Professional Documents
Culture Documents
SSRN Id4320952
SSRN Id4320952
Rogier Creemers
Leiden University
Abstract
This article reviews the regulatory campaign against China’s online platform sector that took place
between 2020 and 2022. It focuses specifically on its substantive policy aspects, arguing that this
“rectification” both intended to remedy existing perceived problems in the online platform
industry and to reshape the sector to better meet the needs of the rapidly altering economic and
development policy environment. The rectification pursued six discrete goals: managing macro-
economic risks, maintaining content control, addressing emerging social concerns, remedying
market imbalances, mitigating foreign risks, and supporting the technology development area. It
led to significant punitive actions, as well as rhetorical and behavioural shifts by companies. As
such, it provides a first test case of the bigger changes occurring under the post-19th Party
Congress “New Era”, but also holds comparative potential for researching platform governance
worldwide.
Introduction
On 24 October 2020, Jack Ma, founder of e-commerce giant Alibaba and its fintech spin-off Ant
Group, took to the stage at a financial conference, the Bund Summit, in Shanghai. In his speech,
Ma sharply criticized financial regulators for failing to understand how technology enabled better
financial risk management, as well as the Chinese banking sector, deriding its “pawn shop
mentality”1. Mere days later, Anti Group’s planned IPO, worth an estimated 37 billion US Dollars,
was suspended. Over the subsequent two years, Chinese “big tech” companies were subject to
a major regulatory campaign. Central authorities issued rules covering competition law and
consumer protection, Internet use by minors and personal information protection, risk
management in fintech services and androgynous pop idols. Regulators also created new
enforcement bodies and review processes, and imposed severe fines and punitive actions against
nearly all major Chinese platform companies.
Many observers have described this regulatory wave as a “tech crackdown”, driven by elite
political concerns and even personal vendettas. Generally, the campaign is described as a bid by
the central government to re-establish control over an economic sector that had hitherto escaped
the strict regulation to which most Chinese businesses are subject2 . Zhang characterizes the
campaign as a knee-jerk response to a regulatory crisis, and a symptom of the volatility inherent
in China’s system of governance3. Journalistic attention has focused on the personalities involved:
the “crackdown” is a Xi Jinping bid to clip the wings of China’s uppity tech billionaires, Jack Ma
most of all4. These elements are not unimportant. For instance, Ma’s cavalier speech was given
right after Vice-President Wang Qishan outlined regulators’ risk perceptions at the same event5,
and may have been the drop that made the cup run over. But the cup was already very full, and
so personal politics are insufficient to fully explain this complex regulatory phenomenon. It is not
1
Unofficial transcript: Xu 2020.
2
Collier 2022.
3
Zhang 2022.
4
See, for instance, Mitchell 2021.
5
Chorzempa 2022.
This article contributes a substantive and contextual interpretation of the regulatory offensive,
which it conceptualizes as a “great rectification”, or the imposition of a comprehensive and
permanent new mode of governance7. Building on Naughton’s notion of “grand steerage”, it
argues that the rectification manifests several high-level policy shifts and socio-economic
changes from the past decade. Perhaps most important is the move away from prioritizing GDP
growth towards a more broadly defined view of development as part of Xi Jinping’s “New Era”,
which fostered policy slogans such as “common prosperity” and “limiting the disorderly
expansion of capital”. The dozens of legislative, regulatory, policy and enforcement measures of
this rectification reveal six major drivers for regulatory intervention: limiting macro-economic
risk; maintaining effective control of online content; remedying market failures and imbalances;
tackling emerging social concerns; contributing to the technological development agenda; and
limiting exposure to foreign adversaries. These drivers form a comprehensive new paradigm for
digital platform governance, in which companies must internalize the perceived social costs and
negative externalities of their business models, and in which they remain loyal corporate citizens
of the Party-state.
The first section of this article describes the policy origins of the rectification in the years
preceding 2020. It pays particular attention to growing state interventionism in technological
innovation and development and the evolving prioritization of platform governance in leadership
circles. The second section successively discusses the six policy drivers listed above, identifying
their policy context, the actors involved, and the specific measures taken. The third section
assesses how the authorities have implemented and enforced the new sets of regulations, and
how platform businesses have responded to it – both substantively and in terms of political
signalling. The conclusion explores the implications for the digital platform industry and China’s
high-tech ambitions in general, as well as how the rectification compares to regulatory trends
elsewhere in the world.
