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China CCCP: You love them or hate them, you gotta respect them!

Updated: Aug 29, 2021


The recent crackdown by the Chinese CCCP(government) on their local tech companies has made waves and has raised many questions on the motive, intent and potential actions ahead. Alibaba's stock, the poster child for this move is at an all time low and continues to slide. More pain is expected ahead. The government in one sweeping move also banned off campus tutoring essentially hitting all of the edtech platforms. They have enforced billions of dollars of fines on the tech giants like Meituan and others lately. These are sweeping moves in a country where the tech economy has been transformational in its impact.

The digital transformation that has unfolded across China in the last decade is now a role model of governance globally. This transformation has made the local economy self sufficient and unleashed innovation at an unprecedented scale. One could argue, this local ecosystem growth has led to the rise of globally respected and innovative companies like Alibaba, Xiaomi, DJI, Tencent, Didi, Meituan and others. There are more startups in China per capita than in any part of the world continuing to create beachhead for China in the latest technologies from AI/ML to Autonomous vehicles to computer vision.


So why would the CCCP put at risk such a rising tide of innovation and be draconian in its actions ?


The western media has speculated about these moves and their narrative largely focuses on the potential political intentions, capital and power games. I do believe that there is another big reason that is at play that needs to be understood and it requires a long view of human development cycles.


At the core the CCCP understands quite well that to for any country to grow and prosper over time, the masses have to partake in any growth, progress and financial upsides in a meaningful manner. You have to carry everyone along in some band of progress. That in itself will ensure the CCCP remains in power as they will be seen as the equitable arbiter and distributer of gains for everyone. Wealth, power or Influence cannot be concentrated in relatively few and once successful, these companies cannot use their position to dominate segments leveraging their influence and power. History has not been kind to political establishments when the gap widens too far between the few privileged and the rest. And the Chinese know their history very well.



For example look at the US. In US today the top 1% of the earners make more than the bottom 80%. And the disparity continues to exacerbate. These disparities are visible at times in movements like BLM or through local issues like homelessness in cities like San Francisco, NY and others. There is an underlying seething anger against the elite class and it continues to create deeper rifts in the fabric of the country. The statistics get worse if you start to look at stock owners and non stock owners in the country. Covid barred these inequalities quite clearly. Who were the ones who had to go to work in the most riskiest environments each day and who got to work from the safety of their homes?

India is no different. Education is a fundamental pillar and so is technology today. We are all in awe of our Unicorns, Soonicorns and tech growth. Is this really an equitable distribution of impact in India. You may want to think twice. Having massive number of ed tech platforms growing at a tremendous scale looks great on paper. The question to ask is does it create a barrier for the ones who cannot afford to avail of this fundamental right? Is this creating a class of students who have a disproportionate advantage due to technology access, financial status and other socio economic levers? If you let the technology and capital games persist every educational institution eventually be sucked into this orbit leaving the larger mission and purpose of equitable opportunity behind. Eventually the relatively few will invariably be ahead leaving behind millions if not billions of citizens neglected, devoid of a fundamental right. Who intervenes and stops this unprecedented concentration of power in the hands of few?

Now some may argue that regulation should curb such behavior and create a better framework. Yes it can but with such massive wealth, stock valuations and growth trajectories is it really possible for any politician not to partake in the upside of these companies?

The US has been trying to curb the power of Facebook for years now and has it happened? Or will the lobbying and moneyed interests continue to stall any progress of any kind. It is the government eventually that has to take a long view for the masses. And I think thats what the CCCP is doing. They understand they cannot be bystanders and let this bifurcation of their society continue. Decisions of any magnitude and impact need to be made no matter how disruptive they maybe in the short term. The elite class, the wealthy, the CEOs, VCs, and stock holders of these companies will complain and lobby. But if these moves ensure a fairer and equitable growth for the billions, these very investors will eventually show up in droves to sell their Teslas, Starbucks and tech toys. The CCCP knows if billions keep rising in their wealth, aspirations and access to opportunities, China will continue to be the world leader in all circles and it keeps them in power. And for that if it has to take short term pain its worth it.

In my view this is a massive shift in the corporate governance at a much larger scale and a message to companies in China. Growth is acceptable only if it is also distributed and inclusive. Will it work or will it lead to other negative ramifications only time will tell. There is only one country that has consistently delivered the GDP growth per capita and continues to do so. This is quite a gutsy move that requires grit to standup to some of the wealthiest entrepreneurs in the world. Whatever might be the fall out one has to learn, understand and respect the CCCP's ability to make such moves. The CCCP has demonstrated once again why China is a powerhouse and it will remain so. Now we have to wait and see if this was the right move. Hopefully we will start to see the results in a decade or so. So till then picture abhi baaki hain mere dost ( the movie is still to unfold)!

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Nice write up Arshad. Hope all well with you and family. Thanks, Avinash

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It's a very interesting thought and something that I've been wondering for a while. The issue of neoliberalism benefitting a few and the increasing gap between the rich and the poor are garnering attention. China's actions are almost as if to prove a point that their version of communism can be a successful model. Or is it a stubborn set of people behind the party whose egos were rubbed the wrong way with capitalists gaining power and influence over state policies that are behind this, without much of an ideological backing? Time will tell. However, we see these problems in India as well - that of the increasing wealth gap and that of egos being rubbed the wrong way. Are…


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Agree, the ramifications of the move by CCCP and how it plays out will be seen down the line. One thing the last two decades has done is created a have vs havenots mentality across the spectrum which in the current economic distress is manifesting itself and showing the wide chasm which exists in the society and every country needs to wake up and address it urgently to avoid strife which has a potential to wipe out all the gains and progress made, thus important for all to be grounded to the broader reality and work to build solutions to address them In a meaningful manner

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