China’s Changing Tech Sector

The gigantic Alibaba, Amazon’s Chinese alter ego, still hasn’t raised the bar. On April 12, 2021, China’s antitrust authority imposed a record €2.3 billion fine on him, culminating in the authorities’ takeover of the “tech” sector.

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They wanted to bring order to markets that often resemble the Wild West: for example, Alibaba was asked to no longer apply different prices for different customers on its platform … “The Chinese government is behaving like a businessman: it allows sectors to innovate without restrictions, and then when it works, it regulates,” says Augustin Missoffet, a Shanghai-based entrepreneur with ten years of experience.

Capitalization has been halved

The Communist Party wanted to redirect research and investment to other activities. Tencent, a web and video game company, has lost many users as the government strictly regulated online gaming by minors. The authorities also opposed the creation of a video game live streaming giant. As a result, Tencent announced on April 7 that it would be phasing out its dedicated platform, a kind of local Twitch, which at that time was presented as one of the most promising projects in this area.

As a result, in a year of BATX (Baidu, Alibaba, Tencent, Xiaomi), these Chinese technology flagships, often compared to the American Gafam, lost half of their capitalization on the Hong Kong Stock Exchange.

→ REPORT. ‘Government gone mad’: China’s Shanghaiers’ fury trapped in ‘Covid zero’

Why such a turn of the nut, even though China’s economic growth should be at its lowest since the early 1990s, if the impact of the health crisis is excluded?

Two weights, two measures

“One of Xi Jinping’s problems is that young people are interested in sectors like the Internet or video games rather than basic research.” analysis by Mary-Francoise Renard, author China in the global economy (one). The goal is to send young people and graduates to areas identified as promising. This does not prevent us from being pragmatists. “There are ‘double standards’ in the video game industry.notes Camilla Gauzhak, project manager at Daxue Consulting, which supports companies expanding their activities in China. Tencent faces restrictions in the domestic market, but not in the development of games sold internationally. »

“Five times more patents than Americans”

“China is changing in terms of the sectors it focuses on,” explains John Egan, director of Atelier, a subsidiary of BNP Paribas in the new technology sector. “Just look at where it files the most patents: biology, nanoparticles, fuel cells… In these sectors, China files five times as many patents as the Americans, and the gap is widening. »

And if some sectors seem to be neglected lately, it is because they have already matured to a large extent. “A lot of money has already been invested in virtual reality or an autonomous car,” remembers John Egan.

A dynamic ecosystem that also needs to evolve

Power can also draw on a vibrant business sector. If the number of unicorns, these young companies worth more than a billion dollars, has not yet equaled the United States, then China is firmly entrenched in second place. “The startup sector has gained momentum, but it has been done haphazardly, explains Marie-Francoise Renard. In recent years, entrepreneurs have given preference to short-term profitable projects on the Internet or in advertising. »

However, Chinese tech faces more structural hurdles that are hindering its growth. “These companies have less room for growth and customers, especially in the domestic market, continues Camille Gojak. There is also an evolution in terms of working conditions where they are asked to stop “996”, that is, to force their employees to work from 9 am to 9 pm, six days a week. . The big tech companies are going there in the opposite direction. »

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Shanghai is still limited

Most of Shanghai’s 25 million residents remained chained to their homes on Tuesday (April 12), although residents of some areas in “low risk” were able to leave their homes on the condition that no new cases were detected in their area. The health ministry has reported more than 23,000 new positive cases in the city.

Concerned “welfare” American citizens The United States announced that it had ordered non-essential employees of its consulate to leave the city. China “extremely dissatisfied and categorically against any instrumentalization and politicization” about this evacuation criticized the representative of Chinese diplomacy in front of the press.

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