Why is China Reforming its Tech Policy And How Should India See it?

China, one of the world's tech powerhouses, is threatening to destroy its own tech companies.

Experts worldwide are trying to decode this adversarial policy by the Chinese government against its own companies.

(Photo: The Quint)

Video Producers: Kanishk Dangi, Naman Shah

Video Editor: Purnendu Pritam

The world of technology is witnessing a major development. China, one of the world's tech powerhouses, is threatening its own tech companies. Chinese ed-tech companies have been deprived of profit-making, IPOs and foreign capitals in the latest regulatory crackdown by the Chinese government.

Most of the companies under threat are those that operate in consumer internet space.

Last year, the news about the disappearance of one of China's most popular billionaire, Jack Ma, had astonished the world. China had denied the IPO request for his company Ant Financial. Moreover, inquiries were ordered against Alibaba in the name of national security. Jack Ma, then, exited Alibaba and its app was removed from the app store. Ride-hailing app company Didi Chuxiang is also under government's radar now.

Why Is China Playing Villain Against Its Own Companies

Experts worldwide are trying to decode this adversarial policy by the Chinese government against its own companies. This is a nuanced, but important story to understand.

Many Chinese companies planning IPOs in the US markets have been affected. And the market capitalisation of already listed Chinese companies in the US is falling by the day. Chinese companies worth USD 2 trillion are now on shaky grounds.

Looking at these measures from the American point of view indicates that China may be trying to become inward-looking and wants to stop the US pumping funds in its companies. But this could be a mere simplified analysis.

It should be noted that Indian companies in food-tech, fin-tech and ed-tech are mere extensions of the real innovations from the US' Silicon Valley and China. Therefore, it becomes important for India, whose tech journey has just started, to understand why China's mature technology sector is facing government crackdown.

Chinese Companies Immune to Government Scrutiny

Companies related to the military and those that deal in telecom, hardware – semi-conductor and chip industries: Dozens of companies that are operating in 'serious' technology have not faced any actions.

Chinese Companies Facing Government Scrutiny

Tech companies related to online shopping, gaming and fun are the ones primarily suffering.

China has probably assessed these platforms to be distractions that is creating wealth only for a few companies and not adding any 'real' value to the economy.

Policy Shift

Another reason could be the policy shift by Chinese President Xi Jinping. China has been one of the leaders in the tech world, but their primary focus has now shifted to geopolitics, military power, and economic power.

The one-child policy has pushed China towards social depression. People are taking loans to educate their children. That's why ed-tech companies have been ordered not to book profits.

USA, on the other hand, has focused more on consumer electronics and has a prevalence of social media, e-commerce company. The US government has taken strict actions against these individual companies but the tech sector in general has remained unaffected.

China is planning a complete reform of this sector. This must be a well-planned decision with a long term view. China sees these distracting sectors pulling people away from productivity. It wants its children to focus on R&D, engineering, new energy, design, etc and not on games, shopping, etc.

In India, private companies are being promoted in the tech sector without any legal framework to oversee them. India must look at the paradigm shift that is being implemented in China, without being autocratic and make a national policy for a secure internet that could empower its people.