Market power of Chinese companies Beijing takes on tech companies

Status: 23.06.2021 12:18 p.m.

Numerous large and valuable tech companies have emerged in China in recent years. The government did its best to promote the rise. In the meantime, however, the feel-good phase is over.

By Steffen Wurzel, ARD-Studio Shanghai A small coffee shop in Shanghai’s Jing’an business district. The shop is popular, a take-away coffee costs the equivalent of two euros, a bargain for this location. The fact that shopkeeper Wu Jialing is still worth it is because he can sell a lot of coffee within a short period of time. Customers pay by smartphone. You simply scan the QR code that is hanging next to the coffee machine. “Paying by app is incredibly fast,” says the shop owner. Serving the cash register, looking for change, washing your hands after contacting the cash register and cash – all of this is eliminated. Correspondingly more sales are possible.

Revolutionized dealing with money

The payment apps Alipay and WeChat-Pay have revolutionized the way money is handled in China within a few years. Instead of struggling with the mostly old-fashioned, complicated and sluggish state banks, most Chinese people now fully rely on the smartphone apps of the domestic fintech companies Ant and Tencent to handle their everyday financial transactions.

It is no longer just about cashless payments. The Alipay app can now also be used to take care of investments, insurance and old-age provision. That too weakens the role of the state banks. “In the area of ​​finance, China has developed from a very backward place to a global pioneer in terms of fintech,” explains Martin Chorzempa of the Peterson Institute for International Economics in Washington. Not only in the financial technology sector have new, powerful large corporations emerged in the country in recent years. There was also a start-up boom in other tech areas, financed partly by state and partly private venture capital.

Government rethinking corporate relationships

Whether online shopping, social media or delivery services: For years, companies such as Alibaba, Bytedance and Meituan have been able to rely on political and sometimes financial support from the government. But in the past few months the climate has changed, says Duncan Clark, head of the management consultancy BDA in the Chinese capital Beijing. “It seems that the government in China is rethinking its relationship with the big tech companies.”

Obviously, some of the big tech companies have grown too big too quickly for the communist leadership – and above all too powerful. The fact that cartel and supervisory authorities are taking action against the market power of large corporations such as Google, Amazon or Facebook is also true in Europe and the USA. But: “What makes the matter special in China are the outstanding position of the Communist Party and the tensions that exist again and again in China: Tensions between the large state corporations supervised by the CP on the one hand and the private sector on the other.” explains Clark.

Ant IPO stopped

These tensions became apparent in China over the past year. In several cases, the state and party leadership slowed down the emerging private companies. Ant, the parent company of the payment and financial services app Alipay, wanted to go public last November, for example. It would have been the largest IPO in world economic history. With him, the Chinese fintech company Ant would have collected around 30 billion euros. But two days before the equity debut in Hong Kong and Shanghai, the government surprisingly stopped the IPO. Ant does not meet certain regulations, it was announced. Further details: none. But in the following weeks it became clear that the cancellation of the Ant IPO probably came from the very top. China’s state and party leadership was apparently bothered by statements by Ant boss Ma Yun, alias Jack Ma, who said in a speech in Shanghai shortly before the planned IPO: “As far as the financial sector is concerned, we are still beginners in China. We do have Big banks – they are like big rivers. But what we mainly need are small lakes, ponds, streams and smaller rivers. ”

Open criticism crosses a red line

China’s financial system, previously dominated by large state banks, harbors risks, Ma criticized. That is unhealthy. A statement that many experts would endorse, but from the point of view of the communist leadership, the previously ubiquitous model manager had crossed a red line with his open criticism of the state banks.

The IPO of his fintech company Ant burst. Ma himself had to withdraw to a large extent from the public.

Several company directors resigned

“At first it was thought that this was all about Jack Ma because he was so open about himself, and about his company Ant,” says management consultant Clark, who has also written a book about the rise of Jack Ma. “But since then we have seen much more extensive crackdown by the authorities against large tech companies in China.”

Other prominent startup founders and tech billionaires resigned. For example, Zhang Yiming, the head of the TikTok parent company Bytedance, and Huang Zheng, who ran the emerging Chinese online shopping group Pinduoduo. The reasons for the resignations are unclear, but most industry observers believe government pressure played a role. “The Communist Party is profiting enormously from the consumption boom that all these tech companies have triggered in China,” Clark analyzes. “But this is not a one-way street. We see a certain double dependency between the CP and the tech companies: Both somehow need each other, but in the end the party says: ‘You need us more.'” It is becoming increasingly clear that China’s leadership is no longer allowing private tech companies to get away with as much as it has before. They too must submit to the Communist Party’s claim to leadership. Criticism will not be tolerated, however subtle it may be.