Over the past decade, large platform companies have come to dominate the Chinese digital space.
The two best-known, Alibaba and Tencent, have built ecosystems integrating multiple service
types, including social media, e-commerce, gaming, music, cloud services and ride-hailing. They
have both established digital payment services, and Alibaba’s spin-off Ant Group branched out
6
See, for instance, Reuters 2021.
7
The article thus takes issue with both elements of the term “tech crackdown”. On the one hand, the rectification only covered a
subset of the entire digital industry: sectors such as robotics, hardware manufacture or corporate software were not affected. On the
other, the word crackdown suggests the Chinese government might have wished to substantially eliminate platform companies from
their activities. With the exception of educational technology, this is not the case. Successive policy documents and leaders’
statements underline the importance of the continued development of the platform economy, even as this necessitates stricter
regulation. It also suggests that this is a temporary aberration, after which the status quo ante would resume. This, too, not the case:
the regulatory environment for platform businesses has fundamentally and irreversibly reoriented from a previous model towards a
new one.
Yet as these companies grew, concerns emerged about their business practices and their broader
economic and political impact. In the cut-throat competition between these different platforms,
regulatory or ethical concerns often took a back seat to business survival and the pursuits of user
numbers and profits, and particularly the data on which the new business models were founded13.,
E-commerce and social media platforms were used to trade in stolen data and counterfeit goods14,
imposed onerous and conditions on their users and on-platform merchants, and became
notorious for the exploitation of workers. Tencent was implicated in assisting disgraced Vice
Minister of Public Security, Sun Lijun, with monitoring members of the top leadership15. Online
peer-to-peer lending platforms soared and then crashed, leading some lenders to commit suicide
and inflicting investor losses in the hundreds of billions of Yuan 16 . In a wider sense, these
companies occupied an anomalous political-economic position, Although privately owned, they
straddled an important demarcation drawn before their foundation. With the Socialist market
economy, China effectively developed a tiered economy. The strategic commanding heights
were occupied by State-owned or controlled enterprises, less critical activities were left to the
private sector17. Big tech enterprises, however, emerged after that division was made, were not
of strategic importance at their foundation, and have only become so relatively recently. Apart
from their essential role in the everyday lives of citizens, they play a key role in governmental
operations as suppliers and contractors of digital services.
The leadership has attempted to co-opt platform companies in different ways. By 2012 already,
Party Committees had been established in all major Internet enterprises, and some of the best
known entrepreneurs were given seats in industry associations and state bodies such as the
Internet Society of China and the Chinese People’s Political Consultative Conference
respectively18. The 2014 4th Plenum called for the creation of “special management shares”, later
called “golden shares”, for online media businesses. These enabled board membership, access
to corporate information and input into corporate decisionmaking19. In 2017, the Cyberspace
Administration of China (CAC) and Ministry of Finance jointly established the 100 billion RMB
China Internet Investment Fund, both to facilitate fundraising and to establish a presence within
corporate reporting and decision-making structures20. In more general terms, from the late 2000s
onwards, the leadership stepped up interventions to shape China’s economy and shepherd it
8
Shen 2019; Tang 2019.
9
Xinhua 2022a.
10
CCCI 2021.
11
Daxue Consulting 2022.
12
Economist 2020.
13
Lee 2018.
14
Bandurski 2017.
15
Chen 2022.
16
Fulco 2020.
17
Yeo 2020.
18
Creemers 2018.
19
Gruin and Knaack 2020.
20
Economist 2021.
At the 2017 19th Party Congress, Xi Jinping declared that the CCP would move into a “New Era”.
The “dominant contradiction” of the previous period, the focus on economic growth prescribed
by Deng Xiaoping, was replaced by a new primary challenge, navigating “unbalanced and
inadequate development and the people’s ever-growing needs for a better life 23 ”. Instead of
pursuing GDP growth at nearly all costs, more attention would be dedicated to other
considerations, ranging comprehensive national security and environmental destruction to
paternalist worries about China’s youth and economic equality. The 5th Plenum of the 19th Party
Congress, which took place a few days before the cancellation of the Ant IPO, announced the
elimination of extreme poverty, ahead of the set target date of the Party’s 100th Anniversary in
202124. It also approved the 14th Five-Year Plan, which did not contain explicit growth rate targets,
focusing instead on “high-quality development” and increasing productivity25. Subsequently, Xi
dusted off “common prosperity” (gongtong fuyu), a slogan used earlier by both Mao and Deng,
to signal the Party would target inequality 26 . Concurrently, China’s relationship with the US
deteriorated rapidly, triggering greater urgency towards technological self-sufficiency and
reduced exposure to risks from abroad27.
