New government guidelines for managing China’s internet platform industry show Beijing will increasingly guide the research, development and investment activities of domestic private tech firms to achieve national development goals while using regulations as enforcement tools. Even foreign tech firms in China will be highly incentivized to focus their activities on technologies central to the government’s economic plans. On Jan. 18, China’s economic policy planner, the National Development and Reform Commission — along with China’s market regulator, cyberspace agency, taxation authority, the central bank and four ministries — published the “Opinions on the Healthy and Sustainable Development of the Platform Economy” (Opinions). The Opinions succinctly laid out the Chinese Communist Party’s (CCP) plans to deepen supervision of the platform economy and encourage innovation in technologies critical to national development plans.

• The Opinions call for bolstering state supervision, including more transparency of platform operations, more scrutiny on advertising and digital payments, support of third-party groups to police internet algorithms for fairness, the establishment of remote supervision methods like monitoring and “online discovery,” and streamlined regulatory enforcement across departments that are less disruptive to platform activities. They also urge platforms to protect the rights of gig economy workers, not wield data or capital for “unfair competition” (based on Beijing’s interpretation), and take central guidance on reasonable fees and traffic support for small high-quality merchants. 
• On the matter of innovation, the Opinions encourage platform companies to increase research and development (R&D) investment and achieve breakthroughs in artificial intelligence (AI), cloud computing and blockchain technologies, as well as help build a digital and zero-carbon industrial chain, form Chinese consortia on the architecture of the industrial internet and methods of sharing algorithm sets and AI tools, develop cross-border e-commerce, marketize data in key industries, promote intelligent supply chains, boost smart tech consumption (especially among the elderly), and use digital tools to transform agriculture.

The Opinions give more detail to and connect core tenets of the many tech regulations China released in 2021, increasing these laws’ utility in supervising markets and coercing tech firms to align their investment priorities with Beijing’s. China’s symbiotic Cybersecurity Law, Data Security Law, and Personal Information and Protection Law all came into effect in Nov. 2021, with some key impacts including government oversight over cross-border data flows, handling of private user information and cybersecurity staffing at key tech firms. Most of these new tech regulations enable Beijing to reassert regulatory and political control over internet companies and the troves of data they sit on. They also aim to increase competition from smaller market actors and boost labor protections to avoid potential social unrest from a large underclass of underpaid innovators and gig workers.

• In August, Chinese regulators imposed new ideological requirements on internet algorithms for advertising and product placement in an aim to level the playing field for platform providers and reassert control over propaganda venues. Earlier this month, China also enacted regulations on mobile applications to ensure app operators created a “positive” networking environment and avoided “fake news.”
• In September, the CCP published directives on regulating online culture titled "Opinions on Strengthening the Construction of Network Civilization.” The document called for educating youth against unhealthy trends (like succumbing to Western ideologies), mobilizing the masses to patrol “uncivilized cyber phenomena,” promoting socialism and publicizing moral models of network activity based on CCP preferences.

Recent business decisions by major tech firms reveal that Beijing’s existing supervision was already influencing investment and expansion behaviors. As China’s regulatory crackdown continues to grow in scope of companies and depth of activities, recent actions by tech players show state supervision and innovation preferences are driving key business decisions. On Jan. 18, Chinese e-commerce giant JD.com announced it was partnering with Canada’s Shopify to boost cross-border e-commerce in a deal that would join Shopify’s merchants with JD.com’s over 500 million Chinese customers. And on Jan. 19, sources cited by the South China Morning Post suggested ByteDance — owner of the short-form video app TikTok and a company privately valued at $350 billion — had also closed its department in charge of strategic investments, including mergers and acquisitions, amid government scrutiny Beijing about the “irrational expansion of capital” (i.e. companies growing too big, too fast for Beijing’s liking). 

• Beijing’s regulatory campaign against the tech sector has only intensified since November 2020, when regulators canceled fintech giant Ant Group’s $37 billion IPO. 
• In April 2021, Chinese regulators leveled a record $2.75 billion fine against another e-commerce giant Alibaba, followed by a state intelligence probe against ride-hailing app Didi after its New York IPO in July and a November freeze on app releases for e-commerce and entertainment giant Tencent. 

The new directives for regulating China’s platform economy indicate that the CCP’s guiding role in the tech sector’s innovation and investment activities will be strong for the foreseeable future, and regulators will be well equipped to pressure firms to that end. Chinese regulators will be more empowered via collaboration with other departments and larger staff on anti-monopoly agencies, and they may also be better organized in their oversight and guidance of big tech. Though Beijing could attempt to reduce the disruptions to corporate operations that these regulatory punishments bring, authorities have so far signaled that oversight and market guidance are far more important than business continuity. Most importantly, whether through incentives (like subsidies or privileged access to contracts) or punishments (like heavy fines, red tape or state probes into data practices), the CCP will be more empowered to coerce major tech companies to innovate in line with China’s plans for national development and global leadership in fields like AI, quantum computing and smart industry. This will, in turn, likely see more Chinese tech companies establish innovation collaborations with government agencies and seek overseas markets. Compared with the early 2010s, there will also likely be fewer frenzies of domestic mergers and acquisitions (M&A) from tech giants like Alibaba and Tencent.