Market Spotlight — Great Walled Gardens: China’s Growing Scrutiny Of Big Tech

By Aqilliz  

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Scrutiny of big tech

Across the world — both in China and the West — the rise of Big Tech went mostly unchecked for years, largely due to the role that technology has played in improving lives and boosting economic growth. However, as power grew, policymakers and consumers eventually became aware of how much control and influence these internet behemoths wielded over society and public discourse. What’s worse, as incumbents grew larger, they began squeezing out smaller competitors and start-ups in a bid to further consolidate their market dominance.

In order to stop monopolistic behaviours and protect fair competition in the market, China began its crackdown on Big Tech, calling for an acceleration of laws to regulate the platform economy. While the move is as much a political one as it is to regulate the ecosystem, the introduction of anti-competitive guidelines marks a drastic change in Chinese regulators' attitude toward their nation’s fast-growing internet companies. For more than a decade, the Chinese government has taken a relatively hands-off approach in regulating tech companies which has not only fuelled the growth of their unparalleled digital economy but also nurtured some of the country's largest enterprises. So what changed?

A battle for control

In China, Alibaba is currently the largest digital ad seller in China, with its ad revenues accounting for more than 32 percent of the market in 2019 — the media properties that it currently owns and has stakes in include the South China Morning Post newspaper, video streaming platform Youku Tudou, social media platform Weibo, a movie production house, and an offline advertising network. Together with Baidu and Tencent, the three tech titans occupy over 60% of the total digital advertising market in China.

For many Chinese netizens, it’s hard to imagine a day without using Tencent’s messaging app WeChat and Alibaba's flagship e-commerce platform, Taobao. In just a mere few years, the superapp services provided by these internet behemoths have reached hundreds of millions of users, penetrating almost every aspect of life in China. Over time, business also expanded beyond the digital realm, driving disruption through digital banking and live streaming. With their superior financial might and data hoards, tech giants like Alibaba, Ant, or Tencent could easily steamroll incumbents in adjacent businesses. This caused many traditional players to raise complaints of unequal treatment, partly because these newcomers have been subject to less stringent regulation.

Tightening the reins

While the Chinese government traditionally took on a sort of wait-and-see approach to the digital sector, it’s now pushing for what it sees as a “healthy” online economy. In November 2020, joining a global attitudinal shift to Big Tech, China began its move to rein in the sector. The nation’s biggest internet companies were urged to bring order to the online economy and to address monopolistic practices, unfair competition, and counterfeiting — what ensued was a series of warnings, antitrust investigations and record fines.

Regulators are particularly wary of possible infractions in the use of data and how it gave platform operators with troves of user data an unfair advantage. Much like Facebook or Google, the enormous amounts of information that China’s internet giants possess are key to their ability to innovate and expand. However, the government has grown increasingly wary of the power they’ve amassed and their potential to influence public opinion.

The same kind of anxieties are also shared by regulators in the West — from the US to Europe and Australia, where the biggest names in tech including Google, Apple, Facebook and Amazon have all experienced different levels of antitrust investigations from various competition watchdogs.

Competition and correction

Leveraging power and influence in an obvious way in any market or any country is certain to draw unwanted attention and rectification. While it’s natural for any government intervention to cause a market reaction, the truth is that any imbalance in power should be corrected.

In the short term, China’s regulatory push against Big Tech may level the playing field and create opportunities for their competitors to consolidate their market share and influence. In the longer term, this action should send a clear message to all media owners in China and globally: the decade of unfettered expansion is over.

As the authorities continue to craft legislation to regulate the platform economy, companies may be required to change some of their long-standing business practices to comply with legal and regulatory standards and to make commitments to fully comply with antitrust rules. Ultimately, any consolidation of power is harmful to society. Competition through diversity is important to act as a check and balance, particularly when it comes to the reach and influence of media and Big Tech.

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