congress on a host of issues. It remains to be seen if these inquiries will have any impact; indeed, President-elect Joe Biden’s administration is expected to be pro-tech.
On the other hand, China now is clamping down hard on these monolithic companies which control massive market shares (Alibaba alone sells almost 20 percent of all online sales in China). And, as we saw last week, it means business: days after Jack Ma denounced global financial regulations, banks issued new draft rules for online micro-lending, which ultimately resulted in the suspension of Ant Group’s IPO.
China’s tech companies have also been in the firing line from the US recently, for example, with President Trump’s Executive Order on perceived TikTok user data security issues. Meanwhile, as the US continues to grappled with the fallout from the ongoing COVID-19 pandemic, its own tech giants were busy acquiring all they could, from US Defense contracts to 5G capabilities. Today, the world’s two largest economies appear to be on two very divergent routes to how and when to intervene in big tech (and it’s diversifications) — one of sanctions, the other of shrugging off.
The Jing Take reports on a piece of the leading news and presents our editorial team’s analysis of the key implications for the luxury industry. In the recurring column, we analyze everything from product drops and mergers to heated debate sprouting on Chinese social media.