In China, big tech is in the regulators’ crosshairs. Since financial regulators spiked an IPO for Ant Group, the Alibaba-affiliated fintech giant that was slated to outraise Saudi Aramco, tech majors have had to get used to fines, investigations, and meetings with regulators. This big tech crackdown shows no sign of slowing down.


Insights is a series of explainers on developing stories in China tech, available to TechNode subscribers.

Most recently, Reuters reported that ride-hailing firm Didi Chuxing is facing an anti-monopoly probe as it prepares for a New York IPO. Alibaba was hit with a $2.8 billion fine in April. JD delayed an IPO for fintech unit JD Technology in the wake of the Ant fiasco. Tencent and Meituan are both reportedly the target of antitrust investigations.

In May, TechNode launched a techlash tracker, aiming to take stock of the big tech crackdown by counting enforcement actions. So far, we’ve identified 29 such events, and we’re regularly adding to it.

How do we make sense of the trend?

Bottom line: China is working through a broad change in its approach to managing tech giants. The crackdown is broader than anti-monopoly, finance regulation, or Jack Ma, seemingly reflecting a change in attitudes to the power of big tech.

It’s a big deal, but it’s surely not the end of big tech. No one ever got big in China tech without knowing how to work with the state, and so far, we see regulators prioritizing compliance over punishment.

But expect to see business models changed, especially around lending and the use of data, likely in ways that will cut into profits for tech majors.

How the crackdown affects tech

It’s not about fines: Compared to the size of the companies, the fines are small. Alibaba’s $2.8 billion fine, a record for Chinese antitrust, represents only about a week and a half of the company’s revenue. Other companies have seen fines in the millions: tutoring platforms Zuoyebang and Yuanfudao paid RMB 2.5 million ($389,000) for unfair competition, while community group buy platforms paid up to RMB 1.5 million.

It is about changing businesses: Ant didn’t pay a fine, but it was forced to agree to a far-reaching “rectification plan” in the wake of its failed IPO that will likely leave it looking a lot more like a bank. Fidelity estimated that these changes will wipe out about $150 billion in value, about half the company’s valuation pre-fiasco.

READ MORE: INSIGHTS | Deciphering the Ant Group rectification plan

A lot happens behind the scenes: In fintech, we’ve seen JD Technology and Tencent prepare to make changes along the lines of Ant Group without publicly getting involved in investigations. Chinese authorities often care more about getting their way than getting a pound of flesh, and many changes will likely be carried out without the public knowing exactly who made the decisions.

Big tech will survive: Rumors that Ant Group would be broken up do not seem to be panning out. While it’s likely to look quite different after rectification, it appears that it and other targets will emerge still massive.

Five ways to understand a crackdown

So what’s the crackdown about?

1. Anti-monopoly is the most active area of enforcement right now. It’s also the biggest change—until late 2020, the anti-monopoly law was not successfully applied to tech majors.

We’ve identified 18 events, starting in December last year. Led by the State Administration for Market Regulation (SAMR), it appears that the campaign will hit every leading firm in the sector. To date, only Alibaba has seen a major fine, while other tech majors have paid small fines for failing to submit mergers and acquisitions for review or face reports of ongoing investigations. The focus of investigations seems to be on the widespread “choose one of two” model under which major e-commerce platforms demand exclusivity from merchants. Didi, Meituan, and Tencent are all reportedly targets of ongoing investigations.

Tencent has also faced lawsuits from ByteDance and private citizens over its practice of blocking users on messaging platforms from opening links that lead into apps from other major tech ecosystems.

We expect to see bigger fines and orders to change business practices as investigations unfold, but it’s not clear if the campaign will challenge the dominance of monopolies on the Chinese web. Choose one of two, or blocking links, are pretty marginal elements of the power of big tech.

2. Privacy enforcement dates back farthest, and has affected the great number of companies. We’ve identified seven events, dating back to 2019. Typically, we see dozens or hundreds of companies fined in each event, for issues like over-collecting data or failures to store it securely. With major data breaches a routine event even at major tech firms, it’s no surprise that fines are common. These fines have come from the Cybersecurity Administration and the Ministry of Industry and Information Technology.

