The author is a friend who is familiar with the inner workings of the political establishment in China. He requested to be anonymous. Any comments/feedback can be routed through hello@mworks.asia. 

The market of Chinese tech stocks has been brutal in the past couple of days. Especially for the so called education tech.

All these companies were legitimately registered and operating legally – with a document from the government the whole sector is practically decimated. Investors need to re-think how to conduct business in China for sure.

In the past, people have doubted the Chinese government’s execution power. Many policies were launched but not implemented, or enforced. The speed how things are rolled out, and implemented, now truly scared the investors. Many will stay away from Chinese tech for a while, I think.

Bold, fundamental adjustments

However, what exactly happened? We see different bloggers (and substackers) writing different interpretations. Many of them paint the Communist Party of China as power hungry and determined to rein in big tech going out of control.

The truth is, and I can say this of fair certainty, that tech is really not the target of current set of regulatory actions.

These actions, such as data security, such as education, are parts of larger adjustments that the government is engineering.

For example, education is about the family planning policy adjustment, which you might know as the 3-child policy. The crackdown of excessive burden on school children is part of the concerted effort to encourage more child births.

Similarly, data security is part of national security especially in the current geopolitical context. You might think that the Chinese government is preparing for cold war, but I guess they have been making such preparations for a while.

Happen to stand in the way 

All these have fundamentally nothing to do with tech in the country. However, tech in China has grown so pervasive that it is in every aspect of life and business in China.

So when actions are taken by the government, tech companies are often impacted the most, as they are just there.

The recent government actions are bold, fundamental societal adjustments. They are meant to resolve some larger societal problems. Tech companies just happen to stand in the way. 

If you can see the bigger objective behind, you will understand things better, and become more adept at adjusting to them.

Thanks for reading The Low Down (TLD), the blog by the team at Momentum Works. Got a different perspective or have a burning opinion to share? Let us know at hello@mworks.asia.