SYLVIE DOUGLIS, BYLINE: NPR.
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STACEY VANEK SMITH, HOST:
This is THE INDICATOR FROM PLANET MONEY. I'm Stacey Vanek Smith.
DARIAN WOODS, HOST:
And I am Darian Woods. Stacey, today, we're talking big business in China and the Chinese government's crackdown on its big tech companies. And to get you in the zone, to really understand what's happening, I have a poem to read you.
VANEK SMITH: OK.
WOODS: It's a poem that you could say cost $37 billion. It's called "The Book Burning Pit."
VANEK SMITH: "The Book Burning Pit."
WOODS: It's about censorship.
As bamboo and silk smoke clears, the emperor's achievements for nothing. The Hangu Pass and the Yellow River vainly guard...
So this poem is over 1,100 years old.
VANEK SMITH: Oh.
WOODS: And it was posted online in May by a tech magnate called Wang Xing.
VANEK SMITH: OK.
WOODS: He's the CEO of a Chinese tech company called Meituan. And the poem is about an emperor trying to suppress an uprising. So it's seen by some to be critical of the Chinese government right now cracking down on big businesses. Wang Xing denied it, of course, but that day, the shares of his company, Meituan, dropped 7%. And they went on to lose a total of about $37 billion in value over the next few weeks.
VANEK SMITH: I mean, Darian, I have definitely regretted certain tweets that I have tweeted in my day but never, like, a $37 billion regret. That's never happened, which is good because I do not have $37 billion.
WOODS: (Laughter). You know, I think this is a striking example of how everyone in China is on a knife edge right now, speculating about what the government will do next to big tech companies. And this is a kind of a new development. Like, in a lot of countries around the world, there is this rethink going on about how big and how powerful tech companies should be. The only difference with China is that that rethinking is leading to sweeping action.
VANEK SMITH: After the break, antitrust, Chinese style.
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VANEK SMITH: Over the last year or so, China has really started to crack down on big companies. And part of what's going on here is that the government is kind of trying to put tech billionaires in their place, like power struggles. Privacy and data security is another big element.
WOODS: But leaving aside power struggles and data security, there is a real question China is grappling with, which the U.S. is, too. And it belongs on an economics whiteboard. Are tech companies behaving like monopolies? And is this bad for the economy?
ANGELA ZHANG: Hi. Hello, Darian. How are you?
WOODS: We called up Angela Zhang. She is an associate law professor at the University of Hong Kong. And she's the author of the book "Chinese Antitrust Exceptionalism."
VANEK SMITH: And to tell the story of Chinese antitrust, we wanted to focus on one company. So we chose this Chinese tech giant called Meituan. It's kind of like a super app, sort of like the Chinese equivalent of DoorDash, Yelp, Airbnb all rolled into one.
WOODS: Have you ever used Meituan yourself?
ZHANG: Actually, when I was in China, in mainland China, I use it. It was incredibly fast. I mean, it's super convenient. It's incredibly efficient.
VANEK SMITH: Angela ordered some spicy Sichuan food on a visit to Beijing. She said it was steaming hot when it arrived, totally delicious. She had no complaints.
WOODS: But she's mindful that there are downsides to dominant tech companies like Meituan. We asked her about how she thinks through antitrust.
ZHANG: Not all monopolies are bad. But often, monopolies are not good. A bad monopoly is that exploit consumers and exclude competitors. So antitrust regulate those type of naughty behavior.
WOODS: Naughty behavior. What kind of naughty behavior what would a monopoly get into sometimes?
ZHANG: Well, I mean, just think about platforms like Meituan, right? I mean, so it was recently accused of charging consumers different prices when they order food.
VANEK SMITH: So charging customers different prices. That is one possible sign of a monopoly. If a company can charge different people different amounts, maybe based on what it knows about those people, that could be an example of a company exploiting its dominance.
WOODS: What are some other examples of things that monopolies can do that can make people worse off?
ZHANG: Another example in the Meituan case is not only can it exploit consumers. It can also exploit the other side, which are the suppliers to the platform.
WOODS: And there have also been similar complaints like this in the U.S. about food delivery companies like GrubHub and DoorDash.
ZHANG: The restaurants complain a lot about these practices. And then they don't have any alternatives because Meituan was really the dominant firm in the market.
VANEK SMITH: So exploiting consumers, exploiting suppliers - those are a couple of different kinds of naughty behaviors that Angela says the Chinese government has been looking into. Another type of monopolistic behavior is something called exclusionary practices. So when restaurants want to partner with Meituan, the company will say, OK, but a condition to using us is you can only use us. You are only allowed to use Meituan. Other platforms do the same thing. And that is stifling competition in China. In the long run, Angela says, this kind of behavior really could harm consumers.
WOODS: That's kind of the rough framework that Angela has for thinking about these tech monopolies. So we asked her, over the last decade or so, what has the Chinese government's approach to antitrust been? And she said that because the government was trying to promote innovation and entrepreneurship, it's been pretty relaxed for tech companies, similar to the U.S. I mean, think about Facebook buying Instagram and WhatsApp - few barriers, just like for the Chinese tech companies.
ZHANG: They make all this acquisition over the years without going through any of the antitrust reviews.
WOODS: Were any mergers or acquisitions vetted and stopped?
ZHANG: None of them. The regulators just don't want to touch those deals. And so as a result, the economy becomes very concentrated.
VANEK SMITH: There are now just two major tech companies in China that are involved in almost all major digital commerce, Alibaba and Tencent. These are some of the biggest companies in the world, led by some of the richest people in the world. And just like in the U.S., the political mood towards these companies has shifted from championing them to starting to really worry about their dominance.
ZHANG: Well, things started to change right at the point when Jack Ma make the speech.
WOODS: Jack Ma is the flamboyant founder of Alibaba. And in the speech, which happened in October 2020, Jack criticized the government's approach to regulation. And that did not, of course, go over well with the Chinese government. It was a huge moment. The regulators called him in for a meeting. One of the world's largest stock market launches that Jack had been planning - it got canceled. Jack vanished from the public view. And people were speculating that he had disappeared completely. And while Jack did return a few months later, it's still a mystery where he went during that time. But what we do know is that the moment marked the start of a huge wave of pain for Chinese tech companies and billionaires, the same way that that Meituan's CEO, Wang Xing, got caught up in when he posted that poem.
VANEK SMITH: Meanwhile, here in the U.S., a lot of lawmakers are talking about some kind of crackdown or regulation on the big software companies. But so far, things have been pretty mild. I mean, just think about when Mark Zuckerberg, the CEO of Facebook, went before Congress. And, you know, people sort of asked him some questions and, in a couple of cases, asked for his help in both understanding how the Internet worked and in crafting regulation going forward.
WOODS: Yeah, I mean, it's quite a contrast, really. And you could argue that antitrust regulation is a tool for the Chinese government to cut down outspoken billionaires to size, and it probably is. But Angela says that the Chinese government does also have serious antitrust concerns with these tech platforms.
ZHANG: The government is worried that this platform will reduce the choices for consumers, reduce innovation and eventually harm consumer welfare.
WOODS: The main difference between China and the U.S., Angela says, is how far and fast China is willing and able to go to discipline the platforms with punishments, fines, saying, you can't list on an app store and the very real possibility of the CEOs going to jail
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VANEK SMITH: This episode of THE INDICATOR was produced by Jamila Huxtable and Michael He. It was fact-checked by Kaitlyn Nicholas (ph). and engineered by Isaac Rodrigues. Kate Concannon edits the show. And THE INDICATOR is a production of NPR.
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