How three tech experts make sense of China’s regulatory challenges and innovations

From 2020 to 2021, China took sweeping regulatory actions against their biggest tech players. The government canceled the IPO of Ant Group, Alibaba’s financial arm, and cracked down on the ride-sharing app Didi and online tutoring. To understand how these regulations affect the mainland economy and tech industry, the FCC held a panel discussion with three Chinese tech industry experts: HKU Law’s Angela Zhang, The Information’s Juro Osawa, and venture capitalist Michael Chow.

The three panellists sat alongside FCC Journalist Governor Joe Pan and shared their views on China’s changing regulatory landscape.

“What I have seen over the past several years is just so striking in that a lot of those things changed very quickly,” said Osawa when commenting on the seemingly overnight changes in mainland’s tech policies.

These actions shook Chinese stocks and caused investors (primarily from the US) to pull out and reinvest their money elsewhere. The dip in revenue was further exacerbated by China’s strict zero-Covid policies which further isolated the country’s finances from the rest of the world.

“This is kind of like a wakeup call for the top policy makers,” said Zhang.

As one of the leading academics in Hong Kong that specialises in antitrust law, Zhang found herself answering calls from journalists covering China’s tech crackdown after the Ant Group incident. Before then, she felt relatively anonymous and was quickly thrust into the media spotlight with appearances on Bloomberg and other financial news outlets.

Through further writing and research, most notably her latest book High Wire (2024), Zhang was able to summarise her model of China’s legal system, which functions as a three-part process where political hierarchy creates market volatility that leads to increased fragility across the entire techno-legal ecosystem.

“Very often, you’ll see [that] these regulatory measures were well-intentioned, but they generate a lot of side effects,” she explained.

Using this model, Zhang demonstrated how a feedback loop is created, leading to even more volatility and less accountability or confidence in China’s tech investment.

“It took a long time for the regulators or the top policy makers to realize the problem. By the time they address the problem, it’s often too late and that’s why I call the Chinese regulatory outcome tends to be very fragile,” she summarised.

Also, Zhang’s model has the capability to be applied to other areas besides technology.

As an experienced venture capital investor, Chow was asked by the panel if Zhang’s model can or has already been applied in his daily work. He noted the government’s continued efforts against corruption as the primary driver of market volatility — not the government’s rigid structure and control.

“Volatility comes whether there’s a hierarchy or not. I think it’s more to do with what’s happening in today’s China. I think it’s a lot to do with the corruption-fighting, and that’s why you see a lot of tightening of power. They don’t tend to give the so-called authority to the lower ranks anymore because of corruption,” Chow said.

Watch the full panel discussion on our YouTube channel: