Xi seeks submission from business giants

Why China's efforts could be self-defeating

Xi Jinping.
(Image credit: Noel Celis - Pool/Getty Images)

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China's regulatory crackdown on its most powerful businesses appears far from over, said Christian Shepherd at the Financial Times. Over the past several months, the world's second-largest economy has "knocked tens of billions of dollars off the valuations of some of the country's biggest tech groups," including Alibaba, Tencent, and Didi, with several "sudden interventions" aimed at curtailing the size and influence of corporate behemoths. But newer restrictions have reached beyond dominant tech firms. China recently prohibited online schools — a big business in China — "from making profits, raising capital, or listing on stock exchanges." Increased regulations have also led to an exodus of almost half of the world's Bitcoin miners. And the effort to "assert Communist Party supremacy" seems to be only beginning.

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There is a Chinese saying that means "picking up a stone to smash one's foot," said Nathaniel Taplin, also at the Journal. That's what China is doing if it thinks "it can snap its fingers and create — or destroy — whole industries at will." The impact on the country's growth, employment, and debt could be significant. "If the global economy were a zero-sum game, Xi's sabotaging China's boldest innovators might cheer Washington," said William Pesek at Nikkei Asian Review. But if Xi's strategy "is to wall off Asia's biggest economy" from the U.S., Japan, and Europe, that's -nothing for anyone to celebrate.

The crackdown "is likely to prove self-defeating," said The Economist. Xi's assault on his own country's $4 trillion tech industry is startling because the rise of that industry is "one of the most impressive of all China's achievements in the past two decades." Stronger regulation of China's internet industry was probably overdue. "In contrast to Vladimir Putin's war on Russia's oligarchs in the 2000s, China's crackdown is not about insiders fighting over the spoils." But the way that Xi has gone about this has set off a battle in which "an unaccountable state wrestles with the world's biggest firms for control of the 21st century's essential infrastructure." There's a lot that can go wrong.

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