China’s tech clampdown is not unexpected in the context of its pledge to tackle anticompetitive practices, as outlined in the five-year plan (2021-2025).
US tech giants are being hit with antitrust lawsuits too, but the disputes will take years to resolve. IT share prices continue to rise.
The contrast between the US and China is stark, with the Chinese authorities able to ‘reshape’ the technology landscape far more rapidly.
Reigning in large digital platforms need not be negative for growth. China’s interventions could, in theory, bolster competition, support small- and medium-sized enterprises, and contribute to more efficient markets and capital allocation.
The antitrust movement in the US will look upon China with admiration for its boldness. China’s activist policy could trigger a presentation problem for developed Western economies, which are purportedly more on the side of economic liberalism and small businesses.
This does not mean China will ‘succeed’: rather, this commentary attempts to outline the ‘economic’ logic behind China’s industrial strategy (i.e., the prioritisation and support of scientific research & development and specific high value-added services and manufacturing alongside stricter control over platform companies).
