Beijing is piling the pressure on China’s big tech giants to align their business strategies with party-state goals: Alibaba this week announced the appointment of a new CFO and the establishment next year of two new business entities to focus on national and international digital commerce – the goal being to create “long-term value.” The new setup comes after missed growth targets and ever-increasing pressure to contribute to “common prosperity” rather than maximizing profits. Regulators have become more active in the last 12 months, fining Alibaba a record amount for antitrust violations, taking renewed interest in past mergers, and forcing “rectification meetings” on company leadership.
Alibaba’s example illustrates what 2022 could hold for China’s tech giants – new regulations, from data protection to workers’ rights, and pressure to align their business strategies with party-state goals. So far, Alibaba has played strictly by the new rules. It is planning a “Common Prosperity Development Fund”, pledging EUR 13.7 billion (CNY 100 billion) for it by 2025. Also, a range of projects to revitalize the rural economy and of politically correct slogans – “sustainable development,” “inclusiveness,” and support for “vulnerable populations” – are meant to show commitment to Beijing’s new policy agenda.
Since Xi called for “the reasonable adjustment of excessive incomes” and “high quality growth for all”, Tencent, another tech giant, has made similar pledges. Pinduoduo, Meituan and Xiaomi have also promised to donate to social causes. Alongside to compliance with stricter cybersecurity, data protection and antitrust rules, considerable contributions to “common prosperity” are a key feature of the new role the CCP envisions for its tech sector.
MERICS analysis: “2021 showed that the Chinese Communist Party (CCP) has successfully started to renegotiate the relationship between China’s private sector and the state-led economy,” says Kai von Carnap. “Beijing’s expectations for big tech have risen, ranging from the development of new growth drivers, to achieving carbon neutrality and providing ‘common prosperity’ and ‘indigenous innovation’). Watch for tensions in this field to continue in the coming year.”
More on the topic: Tech regulation in China brings in sweeping changes. Short analysis and graphic by Kai von Carnap and Valarie Tan.
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