Dan Wang Explains What China's Tech Crackdown Is Really All About

to say the least. Yeah, so obviously, um, being in the Bloomberg news room, it's been kind of NonStop this summer. So we're talking about the crackdowns of course that um, the Chinese Party has announced on various sectors of its economy. Uh. It started with targeting at financial back in October. There was a lot of theorizing about why ant lots of

people focusing on the data that AT controls. But then the summer it kind of just spun into a new level of intensity and we saw China cracking down on for profit education companies. We saw it coming after d D, the ride hailing app, saying that they had to you know, improve their labor laws and also that Beijing, the City of Beijing might actually take them over and kind of make them a state owned enterprise or something like that.

It's it's basically been NonStop and everyone is trying to figure out why now and what exactly is China trying to do. Yeah, that is sort of like the I mean you just sort of listed all of these things, and each one of them on their own have been extraordinary.

Like the d D thing was crazy. It's of course that's like they're there like uber type company, And wasn't that like that was like it like three days of their U S I p O. Wasn't it like it was literally the I p O like out of Tuesday or something, and then the following one day there was like, oh,

we're cracking down. And then some of the companies like these online are these uh private education companies, some of which are listening to us, like their business models are like basically going to zero right there, like your band, there's you can't do what you do. I don't know if it's total zeros, but it has been extraordinary. But I still don't feel like I understand, like what is the the end goal here? Yeah, so I guess two

things on that topic. So you know you mentioned, Um, the d D crackdown happens soon after the I p O. A lot of people are pointing out that the seems like China is sort of shooting itself in the foot. It's going after some of its most successful companies. But on the other hand, you know, a lot of what China says it's doing is about improving quality of life. So it doesn't want people to spend loads of money

on their education and have to be you know, really competitive. Um, it doesn't want well, it wants to protect workers rights, um for for d D drivers and things like that. It wants to protect user data, you know, similar comments that we've heard in the West when it comes to Facebook and Google. Right. So, but of course people are very distrustful of those messages. Um. There's lots and lots of theories going around about what exactly is going on.

And today I am very happy to say that we are going to be bringing back a long time odd lots guests. We're going to be speaking with Dan Wong. He's a technology analyst over at Gavicale drab Eck Economics, and of course he's been on the show a couple of times, one of the best commentators in my opinion when it comes to China's tech sector. So really the

perfect person can't wait? Okay, uh Dan, welcome back. Well it's not for nothing, Tracy that Odd Lots is my favorite podcast and Tracy my Joe my favorite podcast host. Too kind. And so I'm trying to think, Um, where to begin? Um, why don't we start? Well, why don't we begin at the beginning? Um, you know the crackdown on Aunt Financial in October. What was your initial thought about that one? Because I remember when when it happened,

people kind of thought this was an idiosyncratic event. Um, you know, there was something specific about and Financial, an offshoot of Ali Baba and which is of course founded by Jack Ma and so people thought this was all about that one company and maybe that one person. But you know, almost a year later, it seems that there's a wider message here. I think the narrative has evolved since the early days of h and Financial, when about just before the US election, the financials I p O

was halted by the Chinese authorities. And so if we draw the line from late October through to June and

now presently we're speaking in September. The first big shock was the financial I p O and then the second big shock was the d D I p O. Has Joe mentioned, UM, you know, facing a fairly severe regulatory crackdown in terms of having its app pulled from app stores about a couple of days after its I p O. And so I think when we thought about those two events in isolation, um it was a really big shock and we wondered, you know, what exactly was going on.

But as this regulatory campaign escalated, as we saw more industries get taken on, I think paradoxically, I think I am at least a little bit more aware that there is um more of a regulatory theme around governing these internet giants. And so if I wanted to, um, you know, put things into different buckets, I would put the first bucket.

