China Clamps Down on Homegrown Tech Giants Amid Nationalization Drive

Government curbs on the activities of online service providers come as the ruling party forges ahead with nationalization.
By Cheng Yut Yiu and Qiao Long
2021-07-19
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China Clamps Down on Homegrown Tech Giants Amid Nationalization Drive The Beijing headquarters of Didi Travel is shown in a file photo.
Reuters

China's internet regulators are continuing to crack down on the country's top tech companies, with ByteDance's Toutiao suspending new accounts and investigators moving in to ride-sharing app Didi's headquarters.

TikTok owner ByteDance is blocking new user and content creator registrations for Chinese news aggregator Jinri Toutiao, Reuters cited people familiar with the matter as saying.

The freeze began in September 2020, with some content creators reporting on social media that they had been unable to register new accounts, but with no announcement made by the company.

New users who try to register currently see a message: "System is currently under maintenance. Registration is temporarily unavailable," Reuters reported.

Existing users are still able to post, and the app is still available on app stores inside China, the report said.

In 2018m, Toutiao suspended more than 1,000 accounts after being sanctioned last week for alleged breaches of regulations and for spreading "pornographic and vulgar content."

The popular app also added a channel titled "New Era," in a reference to the political "thought" of Chinese President Xi Jinping, "to release information or reports about China's accomplishments and efforts after socialism with Chinese characteristics has entered a new era."

The move came after the powerful Cyberspace Administration temporarily suspended both Toutiao and Phoenix News for "having serious problems in guiding public opinion."

The apps had "carried pornographic content, seriously misled the public and had a very negative impact on the social media environment," the administration said at the time.

The aggregator is ByteDance's second largest source of advertising revenue in China, second only to Douyin, and accounting for 20 percent of the company’s U.S.$5.4 billion in sales in China last year.

But the company's plans earlier this year to list on the U.S. stockmarket had been a slap in face for the ruling Chinese Communist Party (CCP), an internet industry worker surnamed Pan told RFA.

"I think the first major factor in all of the recent crackdowns [on large technology platforms] is that they are going after private companies," Pan said. "Secondly, they are seeking listings in the U.S., which is embarrassing [for the government]."

"Toutiao had always said they would list in the U.S. ... [but then] the financial director announced that the plan had been suspended," she said. "The word is that the listing won't be happening now."

Overseas share-listings

China's cabinet said on July 6, 2021 that it would crack down on overseas share-listings by its companies, just two days after the country's Cyberspace Administration removed the Didi ride-hailing app from Chinese stores following its U.S.$4.4 billion initial public offering (IPO) in New York.

The removal of the app wiped billions from the value of Didi Global Inc shares in the first trading session since the app's removal.

Didi -- which runs an Uber-like service with around 500 million users and 15 million drivers -- went ahead with the listing despite being urged by Chinese regulators to delay the IPO, according to a report in the Wall Street Journal (WSJ) on Monday.

Officials were "wary of the ride-hailing company's troves of data potentially falling into foreign hands" owing to public disclosure around the listing, the WSJ quoted sources as saying.

Didi is under investigation by the Cyberspace Administration, and investigations are ongoing into other U.S.-listed Chinese companies including Full Truck Alliance and Kanzhun.

"The Cyberspace Administration of China will ... cooperate with the ministry of public security, ministry of state security, ministry of natural resources, ministry of transport, the state administration of taxation, the state administration of market supervision and other departments are installed at the [headquarters] of Didi Chuxing Technology Co. Ltd to conduct a review of online security," the administration said in a statement on its official website on July 16.

'Red entrepreneurs'

A current affairs commentator surnamed Zhao said the CCP under general secretary Xi Jinping is going after the second generation of "red entrepreneurs" who are related to revolutionary leaders, to stem their financial power and political influence.

"These platforms have made huge profits for the second generation of red elite, the children of [high-ranking] officials," Zhao said. "Capitalist entities with a communist background are packing more and more of a punch, both internationally and in China."

"These captains of industry are starting to challenge the authority of the central government, and so the government is moving to cut them off," he said.

The moves against China's homegrown tech giants come as the government is also moving to acquire stakes in private companies, businesspeople in the eastern province of Zhejiang told RFA in recent interviews.

Peng Huagang, spokesman for the State-owned Assets Supervision and Administration Commission (SASAC), told reporters on July 16 that his agency would press ahead with "mergers" between private sector and state-owned companies.

These takeovers would be implemented both by paid acquisitions and uncompensated nationalization, as well as share transfers, Peng said.

The process would improve competitiveness and optimize the use of skills and resources, he said.

Zhejiang businessman Jiang Jieben told RFA that the process is already under way in his home province.

"This is actually a long-term trend, which is aimed at strengthening state-owned enterprises at the expense of the private sector and private capital," he said.

"There is pressure within and beyond provincial government to do this, and for it to happen more quickly."

Jiang said the process had only become more obvious with the treatment meted out to Alibaba founder Jack Ma's Ant Financial and to Didi.

"They want to nationalize all of these companies, to the point that there will be no private sector left at all," he said.

Translated and edited by Luisetta Mudie.

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