There’s a saying in China that people fear fame like pigs fear growing fat. Become well known for the wrong reasons and you may well end up on the chopping block. Successful entrepreneurs are particularly at risk. The various rich lists that rank the entrepreneurs by wealth each year have a colloquial name: sha zhu bang: “kill pigs list.”
With the Chinese Communist Party’s 20th party congress approaching in the fall of 2022, China’s ultra-wealthy have an additional reason to be on high alert. Not only will new ranks of senior leadership be elevated, but Xi Jinping will likely be confirmed as leader for at least another term — if not for life. China’s billionaires, seen as occupying rival centers of power and influence in the country, are being put in their place.
Over the last year, China has seen a struggle between state regulators and entrepreneurs as the government tries to bring technology companies increasingly in line with the goals of the Chinese Communist Party. Now some of China’s richest entrepreneurs have embraced philanthropy in a bid to stave off this unwelcome government attention.
When Alibaba founder Jack Ma gave a speech last October harshly criticizing China’s regulatory system, it came as a surprise to many. The critique he levelled at financial regulators was so scathing that his advisers reportedly tried to persuade him to tone it down before he got on the stage. Instead, as one source told Reuters, the speech he delivered was like a “punch in their faces.”
Ma told the assembled members of China’s financial, regulatory, and political establishment that the regulatory system was stifling innovation and needed to be reformed to fuel growth. Chinese banks, Ma said, operated with a “pawnshop” mentality. “To innovate without risks is to kill innovation,” he said. “There’s no innovation without risks in the world.”
In giving the speech, Ma was taking a big risk himself. His words were a clear signal to regulators that tech companies like Ant Group would fiercely resist any imposition of red tape on them, no matter how reasonable. The speech reportedly infuriated the leadership in Beijing and prompted Xi to personally call off Ant Group’s impending $34 billion initial public offering. Part of the reason for the drastic move, according to people involved, was to prevent billionaires and other power figures who invested in Ant Group from getting even richer.
Ma’s speech, and Xi’s reaction to it, served as a tipping point for regulators who had been laying the groundwork for action against the country’s bustling internet sector for some time. Just months earlier, China’s antitrust authority, the State Administration for Market Regulation, had proposed the first major revisions to the country’s 2008 anti-monopoly law in over a decade, including provisions for large internet platforms.
China’s regulatory agencies had treated the country’s tech giants with a light touch for most of their history, favoring the pursuit of technological dominance and economic prosperity over the need to regulate their growing monopoly power. But that easy ride has come to an end. Tasked with “tackling monopolies” and “preventing disordered capital expansion,” the regulators have set their sights on a fundamental restructuring of the tech companies to ensure that they remain focused on technological innovation and align themselves even more closely with the strategic goals of the Chinese Communist Party.
As I argue elsewhere, the COVID-19 pandemic may have been a short-term boon to many of China’s technology giants, but for the Chinese Communist Party, the pandemic and the U.S.-Chinese trade war were a stark reminder of how dependent they remain on foreign technology. Whether they like it or not, China’s tech companies are now being enlisted in what Beijing’s top policy official, Jiang Jinquan, calls a “whole country” approach to reduce reliance on foreign technologies.
The tech crackdown comes at the same time as efforts in the West to rein in companies such as Facebook and Google have gained momentum. The efforts are motivated by some similar worries: Regulators in the United States, Europe, and China all cite concerns that the technology giants have built market power that stifles competition, misuses consumer data, and violates consumer rights. But, for China’s regulators, the need to discipline their country’s tech companies goes beyond those concerns to a broader sense that the companies’ interests aren’t sufficiently lined up with the Chinese Communist Party’s industrial policy or its goal of achieving technological self-sufficiency.
The campaign has continued apace in 2021 with an intensifying series of antitrust crackdowns and data security probes into the major tech firms; Alibaba and the food delivery giant Meituan were fined for anti-monopoly violations, community group buying firms were penalized for price dumping, and Didi Global had its ride-hailing app dumped from app stores days after its own $4.4 billion initial public offering in New York.
As for the tech executives themselves, Xi has made it clear what he expects from them. A 2017 directive called for measures to “strengthen the sense of loyalty” among entrepreneurs and to strengthen the authority of the party leadership over them. In July 2020, Xi told a symposium of entrepreneurs that they should emulate “patriotic entrepreneurs” from Chinese history. Another set of directives released in September 2020 said that “ideological guidance” should be strengthened to “create a core group of private sector leaders who can be relied upon during critical times.”
Most recently, on Aug. 18, Xi presided over a meeting of the Communist Party’s Central Committee for Financial and Economic Affairs at which officials outlined plans to adjust excessive income and “encourage high-income groups and enterprises to give back to society more.”
The tech executives have seen the writing on the wall. One day after Xi emphasized the virtue of philanthropy, tech conglomerate Tencent announced it had created a 50 billion yuan ($7.7 billion) fund dedicated to “common prosperity.” Pony Ma, the founder of Tencent, had already pledged $2 billion of his own shares to charity while his company said it would spend 50 billion yuan ($7.7 billion) in social and environmental initiatives. Wang Xing, the founder of Meituan, said he, too, was donating a $2.3 billion stake in his company to a foundation focused on education and science.
That was followed by Zhang Yiming, the 38-year-old founder of ByteDance, the owner and operator of TikTok, who promised to spend 500 million yuan ($77.3 million) of his personal wealth to improve local education during a visit to his alma mater in his hometown in Fujian province. Most recently, Lei Jun, the founder of smartphone maker Xiaomi, donated shares worth over $2 billion to two foundations.
The sudden outburst of philanthropic activity is part of an effort to court public opinion and burnish their reputations before they find themselves in deep trouble. Some, like ByteDance’s Zhang, Ant Group’s chief executive Simon Hu, and Colin Huang at Pinduoduo have even decided to move completely out of the limelight by stepping down from their positions at the top of their companies.
The Chinese Communist Party under Xi is going back to basics. The laissez-faire approach to the country’s tech billionaires is out, and calls for more social equality or “common prosperity” are in. The goal, Xi hopes, is to show once and for all how “Socialism with Chinese Characteristics” is superior to Western capitalism.
For chastened billionaires like Jack Ma, that means acting less like an American entrepreneur and more like one from the People’s Republic of China. The days of flashy and outspoken leadership styles are over. Even Ma knows by now that too much fame invites a fall just as a fattened pig invites the butcher.