The first bucket would be made up of UH and financial and the D D I p O s in which the Chinese authorities were highly reactive, in which they couldn't really control the timelines because these timelines were controlled by the companies in terms of the I p O s, and so they had to crack down pretty quickly and pretty hard. And then I would cite something like, um, you know, a second bucket made up of items, um, that are much better studied. Uh, and so in terms

of something like the online education crackdown. But we've read from the Chinese Ministry of Education is that the Ministry of Education surveyed around nineteen education firms, around seven hundred thousand children and then over hundred and fifty thou parents before they issued these pretty traconian regulations that more or less decapitated the online education sect. Or we can also think of other antitrust issues here that have affected companies

like Ali Baba. We might also be able to think of some things like video games, in which President season Paying has been talking about video games for over the last four to five years. So I think there is a little bit of, you know, maybe two or three different buckets here. The first bucket are the purely reactive stuff. There's a second bucket of antitrust issues prominently faced by

Ali Baba and mayelon camping. And then there's a longer term issue with video games and online education, in which the party state has decided, well, maybe we don't like these things very much. So already this was really helpful, and you know, obviously coming at this, looking at this from an American American perspective, it's always tempting to try

to draw analogies. And when you look at sort of big tech in the US, you see a lot of politicians on both sides of the aisle with their plants about Facebook and Amazon, they're kind of the complaints are different, some overlap, but there's, you know, complaints about the power

that they have. And then you have a lot of regulatory actions that take place in the US and Europe, and these lawsuits that never seek to that never really seemed to amount to anything, like maybe there'll be a big fine or a bunch of state's attorneys general like to one of the companies, and then four years later they have to make some change whatever, but it doesn't

really seem to do anything. Is the angst about the power of tech slash big tech in China comparable, with the difference being that, well, they could do something about it, whereas politicians and regulators here can't get their act together. Or is the angst something different? I think it is more a question of degrees. So first I agree with you, that's the ferocity that the Chinese Party state um brought to bear on against these companies is you know, nothing

like but the West, do you know? As best as I can tell, there are some irritating lawsuits that big tech is facing in the US, and then some minor finds, you know, somewhat big finds that they are challenging in the European Union. But there hasn't been a really really substantial actions here, whereas the Chinese have acted much more severely. Now, I think I would cite, you know, um, you know, in terms of the type of ankst that the Chinese have.

I would want to put a framework of maybe four big slogans of the moment as well as one theme of the moment. And here I'm really drawing on the work of my Dragonomics colleagues, and I think the four big slogans that we've identified our first building the rule of law, that this is something President se Jingping has talked about over the last three or four years, requires a pretty comprehensive regulatory framework for dealing with a different

company needs. Second, I would cite dual circulation, which is includes a theme to improve the functioning of domestic markets. Third, I would say, um, there's something of family values here. In which the country just really want UM families to

have many more children. And then the big theme that we have been thinking about, the fourth slogan that we've been thinking about right now is something called common Prosperity, which has really exploded in the pages of state media, which is, in our view, something reduce inequality as well

as social division. And so, you know, if you think about these broad interlocking programs trying to make it easier for families to have children, trying to make the marketplace that are regulated arguably more fair, to reduce these antitrust issues, UM, to have a common prosperity, which is uh means to you know, stop the wealthy from getting more wealthy, UM, and then to improve I think what they call it is an olive shaped distribution and economic distribution that's shaped

like an olive UM. You know. I think the tech companies are all implicated by each of these slogans, but it doesn't mean that tech companies are the will be the only companies that will be implicated by each of these slogans. I think right now the focus is on tech because tech companies are implicated by all four of these slogans. Now, one more big theme is the idea that I think Beijing has decided that, well, we are

going to prioritize certain technologies over others. Now, I previously worked in California, and I haven't always bought into the idea that consumer internet companies like Facebook or Snap really represent the peak of our technological civilization, that they are the shortest signs that we live in some sort of

technologically accelerating civilization. Sort of lamented that among my smartest peers who have graduated from very good schools are much more keen work in hedge funds or asset allocation or the consumer internet companies instead of much harder technologies. And I think this is something that has upset Beijing as well.

