Suspending Listings and Regulating... Platform Companies Becoming a 'Nuisance' to G2 [Im Juhyung's Tech Talk]

Chinese Government's Consecutive Big Tech Regulations
Platform Companies Exercising Powerful Monopoly
'Disciplining' Before Threatening the Communist Party
Concerns Over Amazon, Facebook Monopolies in the US
G2 Takes on 'Big Tech Taming'

Alibaba headquarters in Hangzhou, China / Photo by Yonhap News

[Asia Economy Reporter Lim Juhyung] Recently, the Chinese government has been imposing consecutive sanctions targeting internet platform companies. Since last year, starting with Alibaba, regulations have tightened on internet-based businesses such as Didi Chuxing and private education platforms, causing investors to withdraw.

However, the regulatory crackdown is not limited to Chinese platform companies. In the United States, which possesses the world's largest IT industry, signs of a full-scale regulatory drive against so-called 'Big Tech' companies are also emerging. This has led to skepticism that tech companies, which once flourished easily behind shallow regulatory barriers, are now facing a precarious situation.

The Chinese government's crackdown on platform companies began with Alibaba, China's largest e-commerce platform.

Jack Ma, the founder and former chairman of Alibaba, criticized at the fintech (digital finance) forum 'Bund Summit' held in Shanghai on October 24 last year, saying, "While the West has built a credit-based financial system, China has not moved beyond a pawnshop model." Shortly after, he mysteriously disappeared from the public eye. This sparked suspicions that "Jack Ma had incurred the Communist Party's displeasure."

Subsequently, the Chinese government directly and indirectly sanctioned several platform companies. When the ride-sharing platform 'Didi Chuxing' attempted an initial public offering (IPO) on the U.S. stock market, it was regulated citing national security concerns. Recently, regulations on private education platforms caused IT company stock prices to plummet sharply.

Due to the ongoing regulatory risks, major investors in China have also begun to withdraw. According to the U.S. financial media Wall Street Journal (WSJ), SoftBank, a Japanese tech investment firm, stated that it would suspend further investments in Chinese companies until the regulatory risks subside, citing the unpredictability of Chinese authorities' regulations.

Masayoshi Son, Chairman of SoftBank Group, recently stated that additional investments will be put on hold until the regulatory risks in China subside. / Photo by Yonhap News

Why has the Chinese government started regulating platform companies? The Japanese business magazine 'Nikkei Asia' points out that platform companies have become too large in the Chinese market. In China, where digital industry regulations are generally shallow, a few giant Big Tech companies dominate the market. The government is believed to be 'disciplining' them before their power becomes a threat to the Communist Party.

In China, where the concept of separating finance and industry is weak, companies like Alibaba, WeChat, and Ant Group have expanded beyond simple internet platforms into retail, services, and financial markets. Additionally, due to China's communist nature, the internet is largely isolated from other countries, making it difficult for foreign companies to enter. This means domestic Big Tech companies have enormous monopolistic power.

However, Big Tech becoming a 'thorn in the side' is not happening only in China. In the United States, which has the world's largest IT industry, a regulatory drive against Big Tech companies is also underway.

Earlier, the Biden administration appointed three key figures last month to design regulations against Big Tech monopolistic practices. Jonathan Kanter, head of the Department of Justice's Antitrust Division; Lina Khan, Chair of the Federal Trade Commission; and Tim Wu, Special Advisor to the White House National Economic Council?all are well-known opponents of Big Tech monopolies such as Apple, Amazon, and Facebook.

The U.S. is also deeply concerned about Big Tech's monopolistic power. For example, Amazon, a representative U.S. e-commerce company, not only dominates retail but also holds the world's largest market share in cloud services, which is considered the core of today's digital industry. It is fair to say that almost no U.S. company operates without going through Amazon's distribution network and server infrastructure.

Lina Khan, Chair of the U.S. Federal Trade Commission / Photo by Yonhap News

Not only the Biden administration but also Congress is pushing Big Tech regulation through legislation. In June, the U.S. House of Representatives passed five antitrust bills targeting Big Tech. These bills focus on restricting Big Tech companies from acquiring competitors and limiting the use of personal data of platform users. There is also the 'Ending Platform Monopolies Act,' which applies only to large platform companies and can block specific business operations of Big Tech firms.

Both the U.S. and China, which possess the world's largest gross domestic product (GDP) and IT companies, have embarked on full-scale 'Big Tech taming.' Although the details and intensity of regulations differ, the ultimate goal of 'reducing Big Tech's monopolistic power' is similar.

In the past, Big Tech companies could flourish freely in the relatively new field of the internet, but a much more challenging environment is expected to be created going forward.

This content was produced with the assistance of AI translation services.