
Beijing Pushes for a Direct Hand in Big Chinese Tech Firms - petethomas
https://www.wsj.com/articles/beijing-pushes-for-a-direct-hand-in-chinas-big-tech-firms-1507758314
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Canada
Beijing already has its direct hand so far up these firms it can reach the
back of their teeth. Most likely this is Beijing offering a little liquidity
to pay off some connected shareholders.

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adventured
Companies like Tencent and Alibaba have become so large and powerful - and are
still growing relatively rapidly - that the political structure in China
likely doesn't find it enough to just have de facto control. Can they really
afford (in their own perception of what's necessary) to not directly have
control over WeChat and Alipay?

Alibaba will approach a trillion dollars in gross merchandise sales moving
across its platform within the next two or so years. Contrast that with
China's $11.x trillion GDP, and then throw in all of Alibaba's various
divisions. Their rapidly growing influence over China's economy is already
vast. Just go back to 2012, a mere five years ago, Alibaba's sales were only
$3 billion (seven years ago they barely existed on the radar). Then
extrapolate their expansion forward another five years and what that position
of theoretical economic power might look like to the CPC.

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justicezyx
Alibaba and Tencent are _allowed_ to grow like this, not that they organically
grow like this.

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justicezyx
It's obvious that China is run as a state corporation. The party is like the
board, which need and will have to control all major aspects of the whole
"company". It's not so startling to think that any Chinese company should be
controled by the government, just like any department inside a company should
be controlled by the board too.

This is just my observation. I do not offer any review on it's being positive
or negative.

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wslh
It seems the Chinese government is fucking everything up. Those Chinese firms
are investing in many companies outside USA, including South America and
Africa where top American VCs don't usually invest. These firms believe more
in globalization than USA itself.

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adventured
> These firms believe more in globalization than USA itself.

You're confusing mercantilism and globalism. China's firms operate as an
extended arm of China's domestic policies (or they don't operate at all).

The US allows Toyota (Honda, Hyundai, BMW, Mercedes, whomever) to set up its
self-owned operations in the US and compete largely at will with Ford and GM.
That's globalism. The US is still the king of it by far, among major
economies. Compare the US rules in that regard to Germany, Japan and China
(the next three largest economies); and maybe take a look at Brazil, India and
Russia while you're at it (see: all the barriers put in Amazon's way in
India).

Alibaba et al. are not busy in China aggressively arguing for the state to
drop its one-sided economic policies. Those policies have gifted Alibaba the
keys to a trillion dollar protected kingdom.

In the US, as a foreign entity you can establish a business and own 100% of
it. Your rules of competition and operation are _almost_ entirely the same as
a native US firm. You can acquire the radical majority of all types of
businesses at will (with a few exceptions). The US will allow a company like
Bayer to buy a very important strategic company such as Monsanto, for example
(or Sanofi with Genzyme, or Roche with Genentech). Such a thing would never be
allowed in a million years in China.

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ulfw
> In the US, as a foreign entity you can establish a business and own 100% of
> it.

Try to do that with an airline for example. Good luck getting more than 25%.

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bitL
Seems like Chinese really want to end their prosperity quickly. Qing dynasty
mistakes all over again, pushing culture that doesn't work over culture that
brought them prosperity.

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justicezyx
“culture that doesn't work” “culture that brought them prosperity” What are
these 2 cultures?

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bitL
Qing dynasty tried to slap a modern sticker on its culture by importing
western tech. It failed miserably. It seems this is something innate to
Chinese mind in the frame of its historic culture - the tech aberration was
tolerated since 80s, now the old way of thinking is taking over again.

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dmix
While Japan actually adopted western style industry and became a powerhouse
quickly.

Sadly Japan seems to be having their own problems albeit different but still
regressive culture-driven. State-incentivized stagnation, focusing on the
needs of a few small group of elite older companies from a past generation who
are friends with the government, while neglecting the small young upstarts,
disincentivizing risk and change. And trying to make patchwork fixes large
under the guise of western economic theory.

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elefanten
There's the obvious state interference angle. But I wonder how that will
interact with their intense protectionism and huge domestic market.

Yes, the companies may not innovate as much and may lose their edge, but the
Party can (and will have incentives to) just deliver a 1B+ user market by
fiat.

