For Western investors, China’s regulatory crackdown on superstar companies such as Alibaba Group Holding Ltd., Tencent Holdings Ltd. and Didi Global Inc. must appear suicidal. What better way to undermine growth than to bring some of the world’s most successful tech companies to their knees?
President Xi Jinping would not agree. According to him, the technology comes in two varieties: pleasant have, and need to have. Social media, e-commerce and other mainstream internet companies are pleasant to have, but in his opinion, national greatness does not depend on having the best discussion groups or carpools in the world.
In contrast, Xi believes the country Needs have semiconductors, electric car batteries, commercial aircraft and advanced telecommunications equipment to maintain China’s manufacturing prowess, avoid deindustrialization, and achieve autonomy from overseas suppliers. So even as the Chinese Communist Party launches a multi-pronged regulatory attack on mainstream Internet companies, it continues to pay manufacturers’ subsidies, protection, and “buy Chinese” mandates.
Xi described these differential priorities in a speech published by the Qiushi party newspaper last year. He acknowledged that the online economy was booming and said China “must accelerate the construction of the digital economy, digital society and digital government,” according to a translation by researchers affiliated with Georgetown University. . “At the same time, it must be recognized that the real economy is the foundation, and the various manufacturing industries cannot be abandoned.”
Historically, as most countries develop, manufacturing replaces agriculture and then services replaces manufacturing. In recent decades, the share of manufacturing in gross domestic product in the most advanced economies has declined, especially in the United States and Great Britain, which have seen swathes of industrial jobs migrate. abroad, especially to China.