Lost 25 billion euros in one post

This was recently also experienced at the delivery service group Meituan, against which the antitrust authorities are investigating. Meituan boss Wang Xing posted a historical satirical text that is more than 1000 years old in early May. This text is about criticism of a former Chinese emperor. Some understood the post of the company boss and multi-billionaire as a hidden criticism of today’s rulers. The Meituan boss deleted the posted text, but Meituan’s stock market price plummeted by almost 15 percent, and the company lost around 25 billion euros in value in one fell swoop. The fact that Xing then donated around ten percent of his personal fortune, around 1.8 billion euros, to a charity is understood as an attempt at penance. “Many company bosses in China are currently examining how they can get rid of outstanding titles or even parts of their assets,” reports management consultant Clark. “It’s about behaving as inconspicuously as possible, no longer being the tallest tree in the forest. Because it is the first to be felled.”

The zoo is a happy place to remind people. It is the favorite of children and the memories of adults who have grown up with children. In everyone’s memory of childhood, there is about a picture standing in front of the zoo. Suzhou Safari Park is not far from Suzhou Botanical Garden, and is also located to the south of Suzhou Avenue. Unlike ordinary zoos, the animals here are basically wild, and most of them are huge and rare to see every day. A zoo without giant pandas is not a qualified zoo. You don’t need to go to Sichuan specially. In Suzhou, you can see giant pandas by driving for more than an hour. As long as you have enough patience, you can not only see them walking slowly, but you can also see them flexibly climbing trees and chewing. Eat bamboo. There is no doubt that this is a flexible fat man, don’t underestimate them, these two giant pandas have returned from Japan. As a safari park, one basic requirement is big. Covering an area of ​​1,300 acres, it has raised more than 200 species of rare wild animals from all over the world. It is the wild zoo with the largest area and the largest number of animals in Huaihai Economic Zone. In the elephant area, tourists and elephants are only separated by a railing distance, so close that they are within reach. Watching it stretch out its nose to eat carrots, you will surely get the children’s exclamation. The environment of the zoo is excellent, surrounded by lush green trees and flowers. In this environment, the animals also live very leisurely. The zebra has black and white stripes, shiny and shiny, and it must have been well groomed by the staff in the park. The hometown of giraffes is in the African savannah, and it is very pleasant to see them here. Their long necks are covered with various shades of yellow-brown and white interwoven mesh patterns, and they walk slowly and gracefully on the grass. Their docile and beautiful appearance is very attractive. Most herbivores are docile and more interactive with tourists. As a kid who feeds an animal madman, I have a lot to gain here. Not only can I feed regular animals, but I can also get close to large animals like elephants, giraffes and antelopes. I am excited to think about it. Whether it is an animal that can be called or cannot be called, there are detailed signs in the zoo. Those boring text introductions are connected with the vivid animals in front of them. It is really a biology lesson for the children in happiness. Passing through the beast area, because it is relatively open, the animals are wandering in the area like walking on the street, so tourists have to sit in cage cars instead. The two black bears are fighting intently, and they seem to be able to feel their heavy breathing at such a close distance. Under the sun, people and animals share the sun; the docile camel and the children get to know each other friendly; across the railing, the herbivores share the food in the hands of the children, not to mention the vibrant atmosphere of spring and people’s cheerful laughter. When I come to the zoo, I always have a good mood. The cute alpaca is one of the most popular animals in the zoo. More and more cities have their own safari parks. In Suzhou Safari Park, people don’t have to go to closed and airless venues. They are more in the sun and on the grass, watching elephants walking and orangutans climbing. Panda sleeps… In this zoo full of natural breath, there are many interesting stories happening every day. (You are welcome to like and leave a message in the comment area. For more exciting content, stay tuned / Failed Jinshi)

Bundestag resolutions Higher tobacco tax and more protection for “coffee trips”

Status: 11.06.2021 8:26 a.m.

The Bundestag passed numerous laws into the night. Among other things, the redistribution of EU agricultural subsidies was decided and the rules for so-called coffee trips tightened. Smoking will become more expensive in the future. An overview. The plenary session began on Thursday morning – it was only ended on Friday morning at 0.59 a.m. by Parliament’s Vice-President Wolfgang Kubicki. The agenda in the Bundestag was tough. In the last few weeks before the summer break, the grand coalition is trying to get as many projects as possible through parliament. An overview of the most important resolutions of the night session.

Tobacco tax is rising – and also applies to liquids

Germany’s smokers are asked to pay more. The Bundestag decided that the tobacco tax for a pack of 20 cigarettes will rise by an average of ten cents in the coming year. A year later, a further ten cents will be added, in 2025 and 2026 another 15 cents per pack will be added. Vaping e-cigarettes and tobacco heaters is also taxed higher. So-called liquids for use in e-cigarettes are to be subject to tobacco tax in the future; up to now they have been subject to sales tax. An additional tax is to be introduced for heated tobacco, so that in future there will be a taxation similar to that of cigarettes.

More consumer protection with “coffee trips” and online marketplaces

The sale of insurance, home loan and savings contracts, medical products and dietary supplements on so-called coffee trips will be prohibited in the future. In addition, the participants of such trips must be better informed about their rights by the organizer. The fine for violations will be increased from 1,000 euros to 10,000 euros. The new law also provides for a regulation according to which consumers may not be asked to pay before the end of the day on which the contract is signed for contracts that have come about as part of an unsolicited visit to the home. In the future, online marketplaces such as Amazon or eBay will have to disclose the essential criteria for their rankings of search results. They must also inform consumers whether the potential contracting parties are entrepreneurs or private individuals. Rankings in search results must not be influenced by hidden advertising or hidden payments. The platforms must also explain how they ensure the authenticity of user reviews. Fake reviews are expressly prohibited in the future. Advertising in online networks should be more recognizable in the future – this applies to influencers, for example. Labeling is not necessary if the advertiser has not received any money or similar consideration from a company.

Protection of package tours

Consumer protection is also being strengthened for package tours: a multi-million dollar fund will in future protect package travelers from possible damage in the event of bankruptcies. Tour operators are to pay 750 million euros into the fund. The fund is also intended to prevent the state from having to step in when tour operators go bankrupt. The new fund is to guarantee prepayments by customers, the repatriation of stranded holidaymakers and their accommodation until they are returned. It basically replaces the previous protection through insurance or bank guarantees. The background to this is the bankruptcy of the travel company Thomas Cook in September 2019.

Fight against tax havens and money laundering

Capital flight to so-called tax havens is expected to become less attractive in the future. If the Federal Council also approves the new regulation, operating and advertising costs for cross-border transactions can only be claimed for tax purposes if the respective states adhere to international tax standards. In addition, regulations on withholding tax, which are incurred on investment income abroad, are being tightened. The basis is a “black list” of the EU, in which “non-cooperative countries and areas” are listed, which from Brussels’ point of view facilitate tax evasion or unfair tax competition. There are twelve countries such as Panama, Fiji and the Seychelles. However, this list is controversial – mainly because it does not contain any tax havens within the EU. In order to combat money laundering and terrorist financing more effectively, the German transparency register will also be expanded and better linked internationally. Additional reporting obligations for the economy should make it easier to track down letterbox companies and to identify the people behind nested company structures. At the same time, this is intended to protect reputable companies from coming into contact with questionable business partners and criminal machinations. In addition, the investigators in Germany should work more closely with the authorities in other EU countries.

Compensation for phasing out nuclear power

The Bundestag also gave the green light for the compensation of energy companies for the accelerated nuclear phase-out. The adopted amendment to the Atomic Energy Act empowers the responsible federal ministries to conclude a public law contract “on the payment of financial compensation” which ends “all national and international legal disputes”. In March, after years of dispute with the energy companies RWE, Vattenfall, EnBW and E.on, the federal government reached an agreement on compensation: Germany pays the companies compensation totaling a good 2.4 billion euros. This compensates for residual amounts of electricity that the companies can no longer generate in their own plants, as well as investments that the companies made in reliance on the nuclear power plant life extension that came into force in 2010.

Distribution of EU agricultural subsidies approved

The Bundestag also approved the federal government’s legislative package for the distribution of EU grants for German farmers. In the coming years, this will increasingly be based on criteria such as environmental protection and animal welfare. From 2023, a quarter of Brussels direct payments will be linked to certain ecological requirements. For example, there is additional money for not using pesticides or for more nature conservation in meadows and pastures. In total, it is about six billion euros that Germany’s farmers will receive annually from the EU until 2027. So far, the distribution of such funds has largely been based on the area of ​​the farms – regardless of the impact on the environment and landscape. With the reform, small and medium-sized businesses are to receive significantly more support. Young farmers up to the age of 40 also receive more money. In addition, there will in future be a premium for grazing animal owners who have so far benefited little from the area premium. The Federal Cabinet had already adopted the new requirements for the national structure of the Common European Agricultural Policy (GAP) in April. At EU level, however, there is still a struggle about how the reform of the EU agricultural policy should be designed. The aim is to reach an agreement by the end of June. The legislative package that has now been passed, which is aimed at a Agricultural Ministers’ Conference Compromise goes back, then changed again. Previously, the Bundestag had, among other things the powers of the protection of the constitution expanded . In the course of the day, the parliament wants to pass a number of other laws of the grand coalition – for example on care reform and on Compliance with human rights in global supply chains .