Alibaba and the 40 officials

Can Chinese big tech learn to love Big Brother?

The government’s crackdown eases, but the damage has been done

Jack Ma, china’s most famous entrepreneur, has not been one to mince his words about the role of government and business. At a meeting with corporate leaders in Bali in 2018 he told the audience that it is not the government that makes business and innovation happen. That is the work of entrepreneurs, he insisted: "They have the ideas and dreams.”

A crackdown that began in late 2020 on China’s consumer-internet champions has made such inspiring sentiments harder to sustain. For the first time the leading firms’ sales growth is slowing. Alibaba’s revenues rose by just 10% in the final three months of 2021, the slowest quarterly expansion since going public in 2014. Tencent, an internet-services and video-game Goliath, notched up 8% revenue growth in the same period, its slowest rate as a public company (see chart 1). jd.com, another e-commerce group, announced solid revenues but Richard Liu, its founder and chairman, resigned in April, one of many high-profile entrepreneurs to do so in the past few years. Local media reported that Meituan, a delivery giant, plans to axe up to 20% of its employees in its core business units despite its sales rising by 30%. Shares in those four companies, along with Pinduoduo, one more e-commerce group, have shed about $1.5trn in value since February last year (see chart 2).

The techlash is moving into a new phase. The sorry state of the Chinese economy has forced regulators to delay further planned corporate punishment in the hope that the industry can help recharge growth. In the most positive signal for tech in over a year, the central government said on April 29th that it planned to normalise regulation and to "promote the healthy development of the platform economy”. The share prices of several firms, including Alibaba, soared at the news. But some new rules have been merely put off rather than withdrawn, according to the Wall Street Journal. And much damage has already been done. The entrepreneurs behind China's biggest tech successes have come to a grim reckoning: that because of government meddling they will be unable to innovate, and may even become boring.