China's Tech Crackdown: Its about Control, not Consumers or Competition!
aswathdamodaran.substack.com
For the last two decades, China has been the dominant story for both the global economy and capital markets, as the country's immense growth and infrastructure investments have sustained commodity prices, and altered the balance of world economic power. That growth has come (or should have come) with the recognition that in almost every venture in China, public or private, the Chinese government is not just a player, but often the key player determining the venture's success and failure. Afraid of being shut out of the biggest, growth market in the world, companies operating in China have accepted limits and constraints that they would fight in almost every other part of the world, including in their own domestic markets. That includes not just foreign companies, seeking to operate in China, but domestic companies, who, while benefiting from Beijing's backing, knew how quickly the iron fist could replace the velvet glove, in their dealings with the government. In the last year or so, Chinese tech companies, including shining stars like Alibaba, Tencent and Didi have also woken up to this recognition, and investors have had to readjust their expectations for these companies. In this post, I will begin by tracing out the rise of China to global economic power, and then focus on Chinese tech companies, with the intent of examining how government actions and inactions can affect value and pricing.
China's Tech Crackdown: Its about Control, not Consumers or Competition!
China's Tech Crackdown: Its about Control…
China's Tech Crackdown: Its about Control, not Consumers or Competition!
For the last two decades, China has been the dominant story for both the global economy and capital markets, as the country's immense growth and infrastructure investments have sustained commodity prices, and altered the balance of world economic power. That growth has come (or should have come) with the recognition that in almost every venture in China, public or private, the Chinese government is not just a player, but often the key player determining the venture's success and failure. Afraid of being shut out of the biggest, growth market in the world, companies operating in China have accepted limits and constraints that they would fight in almost every other part of the world, including in their own domestic markets. That includes not just foreign companies, seeking to operate in China, but domestic companies, who, while benefiting from Beijing's backing, knew how quickly the iron fist could replace the velvet glove, in their dealings with the government. In the last year or so, Chinese tech companies, including shining stars like Alibaba, Tencent and Didi have also woken up to this recognition, and investors have had to readjust their expectations for these companies. In this post, I will begin by tracing out the rise of China to global economic power, and then focus on Chinese tech companies, with the intent of examining how government actions and inactions can affect value and pricing.