Chinese government crackdown on some of the fastest-growing economic sectors arguing data security and governance disclosure issues, or at least those were the grounds argued by the market regulatory body. The fines imposed and new policy drawn-up represent a significant turnaround from the ‘growth at all costs’ strategy promoted by the party up to this point. Although it is still uncertain how this will affect China long-term economic growth, it has already frustrated the over $30bn Ant IPO, as well as affecting the market value of the tech sector as a whole. As a result, foreign investors may be steering clear from Chinese companies in the foreseeable future, as this crackdown has sent the message that the state intends to tighten up its grip on the tech business.
It looks like the Chinese government is confident that the tech crackdown will not cause a drop in overall foreign investment, but that will go to more underdeveloped sectors in the country. For instance, it intends to divert part of the foreign investment that would usually go to the tech giants to develop its wealth management sector. The recent reform of this industry, which included and improved oversight of wealth products and the removal of guaranteed returns, has caused a sudden rush of the biggest international investment firms to grab a slice of the huge Chinese savings cake. Also, since the most promising technologies like AI and electric vehicles will rely on a stable supply of semiconductors and compact power supply, it seems reasonable for China to go back to industrial development and manufacturing scale-up to keep being one of the most relevant powers in global tech.
However, the key element of the tech crackdown, which could have greater ramifications for the party’s power over the public, is the management of consumer data. Arguing data security concerns, the Chinese government is forcing tech companies to turn over consumer data to the state, as well as enforcing that change in cyber security regulations to control Chinese companies listed in the US amid the ongoing trade dispute. Moreover, the Chinese government is far ahead on its plan to create a new digital version of its currency, e-CNY. Once this is up and running, the state would cut out the middleman and would be able to monitor every digital transaction in real time. Also, state power over its people could go even further once smart cities become a reality in China, where cameras and sensors will be continuously operation to coordinate the automation of the city.