A year into China’s tech crackdown, the sky is no longer the limit for China’s Big Tech

Under a forceful clampdown by Beijing, China’s tech giants fell in line with new national priorities that emphasised hard technologies and common prosperity

As Big Tech companies came under pressure to reform their business models, an era of exceptional growth drew to a close

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For China’s tech giants, whose ethos seemed to be “the sky is the limit”, 2021 saw their ambitions curbed by tightened regulations and increased government scrutiny. Illustration: Perry Tse

Published: 10:00am, 23 Dec 2021Updated: 5:55pm, 27 Apr 2022

This year will go down as a tough period for Chinese technology firms, as Beijing moved to exert control over the once-freewheeling sector. In the second of a four-part series, the South China Morning Post looks at how 2021 became the watershed moment in the development of China’s Big Tech companies. The first part is here.

In early July, the head of ByteDance’s gaming studio outlined an ambitious plan to rival Nintendo and Activision Blizzard, after hiring 3,000 programmers and artists to work for his Nuverse unit, in a display of the company’s mantra to “take initiative and push boundaries”.

Outside Shanghai on the midsummer day that Yan Shou spoke, a chill was already blowing through China’s technology industry, as regulators across multiple disciplines from cybersecurity to taxation were stepping in to cool the feverish growth of the world’s largest internet-related ecosystem, ring-fencing how data collected from internet shoppers, readers, and vloggers could be used to nourish other businesses.

Within four months, ByteDance would reorganise its sprawling operations serving 1.9 billion monthly active users into six business units, including Nuverse in the game division. Founder Zhang Yiming exited the company’s board after handing over the daily running of the world’s most valuable start-up – and only hectocorn – to his co-founder.

ByteDance, whose value has shrunk from US$400 billion in the private markets to US$350 billion, is the largest of China’s Big Tech companies to have made the transformation during a watershed year in the industry’s unfettered growth. Jack Ma predicted in 2017 that the business of Alibaba Group Holding would grow to the size of the world’s fifth-largest economy by 2036. The company, which owns this newspaper, no longer emphasises its size, only the 2 billion customers it still aims to serve.

“The crackdown on tech companies and data usage has had a massive impact,” said Mark Tanner, managing director of research firm China Skinny, adding that the inability to use data as before has limited the ability of Big Tech to exploit their synergies. “It has both restricted what tech companies can do, but also made them sheepish about being too aggressive when trying new initiatives.”

SCMP Series

China’s technology crackdown: a year on

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A year into China’s tech crackdown, the sky is no longer the limit for China’s Big Tech

Under a forceful clampdown by Beijing, China’s tech giants fell in line with new national priorities that emphasised hard technologies and common prosperity As Big Tech companies came under pressure to reform their business models, an era of exceptional growth drew to a close

Under a forceful clampdown by Beijing, China’s tech giants fell in line with new national priorities that emphasised hard technologies and common prosperity

As Big Tech companies came under pressure to reform their business models, an era of exceptional growth drew to a close