How to put toothpaste back into the tube

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Good news! Were No talking about crypto, Elon Musk or SaaS multipliers today. We are also not talking about IPOs, global venture capital trends and the like. Instead, we’ll talk about how to put toothpaste back into the tube. Sounds fun? Let’s go to.

technology industry of China

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With Ant’s IPO has been withdrawn and the Chinese Communist Party has had an unprecedented period of regulatory action in 2021, you’ve probably heard less about Chinese technology. That’s because the companies that tended to make the most headlines in foreign media were the likes of Alibaba, ByteDance and the like, tech companies that affected a lot of people, including people outside the country’s national borders.

The Chinese government has decided that such companies have too much influence and therefore need to be cut. It meant, in different ways, decapitation of the commercial education technology sector, social media regulationeffective reduction of foreign listings, punitive data reviews, restrictions on video games, as well as a long pause in new titles, new rules regarding algorithms and more.

Overwhelmed by bureaucracy, Chinese startups are giving up on their mainland dreams

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After a period of relative freedom to innovate, compete and, yes, act anti-competitively at times, China’s domestic tech industry entered 2022 in a very different state than Chinese tech companies had in 2020; but the transition to remote work and the like has been global, and for our purposes today we care more about changes in the regulatory environment in particular.)

The result of the regulation, full nelson control from above, was probably about what you would expect. Some recent headlines for the fragrance:

They should paint a fairly clear picture of market sentiment towards repression. In monetary terms, the value of many Chinese technology companies has plummeted. After peaking at over $300 per share at the end of 2020, Alibaba is now worth less than $100 per share. Didi, who caught between the Chinese government and American markets after the IPO, its shares peaked at over $18 per share. Today it costs less than $2 per share.

Stories began to emerge of layoffs and other misfortunes for Chinese tech companies. A few more titles for context:

Given that this was pretty much what anyone with a pulse might expect from the Chinese government throwing its absolute control around like gravity on a roller coaster, pushing to remake one of its key economic engines by autocratic fiat in a short period of time. time, you’re probably not surprised. And yet it seems that the Chinese government, at least to some extent!

How do we know this? Well, watch:

The context here is that while the rest of the world is basically figuring out how to get rid of COVID, the Chinese government is isolating hundreds of millions of its citizens in pursuit of the unattainable goal of zero cases of COVID-19. (The government has previously touted its success in containing the pandemic as evidence of its superiority, a stance that makes any backtracking more difficult.) The result of the lockdowns and drastic contraction of the local tech industry has been, surprisingly, economic malaise.

Not that the Chinese government was going to accept it. Pointing out that outpacing US economic growth is a prioritydebt spending on infrastructure back on the tabletogether with more real estate speculationand, it seems, some easing of the flood rules, which its domestic technology market has been forced to endure without complaint.

Good luck?

Can the Chinese government bring back toothpaste in a tube? We will find out, but if I were an investor or founder, I would not build inside the country. Of course, this is a big market, but not one you can count on. More when we get China VC data for Q2 2022.


Credit: techcrunch.com /

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