Fines over data violations have come in parallel with a series of laws on data collection and storage that experts have said are turning China from one of the world’s least regulated data environments to one of its most. These laws limit the transfer of much data outside of China, and create what Control Risks’ Carley Ramsey described as a “mandatory how-to guide” for cybersecurity at TechNode’s Emerge conference last year.

3. Financial de-risking also dates back years. Beijing’s campaign to bring lending under control originally focused on bank loans to “zombie” state-owned companies. But the spectacular collapse of hundreds of online peer to peer lending companies around 2018 showed that small loans to individuals could also drive risks. By 2019, regulators had largely shuttered the once-thriving industry.

But the Ant Group IPO fiasco marked a new wave of fintech regulation. Financial authorities, most importantly the central bank, became concerned that online lending products offered by Ant and its peers—often available during checkout on major e-commerce platforms—were leading retail borrowers into unsustainable levels of debt, and creating systemic risks. After a dramatic intervention, the company and its peers are transforming into more bank-like entities, which will likely focus more on profiting off loan interest than using data to sell loans to other investors. It’s also likely these companies will take steps to add friction to taking out loans.

We’ve identified only three events in the fintech crackdown, but they were doozies. So far, JD Technology and Tencent’s fintech divisions appear to be mirroring the changes at Ant without a public regulatory proceeding.

4. Jacklash may be the most popular frame, but for our money it’s the least convincing taken alone. This theory holds that Alibaba founder Jack Ma fell out of favor with politicians first, and that the Ant suspension and Alibaba antitrust case flowed from that. The theory doesn’t explain why so many non-Ma firms have been caught up in the crackdown. But it is true that his Ant Group and Alibaba have suffered by far the biggest consequences so far. Our feeling is that you don’t have to pick between believing in the policy story or the personalities story—often, they go together. TechNode doesn’t cover politics, but we can recommend some reading on how a policy disagreement turned nasty.

5. Data monopolies are a speculated fifth theme. Some clued in observers predict that the crackdown will end with tech giants forced to share—or at least, to rent out—their data. The Wall Street Journal recently reported that Ant Group is in talks to share its data with a state-backed ratings company, which would fulfill a request regulators have made for years. Protocol recently wrote that companies, both Chinese and multinational, may soon have to comply with wholesale requests from the government for user data.

Tiffany Wong, a consultant at research-based consultancy Sinolytics, told TechNode that there is evidence that data monopolies are one of the issues on regulators’ minds. SAMR’s ruling on Alibaba, she said, argues that “because they own so much data on trade, logistics, etc., they have a huge benefit over competitors. They’re able to do calculation for targeted marketing, and because they own all this data the market entry barriers are very high for other platforms.” Influential former central bank chief Zhou Xiaochuan argued that the amount of data held by platform companies is a threat to competition in a Macau speech last November.

What’s behind it?

Beijing is clearly rethinking how it governs tech. But why now? Outside the policy issues listed above, there’s two more factors worth considering.

One is popular tech skepticism. In recent years, the Chinese public has turned from admiration to skepticism of big tech, following a global trend. Repeated scandals and controversies over extreme working schedules like 996, dangerous false advertisements, and deeply indebted young people have made big tech a popular target. Critical reporting on tech firms regularly goes viral, while self-organized groups of angry consumers are getting traction with companies like Tesla.

On the other side is an international movement toward regulation. On Thursday, the US House Judiciary Committee approved the final piece of a package aimed at curtailing big tech companies’ power to use their platforms to promote their other business lines. The move could make it easier for lawmakers to break up the likes of Facebook, Google, and Amazon.

In fact, China’s concerns are not too different to the arguments made by American thinkers like Elizabeth Warren, Tim Wu, and Dina Srinivasan. Beijing’s privacy model is based on Europe’s GDPR. As China cracks down on big tech, it’s participating in a global trend.

Graphics by Chris Udemans

David Cohen is a former acting editor in chief at TechNode. Since 2010, he has covered China as a writer and editor at outlets including the Diplomat, the Jamestown Foundation, and China Policy. He’s...