China’s Tech Crackdown is Actually Genius, Here’s Why
China’s crack down on exorbitant online tutoring, the poor treatment of workers and regulating its BigTech against wealth inequality and anticompetitive behavior is actually very well organized and very smart. It is short term pain for long-term gain. It’s not a rejection of free market capitalism like some western news media outlets are portraying.
So what’s actually happening? It’s one of the worst days for the $KWEB (down 9% today) (or $YINN) in recent memory. Beijing’s clampdown on the booming private education industry is a valid response to the rising costs of education and competitive educational system in China.
It’s tackling issues for its common people and against its BigTech, in a way that will actually stimulate real competition there, something that hardly exists in the U.S. due to duopolies and their hegemony on talent and AI. Of course, that story is conveniently not being told.
America’s version of capitalism has essentially become corrupt without antitrust regulation or adequate AI and data regulation overall. China’s BigTech stocks are basically experiencing a reset this week:
- Property-management and food-delivery
- Online Tutoring
- BigTech giants who treat their workers poorly
- BigTech giants who abuse their monopoly status
China’s capitalism will be better regulated and this will boost innovation, not hinder it. The proof will be in the decades to follow, no matter how much China is disliked by some western countries and how poor its diplomacy is (it’s nearly as bad as Russia’s).
Since February highs, many Chinese stocks have basically lost half their value on Western markets and in terms of market cap as calculated as Western stocks. That’s not a big issue since these are mostly companies that operate and thrive in China. However even in Hong Kong, the tech crack down is making serious waves for global investors.
Shares in Hong Kong dropped sharply in Monday afternoon trade, wiping out the Hang Seng index’s gains for 2021 once again. They were down more than 4%. Today in the U.S. markets we are seeing similar doom and gloom regarding Chinese stocks as a sector as a panic sell-off occurs.
The online tutoring companies will be not for profit in the future, and their stocks will go down to zero. Didi will likely be forced to delist as they went against Beijing’s authority. Many other corrections will occur, but with that there will be many stocks on discount.
China’s Tech crackdown will be yet another way its companies leap-frog those of the U.S., as a more balance competitive market will be ensured. Anticompetitive practices and corruption are a huge problem in China so this will take a long time to correct.
But with stricter polices Beijing can actually do what Washington cannot, since Silicon Valley’s influence on American politics is far too strong, lobbying is too good and its democratic system is too easy to manipulate. The U.S. doesn’t even have the legal framework to regulate its biggest companies in a contemporary way that makes sense.
China is cracking down on data regulation, data protection, data security and a wide array of unfair practices of its Tech giants from anticompetitive behavior to the unfair treatment of low-wage workers. Beijing’s centralized authority enables it to create a capitalism that’s actually healthier for young people and the rising middle class eventually, though this could take many years.
All 10 industry groups in the MSCI China Index posted declines as the gauge sank 4.4 per cent, the most in 14 months. The fear of the Tech crackdown is enormous stimulated by the likes of CNBC’s Jim Cramer and other hedge funds who can manipulate the news for a dollar.
The truth is American capitalism is not a great system and is very centralized on a corporate side that could lead to serious economic and monetary trouble. Greed is America’s downfall without a doubt and I think in our lifetimes we’ll witness it.
Hong Kong-listed shares of Chinese tech giant Tencent slipped 7.72% on Monday while Alibaba also dropped 6.38% and Meituan fell 13.76%. The Hang Seng Tech index plunged 6.57% on the day to 6,790.96. That’s certainly the appearance of Chinese Tech stock carnage.
Chinese Ed-Tech and online tutoring was very likely in a bubble and very likely abusing the unhealthy pay to play system of Chinese education and skyrocketing declining birthrates. China has a lot of fires to put out with an aging population, floods, corruption and booming technology giants that operate in very shady ways.
Still the vast majority of economic growth in the 21st century will still come out of China, to ignore its companies is rather weird for an investor (in the first half of their lives). China has been by far the most innovative country of the last decade not just in E-commerce, but multiple other industries as well.
To see the West mock China’s version of capitalism is beyond redundant, it’s downright ignorant. The U.S. is a duopoly system without a functioning free-market or political system any longer. It’s entirely manipulated by its financial elite who prey upon the 95%. The Fed, the CDC, the FTC, the FDA (the list goes on) all of these organizations are highly flawed with very suspect policy decisions.
The Fed’s monetary decision during the pandemic only strengthened the monopoly system of American corporate surveillance capitalism, by adding liquidity that enabled them to take even more of a stranglehold on American innovation and competition. It’s difficult to even define how bad that is for America’s economic future and future of capitalism and its dysfunction.
The Fed’s near zero interest rates had a very expected consequence, they would unfairly boost the mega firms. The rest is American future, and how it plays out its going to get ugly for wealth inequality and the decline of American surveillance capitalism. Chinese regulation will boost innovation in China who are already leading in next-gen business models.