Was China powerful in the past

Too big, too powerful: China's leadership is tackling other tech giants

There are increasing signs that China's leadership after Alibaba is now also taking action against China's other tech giant Tencent. As the news agency Reuters claims to have exclusively learned, the Chinese market regulator is planning a fine against the company in the amount of ten billion yuan, around 1.3 billion euros. The reason: Tencent had not properly disclosed and concealed company acquisitions and takeovers in the past. And in the field of music streaming, the group did not behave competitively.

Tencent is best known for its super app Wechat. Wechat can be found on pretty much every Chinese cell phone. It has become an indispensable part of the everyday life of a billion people, as it combines functions of WhatsApp, Facebook and Instagram on the one hand, and is also used for cashless payments on the other. There are also other applications such as games and music streams. The health code with which corona infected people are tracked in China is also based on Wechat.

Last year the company had sales of 480 billion yuan, around 60 billion euros. It was founded in 1998 by Pony Ma in Shenzhen.

Too big, too powerful

Tencent seems to share with the other Chinese tech giant Alibaba not only the surname of the founder, but also the problem that the companies have become too big and powerful in the eyes of the leadership in Beijing.

In the fall of last year, Alibaba founder Jack Ma drew the displeasure of some cadres in a speech to the Chinese banking association. Ma wanted to revolutionize the Chinese credit market with his fintech division by building up a rapidly growing peer-2-peer lending system. The decision-makers in Beijing quickly called off an IPO of the Ant Group offshoot, which was planned for October. Ma himself disappeared from the public for a few weeks. The Alibaba group was sentenced two weeks ago to a record fine of 2.2 billion euros for disregarding anti-monopoly laws.

Subpoenaed

And it doesn't just affect Tencent and Alibaba: An event on Thursday also shows that Beijing is of the opinion that the once-pampered tech companies have become too powerful. The Chinese market regulator asked the CEOs of JD Finance, Bytedance and eleven other companies for an interview. It should have been about financing methods and expansion plans.

The Meituan delivery service has also come under fire. Meituan, in which Tencent has again invested, is number one with a 65 percent market share after Alibaba-backed Eleme. This is not enough competition for the authorities. For this, in turn, the staff of the market surveillance authority has recently been increased.

The events also show Beijing's difficult relationship with the free market economy. In the past ten years, foreign tech giants were first pushed out of the country in order to then allow domestic companies to grow with government support. Because the positive effects of a competition were recognized, in many industries two companies were usually allowed to compete against each other. In the meantime, however, the quasi-monopolies of the companies have become too powerful for the political leadership. Beijing pulls the handbrake and relies on state intervention. (Philipp Matteis, May 1st, 2021)