AFTER NEARLY TWO years of crackdowns on various tech industry sectors, a series of policy plans have emerged that collectively outline a path of re-organisation and gradual but not disruptive development into the middle of this decade.
They bring some cohesion to the loosely connected regulatory measures taken since late 2020. The steady implementation of a clear regulatory and policy framework will replace what has looked like abrupt and random regulatory interventions.
This will be a cornerstone of the recently issued five-year plans for national informatisation and the digital economy,
China’s goal is to streamline private tech businesses from fintech firms to app platforms and enmesh them with state-owned enterprises and investment vehicles to ensure greater policy control. There is a particular focus on data and aligning the tech sector with the ‘common prosperity’ and ‘dual circulation’ development agendas.
It will be a balancing act. Beijing needs to avoid squashing innovation as it pushes to develop an indigenous tech sector that can improve economic self-reliance and be internationally competitive.
Policymakers want to use digital technologies to enhance service capacity and quality across the economy and serve underserved populations, for example, by expanding social services to rural consumers or extending credit to small and medium-sized enterprises. Yet, they also want to ensure state control of the data generated by private businesses and that those businesses do not use oligopolistic power to exploit the troves of data they collect from consumers and citizens.
The plans align with the intent to redress ‘the disorderly expansion of capital’. As with the admonition to the real estate industry that housing is for living in, not speculation, the tech sector is being schooled that it has to fulfil the needs of the real economy.
In particular, that means contributing to national innovation to help transform legacy industries in manufacturing and agriculture and playing a more significant role in generating access to and delivery of government and public services.
That message is being strongly sent to fintech firms, in particular. The idea is that fintech should be incorporated into the existing banking system, not disrupt it.
Financial instability remains a worry. Authorities are increasingly concerned that fintech products for consumers risk adding a layer of unsustainable household debt on top of existing corporate debt. Concerns about threats to the financial system were one of the reasons that authorities banned cryptocurrencies last year.
For tech companies as a whole, Beijing is making it clear that it rejects the digital economy model of large, winner-takes-all platforms as seen in the West and embraces new business models that enmesh state and private actors.
The era of unregulated growth is over. Tech firms will now be expected, for which read required, to contribute to the Party’s other policy objectives — tackling financial risk, supporting social objectives and development goals, improving market regulation and data security — and their shareholders, patriotically, to bear the costs.