Beijing’s Big Tech crackdown stirs a debate over whether it’s hurting or helping the sector compete with US rivals

A debate is under way in China about whether the government’s harsh regulatory crackdown on the country’s Big Tech firms is not only wiping out market value but also undermining their competitiveness with US rivals.

Fang Xindong, one of China’s most influential experts on cyberspace policy and now the director of the Consortium of Internet and Society at the Communication University of Zhejiang, published an article in the Global Times on Tuesday arguing that stronger regulation will help not hinder China’s leading technology companies. The Global Times is a daily tabloid under the People‘s Daily, the Chinese Communist Party’s mouthpiece.

Fang said that the digital economy gap between China and the US has been widening in recent years and that is why China “has had to strengthen rather than weaken antitrust efforts in the internet sector … to spur competition and innovation” so that “China can regain its dynamism and keep pace with the US when it comes to the digital economy”.

The valuations of Chinese tech companies have been falling since 2015 due to their dependence on monopoly positions, lack of innovation and stifled globalisation, Fang argued. In contrast, US firms such as Apple, Amazon, Google, Facebook and Microsoft Corp have grabbed bigger overseas market shares by strengthening their competitive advantages in the core fields of science and technology.

Fang mentioned an article published by “a researcher with an academy of a top Chinese internet firm”, in an apparent reference to a now-censored paper published earlier this month by Tencent Holdings.

Yan Deli, a researcher with the Tencent Research Institute, published an article last Friday warning that Chinese tech firms are falling behind their US counterparts in terms of both revenue and market capitalisation, after a growth period between 2016 and 2018.