You know, one very key line from a major speech that Presidency gave last year was that, well, we can tell that digitization is really important, as we've seen over COVID, but what we must never do is to lose our manufacturing sectors because the real economy is absolutely paramount. And as I've said multiple times on hot lots before, the Chinese government really wants semiconductors, semiconductors, white body aircraft, life sciences.

These are much more the technologies that Beijing is targeting, and I think Beijing has sent this a signal, and US in this case initiated a very severe cracknown to say, online education. While we're not sure that's as important as technology as for something, for example, something like chemicals video games. Children really shouldn't be playing too many of those, Um, they should be working in clean rooms for semi conductors instead.

I'm exaggerating a little bit there, but I think that is a little bit more of the theme that China wants to do regulate the market better and then to prioritize the right source of technologies. Yeah, and I remember, UM, a couple of days after one of the crackdown announcements, or maybe it was on the day, we did see Chinese listed semiconductor stocks just absolutely spiking, So there was

almost a rotation out of consumer tech and into semiconductors. UM. And I have more questions about what exactly China is trying to do when it comes to its tech industry and overall economy. But before we get there, you know, you mentioned some of the key phrases from party speeches.

Common prosperity, disorderly spansion of capital has been another one that's come up a lot, And I know you're on the record saying that you read a lot of the party speeches, probably all of them, and you also go through like all the party the official party reading materials, like you know, the magazines they produce and things like that, and a lot of investors don't tend to do that. So I guess my question is, like, should we be

paying attention to party speak? Were there hints of this in party speeches or things that she had said previously? And do you think that the crackdowns are sort of changing the behavior of investors in the sense that they're going to be paying more attention going forward? Cracy doesn't everyone read the party's main theory magazine, till Translation Seeking Truth as many of us do. Um Seeking Truth is

a magazine that comes out twice a month. UM. Last year, I've read every issue and right now and still continuing the exercise. It's a beautifully laid out of magazine. It is features these thick pages, well printed pictures, uh, and a lot of the best writers in the party state. And every time I flipped through it, UM, you know, it's always led by a major speech or major essay by the General Secretary of the Communist Party C. Kinking in a fund that's distinct the rest of the h

in the magazines. And so if you haven't had the pleasure of holding one of these things, you know, I recommend it just for the tactile experience alone. UM. So you know I did read, um, you know, every one of MS speeches um Gintilshire last year, which isn't as arduous and exercise as you might think. You know, one

speech every two weeks, which usually isn't terribly long. He mixes a great deal of party speak along with some pretty straightforward and frank phrases that are easily compared priscible and so you know that is the signature style. It's not actually that much work, I think to engage with one speech every two weeks, and I think this is

something that more of us should be doing. And really for me, the exercise that um, you know, for me, the meaning of the exercise is that it's really important to see what the party state engages as priorities at the moment. So for example, you know, if they have five issues dedicated on party history, well you know, maybe they're not thinking about for example, you know, some other big projects related to the environment, for example, and so

getting a sense of what the major priorities are. You know, I think that is a decent way of getting there. It would be very reluctant to say that, you know, reading all of the party documents, reading Kosha, reading the People's Daily is an effective way to do uh investing. I think, you know, there are millions of these articles a day, can't possibly read them all. And there's also a lot of noise, um mixed in with these signals now,

you know, when it comes to online education. I think what we found noteworthy was that President Senior Ping has mentioning this a couple of years ago. In fact, it's published in his big compendium, The Governance of China, Volume three, UM. And so you know, this has been a signal for a while, and the signals really started to escalate over the last couple of months. And so I think that is a place where we could have had a bit of a fairer warning. The state media gave us fair warning, um,

if we only chose to engage it. But that's not to say that, um, you know, we have to be pouring over every People's Daily article. UM. But I think you know, it is worth keeping keeping in mind what's going on, what the party is saying, what the party is saying to itself, it's cadres UH and um, you know the broader world. I think there's something interesting you said. You mentioned that they took the survey. I think you said like seventeen thousand education companies and that hundreds of

thousands of UH students. You know, the US is characterized as a democracy where there is a sort of direct feedback mechanism between the voters and the government and theory,

and obviously China is not characterized as such. But these things, these actions that they take, such as going after the education companies or such as going after video game playing, say various things like that to improve like family values, as you put it, is there like this basic like sort of like feedback mechanism where even though there aren't elections per se as we understand them in the US, you still have this sort of like either direct or

indirect response from the impulses that parents and families expressed towards what gets UH turned into government law. There are two mains of feedback mechanisms, UM that the party state are really engages. UM. So First, it maintains these open channels of petitioning where you can see um, you know, people usually elderly people lining up to know, voice their grievances and then tell you know, the government, UM what

they're they're they're they're mad about. I mean usually these things are higher prices of hects or higher prices of gas or something. But you know that is you know, one of these things that are out there. And then the other is UM that the party maintains these active uh you know, groups of people that are actively soliciting people's opinions. And so this is UM. The survey was something that the Ministry of Education announced, UM, you know,

surveying seven thousand different parents. You know, I think it is something that's logistically possible by the Chinese bureaucracy to do. I'm also aware that you know, for example, I currently live in Shanghai, and I know that the Shanghai government regularly hosts these grievance sessions just to tell them what's going on and UM, you know what the problems are. Now, whether this can be UM an effective replacement for democracy, I think absolutely not. Uh, you know, there's no mechanism

for poor leaders to be removed by the people. This is all done, uh, certainly all done by a party basis, But I think, um, you know, I would suggest that there is a lot of very active surveys of public opinion done by the party state, as well as active solicitation of views by different people. This actually leads to the other big question about all of this, which is why now. So you know, there are these different explanations

for why China is embarking on these various crackdowns. Um, you know, perhaps quality of life explanations, perhaps solidifying control. But at first clients, it doesn't seem to make much sense to be doing this in the middle of a global pandemic, um, when the economy is relatively fragile. Um, China just sort of emerged from the trade war with the US, although plenty of people would say that under President Biden relations have actually gotten worse between the U.

S And China. So what's your take on why now? Because they could have gone after these respective industries, um, presumably at any time in history. That's a great question, and that's something I scratched my head a bit as well. And so I think the first thing to note is that, um, I think but the government realized last year over COVID was that, my goodness, a lot of people are using online services, for example, for food delivery or for online education.

And for the most part, the Chinese internet space has been I would say, pretty minimal regulated until basically the last two three years. I think the over the last five years. Um. You know, when I visited a bunch of tech companies when I was living in Beijing, you know, they would often say that they are are fewer regulations relative to the US and relative to every other industry in China. And so I think, you know, I think the most important impetus is that the government realized how

much more online everyone became last year in China. Probably something like this happened in the US as well, um, and so they can't let this be, you know, U governed space for much longer. The other um, you know why now issue is that I think, much more broadly, my view is that China will not open its borders for at least twelve more months, potentially for many years.

And I think that's because COVID is still ravaging quite a few parts of the world and to Chinese don't want to leave China right now, and so there's sort of not that many costs to China for maintaining its borders. Shots hit more or less fields. It can manage a lot of these problems. Um, you know, it's certainly not ideal, but it can manage them. And it's better than letting

COVID run free in Beijing, Shanghai and everywhere else. And so you know, if you remove this idea that um, this constraint that you know, things can only be regulated after things are really good, well, I'm not sure that they believe that there is going to be a much

better time than this. So again, you know, I'm lazily reaching for the U S analogies here, but um, you know you mentioned the first sort of the anti trust aspect of all this and going after like the really big companies, and I think like one of the sources of anxiety in the US is just simply that like there are the big internet tech companies in the US, and consumer tech companies represent a major or some power, and a company like Facebook, I mean it's kind of

like a government. They have like a Supreme Court and uh an internal checks and balances of what can get published. I don't know how well, it works, but it exists, and there's a perception that, say, like Mark Zuckerberg is

as powerful as any other politician in the US. And I'm curious if in that bucket of regulation, that too is a source of the impulse in China, which is just that whether it's Ali Baba, or and Financial or some of these other big ones, that this sort of pure political power or pure power that gets accumulated by some of these companies becomes big enough to rival the state of the party. I think that's definitely underlying motivations

for this crackdown as well. What I wonder about is that I don't feel that there is a broad sense among the Chinese people that the CEOs of the major tech companies are as powerful as the politicians. UM. But it's certainly worth acknologying that the Communist Party cannot suffer any perception that major business leaders are able to challenge its authority. And you know, I think it was certainly offended that Jack mob was so impudent as to insult

the regulators UH Future Financial Forum. The positioning here is, I think this is one of these underlying motivations. UM. Perhaps these tech companies are UM you know, sort of the ponds of internal political struggles based on whose family homes which firm. These are some things that we understand

not at all about UM. And I think from my perspective from having lived in China for the last few years, is that this has been UM one of the main narratives from UM, you know, foreign media about how why there's been a tech crackdown, and I see a pretty considerable discrepancy here. I think for those of us who live in China are able to see the excesses of these companies on a daily basis, companies like may Twin

or the online education companies or Ali Baba. Meanwhile, these companies are celebrated elsewhere as UH having their crime as being only being too beloved, and so I think, you know, that's one of these underlying factors opera. From a lot of people's perspectives, these companies have sort of been getting out of hand, and they should be regulated quite a

lot more extensively, which the party state is doing. And to offer an example, I think, UM, a lot of the people, a lot of the parents UM I've spoken to a lot of the people around me would say that parents around them have been pretty happy about this online education crackdown. These online education firms have become really good at playing parents off of each other to engage in a zero status game to pay more for their children while making um of children more miserable. I think

a lot of them. What I see the government's efforts is to do a coordination game UM to stop parents from competing with each other, and then to coordinate parents against their own children to make sure that they don't play too many video games because now they can say, um, this is against the law. And so these are I thinks some some of the other backdrops that are going on.

So when the crackdown on education or education tech um came out during the summer, I remember there was a bunch of commentary from people saying like this is so unexpected and so extreme, you know, China basically coming out and saying that for profit education firms are no longer will no longer be able to generate profits. That it meant all of the China market was uninvestable. So I'm curious to get your take about what all these crackdowns

actually mean for investment in various China sectors. And also, you know you mentioned semiconductors earlier. And we know that China is very focused strategically on building up its semiconductor industry, and you've come on the show and talked about that quite a lot. But I can't imagine that it needs to squeeze capital out of consumer tech in order to get it into semiconductors. Um there must be plenty of

money sort of going into that already. So I guess the question is what does this mean for investment overall, and is this the best way to get more investment into strategically important sectors. Probably not, is my gut answer, but it's the way that the party state has decided to do things. I guess the best way I can, you know, think about that action is, you know, if you sort of just signal two investors online education, you know,

you should not be deploying any more capital there. But maybe more importantly, I'm signaling to the country's best and brightest in terms of the fresh grads. Now, I mentioned that, you know, at least when I was graduating from college some years ago, a lot of people still wanted very much to work in finance as well as a consumer internet.

And I think, you know, on the margin if the party leaders UM, if the government is thinking well for the marginal student who can move from BETA and uh teeing quiversities China's best university and UM to stop them from going into consumer internet because they know that we Embijing don't like it anymore, and to go work on much harder technologies like life sciences and semiconductors and aviation. Maybe I think that is another one of their motivations.

You know. Michael Lewis in Liars Poker said that, you know, he thought he would get the marine biology students from Ohio State to pursue marine biology instead, but instead, after he wrote Liars Poker, a bunch of marine biology students at Ohio State wrote to him and said, how do

I get off to Wall Street? Well, you know, I think this is a little bit of what the government is trying to fight back against with respect to what's going on with investors, and I think certain types of VC funds could be facing pretty considerable challenges to their

how they deploy capital going forward. But actually that that's been one of the questions I've been UM investigating, and in general, when I speak to these earlier stage funds dcs and PE s They would say, well, you know, the crackdown has been severe, but so far it has been limited to these UM segments, and the Chinese consumer

market is still very big. You know, there are things like healthcare, there are things like fashion, there are things like manufacturing of different goods that don't necessarily how to fall a foul of party directives. And more importantly, for folks involved in the industrial sector or the high technology sector, they're very pleased. Indeed, So I think these signals are doing something to show, well, you know, stop the point capital in UM technologies. We don't like, I'll go do

it in semi conductors instead. Do you think there's going to be a sort of broader macro impact? Okay, so you know you mentioned the sort of sectoral potential rotation. Maybe some VC money reallocated towards the harder tech out there. Is there any sort of macro implication with trade flows? I mean, it's interesting that the d D i p O or the d D crackdown was right after a I believe that was the US listed i p O. So there's gonna be some change in terms of like

where the money potentially comes from. Are you thinking about how this could affect China from that perspective. Yes, Um, for now, I think it's a little bit too early to tell. But we've had someone like UM soft Bank UM publicly wondering whether they should still continue to put capital into China. And I think this is UM, you know, on the margin, one of these other things that are making people much more hesitant to deploy capital into China

going forward. We have pretty regular pads from George sorrows now and the pages of the Journal or the Financial Times to talk about why investors should be legally barred from investing. You know, there is this ongoing Holding Foreign Companies Accountable Act in the United States, which might dealist all Chinese companies who don't comply with p c a O b audits. So I think this is one of

these additional factors that are weighing on investor sentiment in China. So, Um, this is something else that I wanted to ask you. But one of the um things that keeps getting brought up when talking about the crackdowns and China's macro economy is this idea of the German model, and maybe China

is trying to pursue something like the German way. In the sense that there's particular German regulation UM that sort of tries to boost UM its manufacturing export sector UM and maybe limit some of its financial sector, although you can argue they've done that with varying degrees of success. But anyway, UM, when it comes to the economic model that China is targeting out, like how do you see it? I think the German model is a pretty good um yardstick.

Came across a new term to me recently, Rhineland capitalism, which is, you know, sort of this biddle way um that the Germans were promoting in the past, and I definitely see that China wants to do more with Germans. You know. I think at this point Germany is one of the very few Western countries today that have any semblance of you know, positive, um warm feelings towards China, mostly because there's a very big autos and industrial sector making quite a bit of money here now, you know.

Being based in Shanghai, I spent quite a bit of

time talking with Germans. The German industry here really is massive, and they've taught the Chinese to do a lot of different things, and the Chinese, i think, have repaid some of the favor in terms of you know, outright talking about how they want to be more like Germans, in terms of having more of an industrialized economy, in terms of having more mittel stand companies, which are smaller, medium sized companies that are really great at certain industrial aisha uh,

and then in terms of trying to build these vocational schools to make sure that kids can still work for great technology companies like fox Con instead of terrible technology companies like ten cents and so I think there is a little bit more of that sense going on, and especially with common prosperity, maybe we have a bit more of a more even income distribution like how they do in Europe. So what are you watching for next? I mean,

you know, that's sort of the question. Every It seems like every week or every day there's something new, some new regulatory crackdown. I mean that was sort of what's been striking about the last few months, just how it just seemed to keep snowballing. What are the signpost or areas that you're curious we might see further action. I suspect that we won't have any more um sectoral decapitations. Maybe there will still be on some more things on

the margin with video games. UM. It's possible that they will cracked down further on things like real estate or with healthcare. But this is UM getting I think a little bit more speculative. I think at this point the framework for a lot of regulations is now UM fairly complete. UH. They passed the Data Security law in June and the Personal Information Protection Law in Hoggat A lot of this

framework is mostly complete. And I think crucially for investors, now that we know UM what to UM that there is this you know, common prosperity, dual circulation, family values and rule of law initiative going on, you know, I think we are we do have our expectations set a little bit further now. For me, the biggest uncertainty is what's going to go next with the Cyberspace Administration. This is the c a C. And to me this is UM.

This is to me the most remarkable story of the last UM while in which UM the c a C, which is a relatively new regulator and I know to crucially a UM party organization that has arrogated to itself

a great deal of regulatory powers. Now that Cyberspace Administration UM c C is governed by the State Council, but it is a party organization that is a dual party and state organization, And the director of the c a C is a vice director at the Propaganda Department, which is one of the most important party institutions there are.

And so I think investors, now, are you know, dealing with this very novel regulatory instrument that is now regulating I p O s, that is now regulating financial media, that is now regulating algorithms, And I have no idea what is going to regulate X. And I think this

is one of these big uncertainties. You know. I think foreigners, foreign businesses, foreign investors are a bit more used to the sort of wildly state institutions like the National Development Reform Commission, the People's Bank of China or the Securities Regulatory Commissions c src UM. But you know, to be directly regulated by a party institution, this is to me very new and novel, and I don't know how to

think about it. So this is another thing I wanted to ask you about, which is, you know, as the tech crackdowns were unfurling, we did see a lot of people talking about what this means for the future of the industry. So China is going after these big companies that are extremely well known, considered to be massive success stories, and then suddenly they're sort of, um, you know, being

villainized by the state. What does that actually mean for tech in the sense of entrepreneurial spirit and whether or not people are going to want to go into that sector in the future. That's such an important point to Tracy, And you know, I think what, um, you know, the worst outcome of this ongoing tech crackdown is that it completely destroys the innovative and entrepreneurial spirit in China. Right now, I think it is too soon to say on UM

what exactly will happen UM. You know, I would note that, you know, so far, when I talked to you know, friends who are entrepreneurs UM you know, certainly not big success UM like on the scale of jack Ma. What some would tell me is that they would love to have the problems of jack Ma. UM. You know, that

means that they've made it really, really big. And for now, China's UM crackdown has whenever it comes to a personal level, it's really targeted the most elite you know, dozen or two dozen UM figures that a lot of people can identify on a billboard and that hasn't really destroyed. I think, um, a lot of the will by people to you know, still a billionaire. I although um that that that they may not be able to have any confidence in the

near term of what to do going forward. And again I think I would situate a lot of these things as a sort of a spiritual you know, almost a civilizational values question in which I think the Chinese government is accepting that not all types of entrepreneurial hustle is good. I think now that you know, China is sort of living through its own guilded age. Um. Many people have said this. Uh. And in the guilded age, you know, there were a lot of hucksters and fraudsters out there.

And I think that is a little bit of what Beijing wants to control. And so if it has to suffer some erosion of general entrepreneurialism, well, I think it is saying that you can't make profits by uh say, creating financial risks as financial and P two P loans. We're doing, in its view, monetizing status and anxiety and miserating students through online education, or by destroying the eyesight

and UM the free time of children through video games. Now, I think that is a lot more of what Beijing is trying to do to lay down UM guardrails or these no go zos, UM you know, go play everywhere else, but these things are off limits. Well, Dan, you've given us another excellent overview of all the things that are going on in China, and of course it is quite a lot at the moment. So thank you so much. Thanks Dan, that was great. Always joy, Thank you so Joe.

It's always really great to have down on the show. And there's so much to take away from that conversation. UM. One of the things that sort of stuck out to me is this idea, and I don't think a lot of people outside of UM Asia necessarily understand this point, but like the degree to which big consumer tech is actually embedded in China is just on a different scale

to where it is in the US and the UK. Like, I know, everyone uses Facebook, everyone uses Google and Amazon and things like that, but you know, in China, like we Chat, um and financial like these apps are basically like one stop shops for living to the extent that like the government has to work with them. UM quite extensively, and and so from that perspective you can kind of see why the CCP would view this as a problem.

It's almost like de facto privatization of government functions. Yeah, I thought that was a pretty interesting question, and I hadn't thought that about that. Oh when you said, like, well, this is sort of a weird type of correct out in the middle of still, you know, an ongoing pandemic. And Dan's point, it's like this was kind of a wake up call perhaps to the government of just how

just how online the population is. I mean, obviously the size of these companies have been sort of known for a while, but perhaps it was driven home or greatly appreciated the degree to which, and you know, it's kind of the same here, you know, the degree to which some of these mega tech companies become the best arms

for services. I mean, I think, you know, it's like I think back to last April or March, there were a lot of things you couldn't get, but you could, like you could always order something from Amazon throughout the entire pandemic. And so the degree to which large tech company has become like this sort of like lifeline is a pretty sort of fascinating thing totally. Well, the other thing that just struck me is I found it very

useful his like bucketing of these like different things. So there's like the anti trust aspect, but also just this idea of like family values. And you know, it was interesting to hear him describe some of the feedback mechanisms that they get. And I remember it was like a few years ago. It was like one of those like five year plans or something. It was like, wasn't it like better growth not faster growth something like that. Wasn't

that some cliche that was going around? Yeah, And I feel like some of the things you talked about, like making it easier to have families, or making it easier for parents to tell their kids to not play video games on Monday through Thursday because it's against the law

or it's going to damage their eyesight or whatever. It's like feels like perhaps in keeping with some of these other like sort of like promises and priorities that the government has laid up, Right, So those promises and priorities, you know, if they were being taken on in the West, like you know, if you saw the United States government really tackling the antitrust issues with big tech, or if you saw the government actually cracking down on the high

cost and competitive nature of education, you could see like they might actually get some support. But the difference between China and the U S system seems to be about how these things are actually getting rolled out. So you know, in China, you can wake up um on a summer day and suddenly the government is declaring that education firms are no longer going to be able to generate profits.

Whereas in the States, if you actually got something like that, and of course you know you would never get something as extreme, but if you had a measure that was sort of targeting education cost, it would be going through layers and layers and layers of government bureaucracy and and so you would have it sort of well flagged in advance. And I think that's probably one of the key differences here, Like it's not necessarily what they're cracking down on, but

it's the extremity and the way they're doing it. Yeah, the speed and ease and the sort of unilateral decision making, because right you could never do it Affen And I really do wonder whether there are people in the US on either the right the left, and I think there are who look at what China has done, especially with some of the big tech companies. It's sort of like admiringly thinking like, oh, you know, we've been wanting to

do this forever. There's no mechanism because we could never agree on passing a law and there would be like a million layers of courts and regulations. Has sort of like wishing they could emulate the ease with which China can do some of these things. Yeah, I'm sure there are some parents out there who think that limiting the amount of time people or kids can actually play video is a good thing. All right, shall we leave it there? Let's leave it there. Okay. This has been another episode

of the All Thoughts Podcast. I'm Tracy Alloway. You can follow me on Twitter at Tracy Alloway and I'm Joe Why Isn't All? You can follow me on Twitter at the Stalwork. Follow our guest on Twitter, Dan Wong, He's at Dan w Wong. Follow our producer Laura Carlson, She's at Laura M. Carlson. Followed the Bloomberg head of podcast, Francesca Levi at Francesca Today, And check out All our podcast at Bloomberg, under the handle at podcast. Thanks for listening.