Why Is China Cracking Down on Tech Firms?

China recently changed its rules regarding digital payment and Internet services. The global community sees this regulatory shift as a problem for tech firms, although the government calls it a “tightening” of the local anti-monopoly guidelines.

The news rules essentially block a company from forcing sellers to choose between the leading online providers for specific needs. Before the regulatory change, this process was considered a common practice in the country.

Experts see the guidelines aimed at Alipay, WeChat Pay, Taobao, and Alibaba.

Isn’t It a Good Thing to Stop Monopolies?

When we think about monopolies, we’re looking at the business structure from a capitalist viewpoint. If one organization can set the prices, market conditions, and access for goods or services because they’re the only provider, it limits competition and innovation.

The socialist, communist government in China uses the opposite end of a mixed economy. Although there are capitalist elements to the business world, the government holds a stake in virtually all significant businesses

China sees itself in the same battle against tech companies that some conservative and liberal groups feel is happening in the United States. The only difference is that the Chinese government has the authority for immediate intervention, like when it ordered Jack Ma to scale back his expansion plans for an Alibaba subsidiary.

What set off this issue in the first place? For many outside observers, it was the criticism that Ma leveled against the Chinese government.

What Does This Effort Mean to Everyone Else?

At the moment, the rules and regulatory changes are designed to create pressure on Chinese tech firms to comply with government wishes.

The issue could come to a head in the next few months as business leaders come into conflict with political desires.

With as much control as the tech giants have in China, their information assets could trigger the government’s mood changes. Political leaders recognize this, and they are moving to stop it.

These firms aren’t backing down. With more hiring happening in legal and compliance areas, expect battlelines to be drawn soon.