Talk at the Library: Prepared for All Types of Weather – Tech Entrepreneurs in China

ZURICH, September 9, 2021 — Duncan Clark, one of the leading experts on China’s technology sector, talks about Chinese tech sector regulations in a conversation with Asia Society Switzerland's Nico Luchsinger. (35 min., 50 sec.)

Until recently, big tech companies and entrepreneurs in China enjoyed a substantial amount of leeway. However, late last year, that changed quite dramatically: authorities prevented the IPO of Ant Financial in the very last minute, and since then, numerous companies and platforms operating in China have been fined or are under review.

What is the reason for these developments? Can one speak of a “crackdown”, or are Chinese regulators simply doing their job and ensuring healthy competition? What are the implications for entrepreneurs in China today? We asked Duncan Clark, one of the leading experts on China’s technology sector. Here are our four key take-aways.

Our Key Takeaways

It’s all about governance and long-term stability of the party
The Chinese government (and most governments elsewhere in the world) is trying to become increasingly digital. However, it has had to recognize that the “big tech companies got there first”. As Duncan pointed out, the problem is that these companies belong to the private sector, and were becoming, in the eyes of the Chinese government, uncomfortably powerful. Until recently, the amount of leeway entrepreneurs had was “stunning”, but now, new regulatory bodies are emerging in China and efforts to regulate big tech companies are becoming more coordinated. Duncan believes that these developments are all about upholding long-term stability of the party – anything that diminishes or seems to diminish that is subject to severe regulations.

China is doing things that many people have thought about in terms of regulating big tech
Duncan named the example of the recent crack-down on the gaming industry in China. The government recently announced restrictions on the amount of time players under the age of 18 can spend on online games: it is now limited to an hour of play on Fridays, weekends and holidays. This story has started to gain traction outside of China, and parents, organizations and media all around the globe are starting to say: “We need to learn from China about their regulations in the tech sector”. As Duncan pointed out, this is not just about the Chinese specifics of regulations, but are global issues of big tech: In some ways, the Chinese government is addressing fears of big tech which the world is facing, too.

Being a tech entrepreneur in China today means being prepared for all kinds of weather
There was a long period where regulators were on the back foot, and entrepreneurs were increasingly under the impression that they were “immune” and “knew how to play the game”. Now, things have changed, and entrepreneurs are being “hit by regulations left and right”. It is unclear in which direction they are headed in the future, but as Duncan pointed out: Many people are “zen” about it – entrepreneurs will adapt.

There are opportunities arising from this crack-down
Basically, very large players are being told to “stop being so dominant” – which in turn gives rise to new opportunities for smaller companies. Just like in Silicon Valley, there was a risk of crushing competition within the Chinese tech sector, with large companies buying up smaller companies, which may now have become harder or less attractive. Interestingly, there has also been a growing resentment within the Chinese society over the power of these big tech companies – by bringing them under scrutiny, the government is cleverly playing into these sentiments. One should not underestimate the level of support these government policies have in society and even in the new generation of entrepreneurs, who are frustrated about how things are currently.

In conclusion: Being an entrepreneur in China today means playing a “three-dimensional chess game”: entrepreneurs need to be careful about their position with their customers, the society and the government – “it’s a very nuanced game to be a leading tech figure in China today”, Duncan eloquently concluded.

Duncan Clark is a recognized expert on China’s technology sector. An early advisor to China Internet entrepreneurs, Duncan is the author of Alibaba: The House That Jack Ma Built. Published in over 35 languages, Alibaba was named Book of the Year by The Economist and shortlisted as Financial Times/McKinsey Business Book of the Year. Duncan is chairman of the investment advisory firm BDA China, employing over 150 mainland Chinese professionals in Beijing. Duncan founded BDA in 1994 after four years as an investment banker with Morgan Stanley in London and Hong Kong. A seed investor in technology ventures including AppAnnie and Radish Fiction, Duncan is a global trustee of the Asia Society, founding member of Asia Society Japan, independent director of Bangkok Bank (China), Vice-Chair of the China-Britain Business Council and serves on the advisory boards of the Pictet Digital thematic mutual fund and WildAid.org, working to end the trade of illegal wildlife products in our lifetime. A Visiting Senior Fellow at the London School of Economics, his alma mater, and previously a Visiting Scholar at Stanford University, Duncan was awarded an OBE for services to UK-China trade. Raised in the UK, US and France, Duncan is fluent in French, Chinese and is currently studying Japanese.