This growing attention for emerging social concerns, as well as pre-existing apprehension about
domestic and foreign sources of destabilization, joined the growing discontent among platform
users and third-party merchants about the state of affairs in the platform economy. A head of
regulatory steam was already building. Efforts to regulate personal information collection and use,
central to online platforms’ business operations, had been ongoing since 2012, and were
accelerated as the drafting of the Personal Information Protection Law (PIPL) started in 201828.
That same year, China’s first e-commerce law was promulgated. This introduced some general
constraints on data-enabled business models. For instance, platform companies had to provide
opt-out options to users when providing personalized or recommended search results29. Gaming
regulators imposed real-name registration requirements for minors in online gaming, as well as
strict daily gaming time limits30. The People’s Bank of China had prohibited banks from handling
cryptocurrency transactions in 201531. It later refused credit scoring licenses to several private
companies involved in a pilot scheme, including Alibaba’s Sesame Credit programme, over
concerns about conflicting interests and problematic business practices32. The CAC subsequently
rapped Ant on the fingers over violations of user privacy33. Financial authorities banned online
P2P lending after the sector’s crash34.
A clear announcement of comprehensive regulation for the platform economy came in 2019, in
a State Council policy outline on its “standardized and healthy” development, the first time a
21
Naughton 2020; Naughton 2022.
22
Creemers 2020.
23
Holbig et al. 2017.
24
Central Committee 2020a.
25
Central Committee 2020b.
26
Hofman 2022.
27
Bateman 2022.
28
Creemers, 2022.
29
NPC 2018
30
NPPA 2019.
31
PBoC et al. 2013.
32
Cadell and Zhang 2017.
33
Reuters 2018.
34
Reuters 2019.
The rectification unfolded over the period of over a year, in a manner that seemed largely
piecemeal and uncoordinated, as well as event-driven in some cases. In the year and a half after
the cancellation of Ant’s crackdown, authorities issued over a dozen new major policy
documents and over fifty new regulations39 on platform economy-related activities, and stepped
up enforcement resulting in numerous high-profile fines and punishments. These measures
constitute a bundle of six different, albeit sometimes overlapping, objectives.
A first goal of the rectification was responding to the increasing challenges posed by the
burgeoning fintech industry. Its expansion had provided innovative consumer-facing financial
services where the traditional banking sector had not 40 . Nonetheless, as they moved from
payment into wealth management and lending, regulators became increasingly concerned about
their influence on credit allocation and the money supply. In an article published the day before
Ant’s IPO cancellation, Guo Wuping, head of the Consumer Protection Bureau at the China
Banking and Insurance Regulatory commission, warned about improper competition between
underregulated fintech companies and licensed financial institutions. He accused fintech
businesses of charging, excessive fees and inducing risky levels of debt, as well as improper
collection and trading of borrowers’ personal data, causing a build-up of systemic risk and
lowering resilience to crises in the financial system 41 . The response would be, to “fully
incorporate financial activities into supervision in accordance with the law to effectively prevent
risks42” as stated by the Financial Stability and Development Committee, headed by top economic
policymaker Liu He.
35
State Council 2019.
36
Zhu 2021.
37
SAMR 2020.
38
Central Committee 2020b.
39
A full list of these measures is included in Appendix 1.
40
Chorzempa 2022.
41
21 Caijing 2020.
42
Gov.cn 2020
The fintech focus also extended to cryptocurrencies and other virtual tokens. Where China had
once been the largest miner of cryptocurrencies worldwide, successive interventions led to a
complete ban on their mining and use49. The stated reason for this lay both with these currencies’
high energy usage and the fact that they were often used for shady and illegal transactions50. Non-
fungible tokens, products relying on similar technologies as cryptocurrencies, remain legal and,
indeed, popular on online trading platforms. Even so, three State-directed industry associations,
the National Internet Finance Association, Banking Association and Securities Association issued
guidelines on preventing NFT-related financial risks, requiring their members to separate NFTs
and financial services, refrain from financing NFT purchases and to verify identities of NFT
buyers51.
In the area of content, the rectification largely continues the repertoire of practices and tactics
authorities have developed in the past decade. Specifically, new measures have been introduced
incidentally in response to specific irritants, as well as more structurally to regulate new forms of
content production and dissemination. Moreover, the occurrence of several high-priority political
events in 2021 and 2022 also led to increased attention from the propaganda department.
