China's Self-Destructive Tech Takedown
China’s leaders think that they can crack down on the country’s private technology sector and still deliver material progress as state-owned companies take over. But by reversing the policies that enabled decades of rapid growth, they risk imperiling the unique economic model they seek to sustain.
WASHINGTON, DC – Global equity markets appear transfixed by the Chinese property developer Evergrande, which seems poised to default on part of its massive $300 billion debt as the country’s real estate market cools. Investors are right to be alarmed. China’s property sector accounts for almost 30% of GDP, and there is a well-established link between housing busts and deep recessions.
But property-sector woes are not the only economic danger China faces in 2021-22. The Chinese government’s mounting crackdown on the country’s burgeoning tech sector may pose an even greater threat. After all, China’s dynamic tech firms have the capacity to innovate and drive growth just when the digital revolution, coupled with the green transformation, requires a strong private sector and robust investment flows.
Yet, President Xi Jinping, fearing that firms such as Alibaba, Tencent, and Didi Chuxing have amassed too much wealth, data, and power, has stepped up his attacks on the tech sector this year. Big Tech’s implicit challenge to the Communist Party of China’s monopoly of power has apparently become too serious to ignore.