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China’s changing technology sector

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The giant Alibaba, the Chinese alter ego of Amazon, has still not raised the bar. On April 12, 2021, the Chinese competition authority imposed a record fine of 2.3 billion euros on it, the culmination of the authorities’ takeover of the “tech” sector.

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They wanted to bring order to markets that often resemble the Wild West: Alibaba was asked, for example, to no longer apply different prices on its platform according to customers… “The Chinese government behaves like a businessman: it lets the sectors innovate without restrictions and then, once it works, it regulates”, says Augustin Missoffe, an entrepreneur in Shanghai for ten years.

Capitalizations halved

For other activities, the Communist Party wished to redirect research and investments. Tencent, a web and video game specialist, has lost many users since the government strictly regulated the use of online games for minors. The power has also opposed its creation of a giant in the live streaming of video games. Result, on April 7, Tencent announced that it was ending the activities of its dedicated platform, a sort of local Twitch, a time presented as one of the most promising projects in the field.

Result, for a year, the BATX (Baidu, Alibaba, Tencent, Xiaomi), these Chinese flagships of the technology sector often compared to the American Gafam, have all lost half of their capitalization on the Hong Kong Stock Exchange.

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Why such a turn of the screw, even though Chinese growth should record its worst score since the beginning of the 1990s, excluding the effect of the health crisis?

Two weights, two measures

“One of Xi Jinping’s problems is that young people are interested in sectors like the web or video games, rather than basic research,” analysis Mary-Françoise Renard, author of China in the global economy (1). The aim is to direct young people and graduates towards sectors identified as promising. This does not prevent us from remaining pragmatic. “There are ‘double standards’ in the video game industrynotes Camille Gaujacq, project manager at Daxue Consulting, which supports companies that deploy in China. Tencent faces restrictions in the domestic market, but not to develop games sold internationally. »

“Five times more patents than Americans”

“China is changing in terms of the sectors on which it focuses its efforts”, explains John Egan, director of Atelier, a subsidiary of BNP Paribas dedicated to the new technologies sector. “Just look at where it files the most patents: biology, nanoparticles, fuel cells… In these sectors, China files up to five times more patents than the Americans, and the gap is widening. »

And if certain sectors seem neglected lately, it is because they are already largely mature. “In virtual reality or the autonomous car, there have already been a lot of investments made”, recalls John Egan.

A dynamic ecosystem that must also evolve

Power can also rely on a dynamic entrepreneurial sector. If the number of unicorns, these young companies valued over a billion dollars, has not yet caught up with that of the United States, China is firmly anchored in second place. “The start-up sector has ramped up, but it’s been done in a haphazard way, explains Mary-Françoise Renard. In recent years, entrepreneurs have instead favored short-term profitable projects, on the web or in advertising. »

However, Chinese tech is facing more structural obstacles that are weighing on its growth. “These companies have fewer reserves of growth and customers to reach, particularly in the domestic market, continues Camille Gaujacq. There is also an evolution on the side of working conditions, where they are invited to stop the “996”, that is to say to make their employees work from 9 a.m. in the morning to 9 a.m. in the evening, six days a week. . The big tech companies are going there backwards. »

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Shanghai still confined

Most of Shanghai’s 25 million residents were still confined to their homes on Tuesday (April 12), although residents of some neighborhoods in “low risk” were able to leave their homes, provided that no new cases are detected in their area. The health ministry reported more than 23,000 new positive cases in the city.

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Worried about the ” welfare “ of American citizens, the United States announced that it had ordered non-essential employees of its consulate to leave the city. China is “very dissatisfied and firmly opposed to any instrumentalization and politicization” of this evacuation, lambasted a spokesperson for Chinese diplomacy in front of the press.

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