The World Today for September 10, 2021

NEED TO KNOW

CHINA

Too Big To Succeed

Chinese President Xi Jinping recently announced the creation of a new stock exchange for small and medium-sized enterprises in Beijing. The announcement might have surprised some observers. As Reuters explained, the world’s most populous country and second-largest economy already has two main stock exchanges on the mainland and one in Hong Kong.

More curiously, the announcement comes on the heels of a major correction in Chinese stocks following Xi’s crackdown on the country’s burgeoning tech sector, as Investors’ Business Daily reported. Wiping out billions in value, the crackdown came in the form of new regulations aimed at curtailing tech monopolies, protecting data and privacy and ensuring honest financial reporting, CNBC wrote.

In a recent address, Xi said the measures were designed to “prevent the irrational expansion of capital” and curtail “barbarous growth,” according to the South China Morning Post. Analysts say it’s part of a push for “common prosperity” – to decrease income inequality in the country while also reigning in tech companies because the government is concerned over their sprawling reach and power as well as the data they have amassed.

Xi’s moves are about more than money, though analysts note that hurting the titans of the tech industry hurts China’s overall prosperity. Instead, it’s also a political program designed not only to keep officials in Beijing – not China’s titans of industry – running the country in the future but also to make sure China’s socialist ideology rather than the gospel of wealth retains its grip on citizen’s minds, analysts told CNN.

The crackdown on China’s tech giants arguably began last year in November, when Chinese officials halted the initial public offering (IPO) of Chinese billionaire Jack Ma’s Ant Group, which has 800 million users who shop, bank and use other services. Before the IPO, Ma gave a speech where he criticized China’s state-controlled economic system. For the next three months, nobody saw Ma. As the BBC reported, it wasn’t clear if he had been detained or killed for his impertinence.

Then in April, regulators fined Alibaba $2.75 billion for antitrust violations. A few months later, regulators removed the ride-hailing app Didi Chuxing from app stores after its US IPO on data privacy grounds. Online recruitment company Boss Zhipin and truck-hailing apps owned by Full Truck Alliance came under scrutiny as well as online gaming giant Tencent.

More recently, Chinese anti-graft regulators launched an investigation in August into Hangzhou’s party secretary, Zhou Jiangyong, for suspected “disciplinary violations,” an official euphemism for corruption, and a broad anti-graft probe against the city’s current and former officials, focused on their business activities, the Washington Post wrote. Hangzhou is home to e-commerce giant Alibaba and other tech companies.

Chastened, Ma and other Chinese tech tycoons are now eager to “display their socialist spirit through a spree of public charitable donations and pledges,” the Financial Times noted: Tencent, for example, recently announced the creation of a $7.7 billion “common prosperity” fund and Alibaba has pledged millions to help flood victims in central China.

Chinese philanthropy is unique, however, the British newspaper added. The tycoons donate the money to the government and politicians dole out the largesse to the masses.

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