Since CAC gained responsibility over online content in 2014, it has issued a cavalcade of content-
related regulations52. Its interventions during the rectification constitute a logical continuation of
that process, aimed to ensure novel technologies do not result in regulatory loopholes.
Specifically, in some cases together with other authorities, it has issued regulations for deep
synthesis (deep-fake) content, online livestreaming, algorithm-based recommendation systems,
pop-up windows, app-based information services and online religious information53. By and large,
these were assembled from the same parts bin as the existing regulatory corpus, including
components such as real identity verification requirements for users, registration obligations for
43
Sina 2022.
44
PBoC 2020.
45
Xinhua 2020.
46
Sun 2021.
47
B01
48
B04
49
B09; B21; B11.
50
People’s Daily 2021.
51
B06.
52
Creemers forthcoming 2023.
53
B07; B18; B30; B38; B39; B40; B42; B44; B46; B50; B54.
The legacy regulator National Radio and Television Administration has no direct regulatory
power for the online world, but is still in charge of audiovisual entertainment – mostly distributed
through the Internet. It did not issue new rules, but took several initiatives against particular
undesired phenomena, with its usual curmudgeonly and paternalistic approach. One of them
was the “fan circle” phenomenon, or online communities of fans of particular idols or franchises.
In the eyes of authorities, these had become rife with misbehaviour, ranging from cyberbullying
and doxing to filing malicious complaints and reports, falsifying online rankings and compelling
fans to purchase merchandise to show their support. More broadly, the NRTA addressed
excessive “entertainmentization” (yulehua) and undesired aesthetics, amongst others deeming
“sissy boys”, or insufficiently masculine male pop stars, to constitute an “abnormal tendency”.
Shows should also not highlight wealth, hedonism, gossip or scandals54 Relatedly, CAC took
action against perceived problems in online fan communities, involving money-raising battles
between celebrities55.
Across the board, content regulators sought to shape a better “online ecology”56, brimming with
positive energy, and contributing to the realization of overall Party goals. Platform companies
obviously had to play a proactive and constructive role in this process, particularly as the
enormity of online content made it impossible for government authorities to provide detailed
rules or instructions to deal with every eventuality. Instead, the rectification saw the consolidation
of the “primary responsibility” (zhuti zeren) concept. This holds that platform companies
themselves have first-line responsibility for content and information management, and will be
held accountable should problems emerge 57 . Consolidating companies’ content review and
information dissemination abilities was especially important as the timeframe of the rectification
also included several high-profile political events, including the Party’s 100th anniversary, the
2022 Beijing Winter Olympics and the 20th Party Congress. Moreover, the Covid-19 pandemic
led to multiple protests where content management mechanisms were put through severe tests.
Even so, measures in the area of content management reflect practices that have gone on for
years, if not decades. “Spiritual pollution” was an area of concern in the 1980s, for instance.
Media authorities regularly crack down on entertainment content they deem morally dubious,
even before the advent of mass mobile connectivity, as in the case of a dating participant who’d
rather “cry in a BMW than smile on the back of a bike” in 201058. This element of the rectification
thus largely constitutes the incremental evolution of existing tactics and practices.
The growth of the platform company has, in the eyes of authorities, been accompanied by the
emergence of a series of imbalances, abuses and undesired forms of conduct, which distorted the
functioning of online market mechanisms. A major part of the rectification was to redress these
phenomena through introducing and enforcing data protection, consumer protection and
competition regulation.
The ability to collect, process and trade personal information was critical to platform companies’
business models from the start59. Yet cutthroat competition often drove businesses to fraudulent
54
B20
55
B16; B29.
56
A13.
57
C04.
58
Guo 2017.
59
Lee 2018.
Regulators also took aim at a range of monopolistic and unfair competition practices tech firms
habitually practiced. Several had, for instance, built “walled gardens”, in which links to or
content from other platforms would not function properly within their own applications, limiting
interoperability. Links to Alibaba’s Taobao marketplace could not be opened from within
competitor Tencent’s WeChat messaging app, while Douyin blocked third-party e-commerce
links in its own livestreams. Main payment competitors Alibaba and Tencent would also not
accept each other’s payment systems. Furthermore, large platform competitions would use their
dominant positions to price out on-platform merchants from their platforms. “Pick one from two”
(er xuan yi) provisions, or obligatory exclusivity clauses, in service agreements meant that on-
platform merchants could not benefit from inter-platform competition.