I wouldn't be optimistic about this model, but the companies may not feel as
much of a disadvantage as business wisdom would dictate.

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silipripang
There's no 1B+ user market automatically; There are so many poor people in
China living on $1.50 per day. (I think maybe 8-900 Million)

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ekianjo
Exactly. Many people forget that Chinais not just Shanghai or Beijing. During
my travel in more rural parts I could see farmers who had virtually no tools
to work their land, about everywhere. This is not a rich country, this is a
poor country witha few pockets that are massively developped.

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sytelus
56% of China population now lives in urban area. So urban population is
technically a majority.

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ekianjo
Urban area does not mean to be the same kind of level of life as Shanghai.

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nullnilvoid
The big brother gets his hands in everything. They want to turn tech giants
into corrupt, in-efficient, state-run companies? It is not going to be good
for the Chinese tech giants. I feel bad for them.

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godzillabrennus
Good for the rest of the world.

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pufferfish
I disagree, this is not a zero-sum game.

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justinzollars
But there is only so much tech talent on Earth. I hope all the talent comes
here.

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neom
I presume Chinese tech companies are also aware of the pending large-scale,
American tech negated, b2c push by China into the US.

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l5870uoo9y
I would imagine the Chinese leadership values state control of the strategic
sector more than Chinese business' making money abroad.

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mankash666
I think the appropriate response is for the West to block said companies from
doing business in the West, as was done with Huawei

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rdlecler1
This is what hedgemony looks like. In 30 years we may see China making the
same demands of top US/EU companies.

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xr4ti
I'll be very interested to see how this plays out over the long term.

Positive:

\- Adds the voice of a civic minded, non-profit entity to the board. Maybe
less brutal than pure capitalism?

\- Less risk of Frankenstein's monster (e.g. dual use adware)

Negative:

\- Govt is now married to them, and the tech graveyards are littered with the
corpses of behemoths who lost their edge.

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bkeroack
> Adds the voice of a civic minded, non-profit entity to the board.

Wat. We are talking about the PRC here. A totalitarian communist regime. "Less
brutal"?

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lovich
Than pure capitalism? That's caused enough human suffering that I'd give the
PRC a 50/50 chance to be less brutal when all is said and done. Before anyone
comes in and talks about all the pain and human suffering that capitalism
allievated through progress, such as all the people lifted out of poverty, you
have to give the PRC the same credit for what it's done for it's citizens

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SamReidHughes
What did it do to bring its citizens out of poverty?

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seanmcdirmid
This is obvious: the Chinese government stopped interfering with the people
who already had a culture for business and development. Deng simply stopped
Mao's disasterous policies and china started to thrive.

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imron
That's a big part of it.

The other thing the government has done (at least in the last couple of
decades) is a big push in to transportation infrastructure - bridges,
highways, high-speed rail. All of these things help in opening up the economy
of previously isolated regions.

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seanmcdirmid
Yes. But that isn't especially a communist thing. There is no special formula
to China's success beyond getting out of the way and eliminating barriers.

Ironically enough, much of China's transportation infrastructure is supposed
to turn a profit, leading to still fairly high logistic costs.

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imron
> But that isn't especially a communist thing.

It's not, however unlike other countries, by being authoritarian they can get
things done. Compare for example a proposed high-speed rail line between
Melbourne and Sydney, which has been under investigation _since the 80 's_ and
it still hasn't gone beyond the basic planning stage.

And it's not like there isn't demand, Melbourne->Sydney is currently the 5th
busiest air route _in the world_.

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seanmcdirmid
There are good reasons for that. Each time I rode the hsr in china, the car I
was in was pretty empty. I'm not sure if this line (BJ to GZ) made much sense
demand wise. Sure the government can push through face glorifying project, but
whenever it rains heavily in southern china everything floods because
investing in basic drainage isn't sexy enough.

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imron
> whenever it rains heavily in southern china everything floods because
> investing in basic drainage isn't sexy enough.

Same thing happens in northern China also :-)

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seanmcdirmid
Yes, tough to be fair, beijing gets a bad storm once every 4 years that causes
the subway stations to flood (I had nice flood pictures for zhichunlu stations
back in 2008 but lost them...it was basically a huge swimming pool). Cities in
southern china have to put up with it every year (that and bloody no indoor
heating makes living there a no-no for me).

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Rei_Murasame
This will be interesting.

