Recently, two cases of fines in China have attracted the attention of the outside world. One was the case of Jin Deqiang, a truck driver in Hebei who was fined 2,000 yuan by a Tangshan highway checkpoint and died in a moment of grief and anger after drinking pesticide. In another case, Alibaba was fined more than 18 billion RMB by the Chinese government for monopoly.
Alibaba is one of the world’s largest so-called “Internet technology companies”, with annual profits of tens of billions of dollars, and the fine of more than 18 billion yuan is a trivial matter. However, Jin Deqiang could only earn 7,000 to 8,000 a month, which is quite hard to cope with the basic life, and after his suicide, he only had 7,000 yuan in the bank, which shows that his life was quite difficult.
To put it mildly, these two fines are not much related, but in fact they are both related to technology in China. The truck driver was fined because the Beidou positioning system on his truck was disconnected, while Alibaba was fined for monopolizing internet services.
Alibaba’s most profitable business, which comes from Alipay, was basically the only one in China, especially before Tencent Pay started. The e-commerce industry in China’s network thus thrived and Alibaba made big money.
After 2000 A.D., the global Internet entered a new era and online commerce became very popular, but mainland China was losing ground at that time. One important reason is the lack of network payment means. Overseas online commerce, early relied on credit card payments, but there are few credit cards in mainland China, and due to the lack of social credit, fraud is rampant, so the lack of Internet payment means, for a long time it is difficult to promote online commerce in mainland China.
According to Jack Ma’s own words, in 2006 he attended an Internet conference overseas and suddenly had an experience, so he called his company subordinates and asked them to immediately follow the paypal model and launch Alibaba’s own network payment system. In a later speech, he emphasized that his instructions at the time were that if it caused legal problems, he was responsible for going to jail. His argument was that it was only later that Alibaba’s spurt of growth and the rapid development of China’s Internet commerce industry came about.
Jack Ma did not go to jail later. Although Alibaba copied Paypal, which touched off China’s government-run monopoly of the financial industry and caused a backlash from China’s government-run banks, he never ran into a lawsuit in this regard and was not sued by financial institutions or banks. Although Alibaba broke the rules of Chinese financial management, the CBRC gave way.
Anyone who understands the characteristics of the Chinese Communist Party in mainland China knows very well that the Communist Party gave way to Alibaba, not because of Ma’s determination to “go to jail” or even to appreciate Ma’s vision of developing Internet commerce (because at that time many Internet companies understood that the bottleneck limiting the development of Internet commerce in mainland China was the lack of payment systems), but because Ma had a large group of political forces behind him that could make the Chinese Communist Party bureaucracy give way.
This group of forces is the CCP’s crony capitalism. At the top of the list are the sons and grandsons of Jiang Zemin. Of course it was not only Jiang Zemin’s family, but the shareholders behind Alibaba at the time included the family members of almost all senior CCP politburo members and above, including Xi Jinping’s family. Xi Jinping’s brother-in-law, who later withdrew from Alibaba as Xi Jinping formally ascended to the top of the CCP’s power. But most of the other senior officials did not, and this is the real core of Alibaba’s “monopoly”. In other words, without this group of political forces, there would be no Alibaba, and there would be no question of Alibaba’s monopoly.
The second kind of monopoly also involves the same power, which is the closed market. Without the Chinese Communist Party’s blocking of foreign credit cards, foreign online payment tools, and foreign e-commerce companies, Alibaba would not have risen so easily.
The biggest problem with monopolies is that they control markets and prices, causing social resources to be allocated in a less efficient way, and ultimately hindering the development of society as a whole.
The fundamental reason for the inefficient allocation of social resources in mainland China over the years is not corporate monopoly, but power monopoly. The example of Alibaba shows that it is not capital but power behind Alibaba, so it is the process of monopoly power monopolizing capital and then monopolizing the market. This is the inevitable result of the totalitarian system.
Jack Ma is definitely an excellent businessman and very smart, but without the monopolistic political power behind him, he could never have completed Alibaba and turned a small company of a few million into the world’s largest online technology company in just over a decade.
After the Chinese Communist Party announced the imposition of a fine of more than 18 billion RMB on Alibaba, Alibaba issued a statement saying that it accepts the punishment, but also that it accepts the lesson and expresses gratitude. The foreign media is puzzled by this. It is too strange that the government fined you 18 billion and then you are happy and have to thank him. If the U.S. government fined Google or Amazon billions of dollars, the two companies would not only have to fight with the U.S. government, but also spend money on advertising and express their discontent everywhere. Alibaba’s performance, in their view, is simply unbelievable.
If they understood the process of Alibaba’s origins and the actual status of Chinese companies, they would probably be able to understand why. Mainland Chinese enterprises are not enterprises in the general sense of the Western world. They are not a separate social unit, but a link in a chain of power, and all enterprises must rely on power to exist and survive. Therefore, there is no article in the Chinese constitution that says “private property is sacrosanct”, because this is a totalitarian communist society, a remnant of the slavery system of “nothing under heaven is king’s land”.
