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Beijing Pushes for a Direct Hand in Big Chinese Tech Firms (wsj.com)
104 points by petethomas 11 days ago | hide | past | web | 83 comments | favorite





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.

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.


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

GDP is not the best measure for firms that get much of their revenue from retail, import, and export. That said, alibaba and ten cent are too big to fail/kill without causing social instability trough immediate mass unemployment which is a big no no in Chinese politics. However, the state security apparatus has always had the other options to exert power over the key decision makers at any Chinese company so this is essentially a check on the political influence of said executives.

Fear, it is never enough. It is laughable, how insecure those Chinese red nobles are about themselves, while in absolute terms, they might be already among the most powerful human beings on earth.

There seems to be a global correlation between people with power and reluctance to lose any of it. It's practically down to a science now.

Random, but I was thinking about this in the context of the U.S. democratic system. Why do we still have representatives all going to Washington D.C. to hash out decisions when each of us has the power and ability to vote remotely on single issues every day?

I think it's due to your point, and I wish I had a candidate on the slate who was serious about having constituents vote securely on single issues rather than forcing us to choose a single party docket.


that would create a tyranny of the majority [1]. Direct Democracy is great on small scale, but a terrible idea with millions. Just imagine the damage that somebody like trump could cause within weeks with such a system.

https://en.wikipedia.org/wiki/Tyranny_of_the_majority


Not if combined with a Senate and Presidential veto. I agree that it's not clear that direct citizen vote is superior to Representative vote. Though given the low caliber of HoR debate and their lack of party independence (and their historical lack of accountability to serve all their constituents), I believe direct vote should be considered.

Perhaps changes to law like 1) a voter calibration test to demonstrate sufficient understanding of issues (thereby scaling the value of your vote up/down) combined with 2) restrictions on corporate/lobby media ads to manipulate voters could produce better results than the HoRs? Also worth discussion, IMO.


People forget, or don't know, that the founders had experience building lots of democracies of many types in towns, counties, and colonies/states leading up to the American Revolution. These people had more practical direct experience than anyone before or since. It behooves all of us to study what came before, only then can real improvements be made and insight gained.

If you’re allowing the senate or president to veto a national popular vote then it’s not really a direct democracy.

This assumes a naive system without a constitution. If you start with a solid set of rules that say they can only be changed by reaching a certain threshold, e.g. 80% of the population and specific timeframes for votes, it will be much harder for populists to push through evil.

You could also have a weight system, e.g. engineers get double votes on technical issues in their field. This will lower the power of redneckish factions.


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.


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.

> 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.


> 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%.


What are the barriers put in Amazon's way in India? Really curious.

> Germany

Wat?


No, they believe in using government money to invest/bribe overseas to build up a market for mid level Chinese goods. This is how they plan on moving up the goods ladder.

We are talking about different things here. It is true that the Chinese government is expanding its influence worldwide but also true that some Chinese firms have a genuine investment interest outside mainland. Chinese are more eager to build strategic partnerships instead of having a vendor/client relationship, and... they work really really hard, which is a natural strategic advantage.

Rephrasing the above post, sans adjectives: "building up foreign markets" - isn't that how globalization happens?

That's essentially what most Western European companies did (and probably) still do abroad, for the better part of two centuries.

Besides a legacy of centralism, statism and being a one party state it is fairly simple; Beijing wants control over the strategic sector.

Chinese government is the least likely candidate for the word fucking around, they merely try their best to control and grow.

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.

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

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.

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.


I'm assuming freedom VS authoritarianism.

The control over the economy is overall getting lowered instead of tightened.

Internet companies appear to lose freedom not because Chinese government tightens control, but they are allowed to grow to certain sizes so that state control that has always been there now is applicable to them.

Like everything, complexity adds up. Control comes with a cost, and needs careful planing and execution.


Just a blanket, nebulous statement. Means nothing

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.


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)

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.

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

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

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.

Don't be surprised, they even get hands in our vaginas[0] few decades ago, so.

It will be very interesting to see how they goes, but I don't believe it will yield many good results (If any).

Censorship already preventing China's tech companies from reaching global market, now this.

[0] https://en.wikipedia.org/wiki/One-child_policy


Half of Chinese economy are state-owned enterprises, and it's been even more so earlier. Mainstream assumption is that liberalization of the rest of their economy was the main factor in phenomenal Chinese growth over the past decades, but there's an argument to be made that maybe it was a mix of central planning of key sectors and liberalization of non-key sectors. In either case, when compared to neoliberal Reagan-Thatcher policies in the US and elsewhere, Chinese approach of long-term planning beyond the next quarterly earnings report seems like a better bet so far.

We run all of our companies like China runs its economy. It’s funny to realize sometimes how dogmatic we are about this or that type of government being objectively best. Democratic republics have become failed states too. Sometimes I admire their ability to actually get shit done (transit systems etc).

Of course, if I were a dissident I’d rather be in the US.


If you look at GDP per capita growth be it China or other places, the striking thing is that stability seems to matter more than almost any level of policy differences.

E.g. you can see China's growth skyrocketing after the end of their semi-regular ideological purges, but Deng's large-scale reforms seems to not have affected the rate of growth much.

Presumably when a regime remains stable, people learn to work around even quite severe constraints given enough time.

That of course does not mean that reforms may not be helpful in making life better for people (or worse), but that they may mean less in terms of overall economic growth than avoiding rapid change.


I'd guess that it will make those companies into somewhat more corrupt, in-efficient and state-run than they currently are, but that the change will be incremental. So I expect these companies to still take the world by storm.

They effectively have access to unlimited capital and cheap labor due to Chinese asset bubble. Yet, their penetration outside of China is still extremely limited.

That's not a great sign for the long term as over the next 30 years a new set of Party members are going to want to enrich their family and will use whatever means nessisarily to do so.


Good for the rest of the world.

lol right.

China: Widow of Nobel Laureate Feared ‘Disappeared’

https://www.hrw.org/news/2017/07/20/china-widow-nobel-laurea...

Tens of thousands protest in Hong Kong over jailing of democracy activists

https://www.reuters.com/article/us-hongkong-politics-idUSKCN...

China Pushes ‘Human Rights With Chinese Characteristics’ at the UN

https://chinachange.org/2017/10/09/china-pushes-human-rights...


As usual, we can depend on the Chinese government to ruin the (opportune for them) situations which they and businesses in China have worked so hard to create.

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

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

> Every time we witness an injustice and do not act, we train our character to be passive in its presence and thereby eventually lose all ability to defend ourselves and those we love.

--Julian Assange


I am not exactly a Julian Assange fan... in the least... but there is something to this quote.

The hard part about any quote, of course, is that the context in which the statement is originally made could be very different than the context here and the change of context can change the meaning entirely. And this can, over time, ascribe new positions to the person being quoted that they really don't hold. Not saying that is necessarily the case here, I don't know... just something to keep in mind.

(stepping down from soapbox)


> the context in which the statement is originally made could be very different than the context her

The context I replied to was gaining from the injustice (and suffering) inflicted on others, and being smug about it. What could change about the "context" - what one considers injustice? That's factored in already, and gloating is, as I see it, being passive and worse.

It doesn't matter who said it anyway, I bet you I could find you a lot of wise people who said it in different and expanded forms. He put it succinctly.

It takes guts to stand up for yourself when push comes to shove. When you water down the wine of what even you yourself consider just, subjective and restricted as we all may be, it will fail you.


I don't think so. Chinese investments in startups are reaching places American VCs are not interested in. If you read top VC blogs you realize that they don't want to flight far away to attend board meetings.

I presume you're being downvoted because other believe you are incorrect, but I don't know enough about the subject matter to understand why or how.

Perhaps someone will respond and explain how this view is faulty?


It's true. Good luck getting investment if you're not in a Tier 1 city. There are plenty of companies that start in smaller cities/towns that end up moving to NYC/Chicago/LA/SF,etc because investors don't bother considering them if they're not from a big city

You can quickly check Tencent investments reach: https://www.crunchbase.com/organization/tencent/investments/...

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

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

Interesting. Do you have any articles on this? Would love to hear more.

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

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

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.


> 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"?


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

I think that you’re forgetting the scale of human misery caused by Mao and his cult of personality. In the west we talk a lot about Stalin and Hitler. Mao was up there in the hall of fame of “evil butchers of the 20th century”.

The fact that China has managed to prosper where places like Russia that underwent a similar type of regime have been stuck in the mud is a testament to the enduring Chinese culture.


I'm not forgetting. I'm not even saying that the PRC is within a light year of good. I'm saying that if the comparison is to pure capitalism then it's got even odds of being less brutal because _both_ are spectacularly brutal. That they manage to help people at times is entirely coincidental.

The PRC has black prison sites for political dissidents and the famine from the great leap forward. Capitalism has child slaves working cocoa farms or pharmaceutical companies giving aids tainted medicine to third world countries because it would net them a profit.


I missed your distinction of “pure” capitalism. Thanks for reinforcing/clarifying that.

Modulo the 60-90 million killed under Mao

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

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.

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.


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.


> 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.


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.

> 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 :-)


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).

Built a metric fuck ton of infrastructure? Manipulated it's currencies so that it's burgeoning manufacturing industries could become the factory of the world?

I get if you have a problem with the bad things they did but it's disingenuous for people to say all the positive consequences of the side they support was because of specific actions on their sides part, while the side they dislike had good things happen by coincidence or in spite of themselves


Sinologists have a long running debate as to whether the CPC should be praised for the Chinese Economic Miracle™ or if the Cultural Revolution just set the bar really, really low. Either way the "iron rice bowl" was as a genuine phenomenon.

I believe the phrase is 'capitalism with Chinese characteristics'? China has admitted for a long time that their economy can't work without capitalism. It's simply a different take on impure capitalism (and the world has never known pure capitalism).

The phrase is 'socialism with Chinese characteristics', which we in the west call 'capitalism'.

Deng Xiaoping was a smart chap. He knew China needed capitalism, but also knew that after decades of railing against capitalism there was no way the people would support it and no way to implement it without undermining the government, and so 'Socialism with Chinese Characteristics' was born.


How is a state which allows and encourages wage labour and trade 'communist'? Totalitarian everyone agrees on, as to whether it is Communist or Socialist other than in name is heavily doubtful.

State intervention in a capitalist economy does not the abolition of the value-form make, it makes a state capitalist economy.


> civic minded

China? Civic? What? Is today opposite day?


Well it is “civic” in the sense as defined by the Chinese government which means stable or not changing at a fast pace.

This will be interesting.



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