Angela Zhang, an Associate Professor of Law at the University of Hong Kong and an expert in Chinese tech regulation, dives into the intricacies of how China controls its big tech companies. She discusses the government's tumultuous relationship with firms like Alibaba and the implications for global tech governance. Angela compares Chinese tech regulation with that of the US and EU, shedding light on China's unique pyramid model. Additionally, she examines the impact of COVID-19 on policy changes and explores the competitive dynamics in the US-China tech rivalry.
China's shift to stringent tech regulation post-2020, exemplified by the Ant Group IPO incident, has reshaped its tech industry's growth dynamics.
The 'dynamic pyramid model' of regulation in China reflects a volatile and hierarchical approach that contrasts with Western regulatory systems, impacting market stability.
Deep dives
The Regulatory Turning Point in China's Tech Sector
The Chinese government underwent a significant regulatory shift in October 2020, moving from a lax to a stringent approach in governing its tech industry. This was triggered by the controversial suspension of Ant Group's $34 billion IPO, which occurred just hours before it was set to launch. The abrupt intervention highlighted longstanding regulatory tensions between Ant and financial regulators, raising international scrutiny over China's motives. The incident not only underscored the complexities within China's regulatory landscape but also marked a turning point that drastically impacted the tech sector's growth and investor confidence.
Distinctive Features of Chinese Tech Regulation
A unique model for tech regulation in China, termed the 'dynamic pyramid model,' features three main traits: hierarchy, volatility, and fragility. This model illustrates how China’s regulatory framework involves multiple governmental tiers that often engage in regulatory cycles of strict enforcement followed by relaxation. Unlike Western systems characterized by robust checks and balances, Chinese regulation can lead to unintended consequences due to its swift and hierarchical nature. These features result in an environment where rapid interventions are common, yet often disruptive to the market.
Geopolitical Implications of Tech Regulation
China's regulatory measures are deeply intertwined with its geopolitical competition with the United States, particularly in the tech sector. The Chinese government has reinforced its focus on developing hard technologies in response to its perception of the US as a competitor, forcing companies like Alibaba and Tencent to pivot from consumer-oriented models to foundational tech. This shift has significant implications for China’s aspirations to become a global tech superpower, as it aims to diminish reliance on foreign technology. Lessons drawn from the regulatory backlash may influence future approaches, calling for a more cautious and deliberate regulatory strategy.
China is becoming ever more important to global affairs. But political and geopolitical challenges, as well as the covid-19 pandemic, have diminished Europeans’ ability to engage with Chinese thinkers and understand their views and ideas about the world. In this mini-series, Mark Leonard and Janka Oertel try to change that by engaging in conversations with some of the best Chinese academics, researchers, writers, and journalists on the topics in Chinese internal debates that matter most to Europeans.
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In this episode, we are joined by Angela Zhang, associate professor of law at the University of Hong Kong and director of the Philip K.H. Wong Centre for Chinese Law, to discuss China’s big tech regulation. Angela talks us through big tech companies’ far from frictionless relationship with the Chinese state. How is China regulating its big tech firms? What role do these firms play in China’s competition with Europe and the United States? And what are the lessons for Europe’s own attempts at tech regulation?