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The Chinese Tech Industry Adjusts to Beijing’s New Reality

Company executives and investors are grappling with Beijing’s demands that they work for “common prosperity.”

Actors in Beijng perform on June 28 to celebrate the 100th anniversary of the founding of the Communist Party of China.

Actors in Beijng perform on June 28 to celebrate the 100th anniversary of the founding of the Communist Party of China.

Photographer: Lintao Zhang/Getty Images

For the past year, Chinese President Xi Jinping has compelled the country’s internet giants to work for “common prosperity” instead of just chasing profits. Rolling crackdowns in several areas of tech have already humbled some of China’s most successful companies, erasing as much as $1.5 trillion of the sector’s market value in the process. While few expect the Communist Party’s campaign to end up with companies such as Alibaba Group Holding Ltd. or Tencent Holdings Ltd. becoming government-owned enterprises, it’s clear that a fundamental transformation is under way in the relationship among the government, company executives, and investors.

Chinese regulators aren’t interested in controlling the daily operations of private corporations, according to Fergus Ryan, a senior analyst at the Australian Strategic Policy Institute’s International Cyber Policy Centre, but they are looking to ensure that companies operate in line with Beijing’s industrial policies. Tech companies are under new pressure to share valuable data and shift away from internet commerce in favor of core technologies that could help insulate China from being cut off from U.S. suppliers. “The direction we’re moving toward is a new type of Chinese company that is neither state-owned nor private,” Ryan says. “They’re becoming hybrid entities that are effectively state-controlled.”