About half of the business activities of Chinese entrepreneurs have to do with how to deal with power.
I have a friend who used to work in real estate on the mainland, and when we talked on the phone, he would always look so happy and make a lot of money. Sometimes he would say with great regret that he was so close to getting a super project this time, so close that he could be among the national rich. Then in about 2014, his attitude changed and he told me that several of the big bosses who got those super projects back then were basically in jail. The reason is simple, those big projects are the result of power operations, until the power struggle intensified, the provincial figures behind the horse, the following so-called big project boss, one can not escape.
So, let’s put Alibaba’s statement back together and look at it this way: Beijing’s monopoly of power has provided us with space for development and expelled countless competitors for us, even though we developed in an illegal way back then, we still got Beijing’s support, without the blessing of this power, we simply could not have developed. Beijing’s power is unlimited and completely life-or-death. So now the power in Beijing is asking us to change, asking us to give money, instead of arresting us and seizing all the company’s property, it is letting us continue to survive, and we are very grateful for that, very grateful.
Isn’t that a bit more logical and reasonable. To be honest, the BAT in mainland China, which is now competing with the U.S. for AI, are three large technology innovation companies in mainland China, Baidu, Alibaba and Tencent. After Alibaba, Beijing wants to investigate the monopoly of Tencent, which has a major monopoly on music and games. In fact, the structure of these companies is very, very close and similar to Alibaba.
A few days ago, former U.S. Secretary of State Mike Pompeo and former White House National Security Advisor Robert O’Brien held a Nixon Seminer where they asked Peter Thiel, one of Silicon Valley’s most famous venture capitalists, to attend. Thiel talked a lot about the U.S.-China technology competition.
He said that Americans are good at innovation and creation and the Chinese are good at stealing. It’s not very nice to say steal, some of my friends don’t like it, so let’s translate steal to learn, it’s better. What he means is that in the past few decades, almost all the innovation and creation of science and technology were made by the Americans, and China is playing on the basis of the American innovation and perfecting it into a more Chinese market-oriented.
Let’s think about whether this is the case. Almost all of China’s scientific and technological achievements in recent years have been in this mode.
At the seminar, Pompeo asked if China could start to create its own and not have to “learn” from the United States anymore. Thiel said, “No, because creation is a culture and a social mechanism, and China does not seem to have formed such a culture and mechanism.
Most of the books on corporate innovation and creativity in the United States talk about several characteristics: first, clear goals, which is fine, China has goals; second, authoritative figures undermine innovation; third, innovation and entrepreneurship must have a “constructive confrontation” environment (constructive confrontation), that is, there is no “constructive confrontation”. Third, there must be a “constructive confrontation” environment for innovation and entrepreneurship (constructive confrontation), that is, without conflict, without questioning, without argument, there can be no innovation; fourth, it is to encourage experimentation, this encouragement is not verbal, you do a good job, keep trying, go ahead and try, it is not like this, but there are actual social mechanisms, such as venture capital; fifth, and probably the most important, is to encourage failure.
That’s probably what Thiel meant when he said that China has not yet established an innovation mechanism and culture, as he pointed out.
Some of these China already has, such as encouraging experimentation, and China already has its own venture capital system. But some of it is not there yet, and some of it may not be there at all.
Remember that Peter Drucker, the world’s most famous business management guru, once said that central planning is the greatest enemy of the innovation economy. And the supposed greatest strength of the Chinese Communist system is central planning. Then again, the core of the authoritarian system is the presence of authoritative figures, and China is the same model across the system, with authoritative figures not just at one national level, but at all levels below. There is also constructive conflict, encouragement and tolerance of different ideas and opinions, and encouragement of failure, all of which are hardwired into China’s innovation and entrepreneurship system and may not be likely to improve at all.
There are, of course, many other areas of STI, but in the U.S. environment, most authors focus on the above points.
So Pompeo, O’Brien, and Thiel, talk about the issue of Chinese students. There are 330,000 Chinese students in the U.S. Think about the fact that the U.S. population is just over 300 million and 330,000 Chinese students, meaning that there is one Chinese student in a thousand people. Many of the Chinese students are highly intelligent and smart, with very solid basic science training at universities in mainland China, but never innovation and entrepreneurship training, which takes place in U.S. institutions, including universities, research institutes and large companies.
The reason that Chinese students were talked about in the U.S. forum discussing national security is that Americans believe that this could be a long-term competition involving not only political-military-diplomatic, but also economic, and most importantly scientific and technological, especially innovative technologies. In this case, we can conclude that Chinese students related to science will get fewer and fewer opportunities to come to the United States.
Going back to Alibaba, the “technology company” in mainland China that has emerged in recent years, what will happen in the future? First, the monopoly of power behind them is getting worse and worse, second, they lack a real innovation mechanism of their own, and third, the opportunities to “learn” from the United States are likely to become fewer and more difficult. Therefore, the future of technology companies in mainland China will become more and more difficult, and there may not be any new unicorn giants anymore.
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