Vertical Divider
Deconstructing the Differences Between The Chinese and US Attack on Big Tech
The crackdown on China’s internet industry seems to be part of the country’s inexplicable emerging national industrial policy. Instead of simply letting local governments throw resources at whatever they think will produce rapid growth (the strategy in the 90s and early 00s), China’s top leaders are now trying to centralize industrial policy and funding in an attempt to maintain Power. Geopolitical and military power for the People’s Republic of China, relative to its rival nations.
In order to fight a cold war or a hot war against the U.S. or Japan or India, lots of military hardware is needed, requiring materials, engines, fuel, engineering, and design. A war machine needs chips to run that hardware, because military tech is increasingly software-driven firmware is required. In addition, surveillance capability, to track opponents, destabilize them, and for maintaining social control in case they try to destabilize you.
For those outside China’s byzantine, opaque nexus of party, government, and big business, it’s very difficult to figure out what’s going on. Some observers see this as an antitrust campaign, similar to the ones going on in the U.S. or the EU. China’s leaders famously want to prevent the emergence of alternative centers of power, but is the West so different in this regard? One of the driving motivations behind the new antitrust movement in the U.S. is to curb the political power of Big Tech companies specifically and the Chinese tech crackdown has been interpreted as simply a Neo-Brandeisian movement on steroids. An important piece of evidence here is that China also appears to be reducing venture funding. If more competition is being encouraged, new entrants wouldn’t be squashed. For whatever reason, China is suddenly not a fan of the industry we call “tech”.
The U.S. has slapped down a few of its corporate giants before — Microsoft, AT&T, Standard Oil — but ultimately it didn’t crush the industries these companies were a part of. We’re unlikely to see major action against all the U.S. internet companies at once, and broad EU action will likely take the form of new rules rather than a sweeping crackdown. China’s attack on its tech companies, in contrast, seems far more comprehensive — it’s not just attacking the biggest internet companies, it’s attacking the entire sector.
The breadth of the crackdown suggests a major difference between US and Chinese objectives. The U.S. has slapped down a few of its corporate giants before — Microsoft, AT&T, Standard Oil — but ultimately it didn’t crush the industries these companies were a part of. A major action against all the U.S. internet companies at once is unlikely and broad EU action is taking form of new rules rather than a sweeping crackdown. China’s attack on its tech companies, in contrast, seems far more comprehensive — it’s not just attacking the biggest internet companies, it’s attacking the entire sector. An important piece of evidence is that China appears to be reducing venture funding. If more competition is being encouraged, new entrants wouldn’t be squashed.
China is suddenly not a fan of “big tech”. American pundits argued that China’s economy would be held back by the government’s insistence on control of information, because it would make it impossible for China to build a world-class tech sector. Then China did build a world-class tech sector anyway, and now it’s willfully smashing the world-class tech sector it built. So much for U.S.-style “innovation”.
The crackdown started when the government effectively canceled the IPO of Ant Financial, then dismantled the company. Jack Ma, the founder of Ant and of e-commerce giant Alibaba, was summoned to a meeting with the government and then disappeared for weeks. The government then levied a multi-billion dollar antitrust fine against Alibaba (which is sometimes compared to Amazon), deleted its popular web browser from app stores, and took a bunch of other actions against it. The value of Ma’s business empire has collapsed. But Ma was only the most prominent target. The government is also going after other fintech companies, including those owned by Didi (China’s Uber) and Tencent (China’s biggest social media company). As Didi prepared to IPO in the U.S., Chinese regulators announced they were reviewing the company on “national security grounds”, and are now levying various penalties against it. The government has also embarked on an “antitrust” push, fining Tencent and Baidu — two other top Chinese internet companies — for various past deals. Leaders of top tech companies (also including ByteDance, the company that owns TikTok) were summoned before regulators and presumably berated. Various Chinese tech companies are now undergoing “rectification”.
For those outside China’s byzantine, opaque nexus of party, government, and big business, it’s very difficult to figure out what’s going on. Just who is ordering these actions is not clear, or what the ultimate result of the crackdown will be. That makes it very hard to figure out why it’s happening. Some observers see this as an antitrust campaign, similar to the ones going on in the U.S. or the EU. China’s leaders famously want to prevent the emergence of alternative centers of power, but is the West so different in this regard? One of the driving motivations behind the new antitrust movement in the U.S. is to curb the political power of Big Tech companies specifically; if you wanted to, you might see the Chinese tech crackdown as simply a Neo-Brandeisian movement on steroids.
Americans should recall a time when “ability to win wars” was the driving goal of technological innovation. The NDRC and the OSRD were the driving force behind government sponsorship of research and technology in World War 2, and the NSF and DARPA grew out of this tradition. Defense spending has traditionally been a huge component of government research-spending in the U.S., and many of America’s most successful private-sector tech industries are in some way spinoffs of those defense-related efforts.
The crackdown on China’s internet industry seems to be part of the country’s inexplicable emerging national industrial policy. Instead of simply letting local governments throw resources at whatever they think will produce rapid growth (the strategy in the 90s and early 00s), China’s top leaders are now trying to centralize industrial policy and funding in an attempt to maintain Power. Geopolitical and military power for the People’s Republic of China, relative to its rival nations.
In order to fight a cold war or a hot war against the U.S. or Japan or India, lots of military hardware is needed, requiring materials, engines, fuel, engineering, and design. A war machine needs chips to run that hardware, because military tech is increasingly software-driven firmware is required. In addition, surveillance capability, to track opponents, destabilize them, and for maintaining social control in case they try to destabilize you.
For those outside China’s byzantine, opaque nexus of party, government, and big business, it’s very difficult to figure out what’s going on. Some observers see this as an antitrust campaign, similar to the ones going on in the U.S. or the EU. China’s leaders famously want to prevent the emergence of alternative centers of power, but is the West so different in this regard? One of the driving motivations behind the new antitrust movement in the U.S. is to curb the political power of Big Tech companies specifically and the Chinese tech crackdown has been interpreted as simply a Neo-Brandeisian movement on steroids. An important piece of evidence here is that China also appears to be reducing venture funding. If more competition is being encouraged, new entrants wouldn’t be squashed. For whatever reason, China is suddenly not a fan of the industry we call “tech”.
The U.S. has slapped down a few of its corporate giants before — Microsoft, AT&T, Standard Oil — but ultimately it didn’t crush the industries these companies were a part of. We’re unlikely to see major action against all the U.S. internet companies at once, and broad EU action will likely take the form of new rules rather than a sweeping crackdown. China’s attack on its tech companies, in contrast, seems far more comprehensive — it’s not just attacking the biggest internet companies, it’s attacking the entire sector.
The breadth of the crackdown suggests a major difference between US and Chinese objectives. The U.S. has slapped down a few of its corporate giants before — Microsoft, AT&T, Standard Oil — but ultimately it didn’t crush the industries these companies were a part of. A major action against all the U.S. internet companies at once is unlikely and broad EU action is taking form of new rules rather than a sweeping crackdown. China’s attack on its tech companies, in contrast, seems far more comprehensive — it’s not just attacking the biggest internet companies, it’s attacking the entire sector. An important piece of evidence is that China appears to be reducing venture funding. If more competition is being encouraged, new entrants wouldn’t be squashed.
China is suddenly not a fan of “big tech”. American pundits argued that China’s economy would be held back by the government’s insistence on control of information, because it would make it impossible for China to build a world-class tech sector. Then China did build a world-class tech sector anyway, and now it’s willfully smashing the world-class tech sector it built. So much for U.S.-style “innovation”.
The crackdown started when the government effectively canceled the IPO of Ant Financial, then dismantled the company. Jack Ma, the founder of Ant and of e-commerce giant Alibaba, was summoned to a meeting with the government and then disappeared for weeks. The government then levied a multi-billion dollar antitrust fine against Alibaba (which is sometimes compared to Amazon), deleted its popular web browser from app stores, and took a bunch of other actions against it. The value of Ma’s business empire has collapsed. But Ma was only the most prominent target. The government is also going after other fintech companies, including those owned by Didi (China’s Uber) and Tencent (China’s biggest social media company). As Didi prepared to IPO in the U.S., Chinese regulators announced they were reviewing the company on “national security grounds”, and are now levying various penalties against it. The government has also embarked on an “antitrust” push, fining Tencent and Baidu — two other top Chinese internet companies — for various past deals. Leaders of top tech companies (also including ByteDance, the company that owns TikTok) were summoned before regulators and presumably berated. Various Chinese tech companies are now undergoing “rectification”.
For those outside China’s byzantine, opaque nexus of party, government, and big business, it’s very difficult to figure out what’s going on. Just who is ordering these actions is not clear, or what the ultimate result of the crackdown will be. That makes it very hard to figure out why it’s happening. Some observers see this as an antitrust campaign, similar to the ones going on in the U.S. or the EU. China’s leaders famously want to prevent the emergence of alternative centers of power, but is the West so different in this regard? One of the driving motivations behind the new antitrust movement in the U.S. is to curb the political power of Big Tech companies specifically; if you wanted to, you might see the Chinese tech crackdown as simply a Neo-Brandeisian movement on steroids.
Americans should recall a time when “ability to win wars” was the driving goal of technological innovation. The NDRC and the OSRD were the driving force behind government sponsorship of research and technology in World War 2, and the NSF and DARPA grew out of this tradition. Defense spending has traditionally been a huge component of government research-spending in the U.S., and many of America’s most successful private-sector tech industries are in some way spinoffs of those defense-related efforts.
After the Cold War, US priorities shifted from survival to enjoyment. Technologies like Facebook and Amazon.com, which are fundamentally about leisure and consumption, went from being fun and profitable spinoffs of defense efforts to the center of what Americans thought of as “tech”. China never really shifted out of survival mode. China’s leaders embraced economic growth, but that growth has always been toward the telos of comprehensive national power. They’ve got bigger fish to fry — they have to avenge the Century of Humiliation and claim China’s rightful place in the sun and blah blah.
So one theory is that when China’s leaders look at what kind of technologies, they want the country’s engineers and entrepreneurs to be spending their effort on, they don’t want them spending that effort on stuff that’s just for fun and convenience. In classic CCP fashion, it was time to smash the concentration on consumer technology.
So one theory is that when China’s leaders look at what kind of technologies, they want the country’s engineers and entrepreneurs to be spending their effort on, they don’t want them spending that effort on stuff that’s just for fun and convenience. In classic CCP fashion, it was time to smash the concentration on consumer technology.
- It explain why China would suddenly smash its for-profit education sector, though there are other reasons
- Another suggested factor is that the consumer internet companies that China is penalizing have large degrees of foreign ownership. So it could also partially be about denying foreigners a toehold in Chinese tech.
- There are people with different interpretations of events. Here is one such contrary view, arguing that China’s actions against tech companies are done mainly with the interests of consumers in mind.
- Meanwhile, shares of China’s semiconductor champion, SMIC, are surging, as my theory would predict: