It is a very significant political event that “DDT” has been taken down and purged by Beijing authorities just three days after its launch in the United States. If we use the analogy of an earthquake, we can say that it is an earthquake of intensity eight or higher. It has been more than a week since the incident occurred, but the aftershocks are still ongoing. A quick look at the mainstream and business media’s interpretation of the incident shows that most of them still emphasize the regulatory implications of the incident, i.e., that Beijing’s purge of “DDT” is an attempt to tighten regulation of Internet companies involved in data security, while “DDT” is This interpretation has the effect of downplaying the incident. This interpretation smacks of downplaying the political implications of the incident. Of course, there are those who see the seriousness of the DDT purge, pointing out that it is a watershed moment for capital flows in and out of China, with China set to lose tens of trillions of dollars in capital flows over the next decade.
If it was just a matter of data security, there would be no need for Drip to take the huge risk of disobeying the Beijing authorities by going public in collusion with Wall Street while Xi Jinping is busy with the Communist Party’s centennial “celebration. Moreover, if the Beijing authorities were only trying to solve the data security problem, there would have been no need to make the conflict between the regulatory authorities and the management of DDT public in such a reckless manner that would have dealt an irreversible blow to the confidence of overseas investors in China.
So what is the political message that the Beijing authorities are trying to send by purging DDT, regardless of the cost and public humiliation? In the context of the U.S.-China confrontation, the message should be quite clear: Beijing wants to tell China’s rich and powerful that “no one is going to run away. This is a clear escalation of the purge of Jack Ma, because by purging Jack Ma, it is telling the rich and powerful to keep their mouths shut and not challenge Xi Jinping’s personal authority. Why are the Beijing authorities now using the “DDT” purge to send the message that “no one will run”? I believe the direct reason is that DDT is so determined and bold as to go public before July 1. It represents a powerful undercurrent that is very dangerous for the authorities: a large number of rich and powerful people have already made up their minds to abandon ship and flee.
The broader context for this undercurrent is that the situation in the U.S.-China confrontation has changed dramatically over the past six months, beyond the imagination of many people, especially the rich and powerful in China. Simply put, the U.S. is not as bad as they originally thought, especially the economy, which is rapidly emerging from the shadow of the epidemic, while China’s situation, especially its economic dynamism, is not as strong and unafraid of a U.S. blow as originally thought. The Chinese powerful and wealthy once generally believed that the United States could not live without China and that the world could not live without China, but the developments in recent months, especially the effectiveness of Biden’s determination and strategy to encircle China, have seriously shaken the confidence of the Chinese rich and powerful in the Chinese economy, and also in Xi Jinping.
And confidence in the Chinese economy and in Xi Jinping is the very reason why the Beijing authorities had once shouted for more openness in finance. Under these circumstances, not only is it impossible to open up finance more, but decoupling is inevitable. In the view of the Beijing authorities, the executives of DDT would not have failed to see this situation and should have known how to “take care of the big picture”. The “victory flight”.
For Washington, this incident further exposes Xi’s political woes at home, and at the same time facilitates the acceleration of U.S.-China financial decoupling at the hands of Beijing authorities. There is a group of investors in the U.S. who have been unable to shed their addiction to making Chinese cross-money, causing headaches for Washington policymakers. In this case, Beijing has played the role of the villain who hurt the U.S. investors by purging the “dropshipping”. In future negotiations with Beijing, U.S. investors will be more aligned with Washington’s position, while the rich and powerful Chinese, who have lost their wealth and moreover their freedom to leave the country, will have less and less room to bide their time or stay out of it, and will have to see Xi Jinping as an implacable enemy.