In more general terms, SAMR also imported the concept of “main responsibility” into market
conduct, publishing guidelines on how Internet platforms could be upstanding economic citizens,
covering over thirty points of attention. These ranged from fair competition, internal governance
and inter-platform openness to the maintenance of platform security, countering the sale of
prohibited items, pricing and advertising, intellectual property protection, worker protection and
assistance to law enforcement bodies62. In SAMR’s view, this serves to ensure that the commercial
activities of platform companies are appropriately balanced against “national and social interests,
the lives and health of the people and the security of their property, the principles of voluntariness,
equality and sincerity, respect for laws, regulations, rules and commercial ethics, public order
and morality”. In other words, markets are not there as a conduit for unlimited pursuit of profits,
but are embedded in a wider list of political concerns and objectives.
Chief among non-market considerations were several worries about the impact of platform
businesses on specific social groups. A first prominent strand of such social concern is the
protection of minors. Always having had a paternalist streak, the CCP has devoted increasing
attention to compile a comprehensive legal and policy framework detailing how children should
be brought up63. The new Law on the Protection of Minors, passed in October 2020, contained
a new dedicated section on online rights, covering matters such as online bullying, a prohibition
of smartphones in schools without permission, and the protection of minors’ personal
information64. In spite of the earlier limitations on online gaming time, several high-profile policy
60
C06.
61
B15.
62
B26
63
Daum 2022.
64
NPC 2020
A further specific concern around the “healthy upbringing” of children relates to livestreaming as
a career choice. As employment prospects grew slimmer for university graduates, many turned
to influencing, and a 2021 employment market report revealed that nearly two thirds of Chinese
students hoped to become an influencer 70 . However, this does not fit well with economic
development priorities focusing on hard tech and the manufacturing sector. Several measures
have made livestreaming far less financially attractive. In September 2021, the State Council
indicated in a 10-year plan for childrens’ development that anyone younger than 16 would no
longer be permitted to feature in livestreaming content 71 . Subsequent policy instructions
prohibited livestreaming platforms from enabling “tipping” and other money-spending
functionalities, and required the limitation of “player knock-out” real-time competition between
multiple influencers72.
A last child-related intervention was the prohibition of for-profit tutoring services for school-age
children. This measure was introduced as part of a comprehensive effort to reduce burdens on
students in China’s fiercely competitive education system, and restructure that system to meet the
needs of its changing industrial development policies. Moreover, this measure can be interpreted
as a “common prosperity”-related response to class and wealth inequalities affecting social
mobility. Moreover, this policy isn’t just concerned about existing children, but also unborn ones:
as fertility rates have plummeted in recent years, authorities have grappled for ways to encourage
pregnancies, for instance by addressing the high costs of child-related services.
The social policy and common prosperity component of the rectification also involved
exploitative labour practices. Chinese tech companies, under competitive pressure to reduce cost
and increase product development speed, adopted a work schedule that became known as the
“996 system”, referring to work from 9AM until 9PM, 6 days per week. Corporate titans such as
Jack Ma credited this work ethic as essential to the success of their companies, and official media
reported it was adopted by over 40 major tech firms73. Yet the practice also led to deaths through
overwork and suicide. Online protests and publicly accessible working time tracking
spreadsheets were rapidly censored, but the Supreme People’s Court and the Ministry of Human
Resources banned the practice in August 202174. At the lower end of the socio-economic scale,
concern also arose on the fate of the millions of people working in the gig economy, most notably
delivery drivers. Dispatching algorithms used by food delivery platforms such as Meituan and
65
B12.
66
Jingji cankao bao 2021
67
Cao 2022
68
B19
69
B43.
70
Wutongguo 2021
71
C03
72
B46
73
Wen 2019.
74
B17
Although the brunt of the rectification dealt with domestic concerns, some of its measures also
reflect growing geopolitical tensions with the United States, most notably in the areas of data
export and the listing of Chinese tech companies on foreign stock exchanges. Some data
localization requirements were already present in the 2016 Cybersecurity Law, and were
expanded in the 2021 Personal Information Protection Law and Data Security Law. Dedicated
rules on data exports came rapidly after, and were finalized in 2022. These imposed security
review requirements for any export of data designated as “important” under the Data Security
Law, data pertaining to over 1 million individuals and sensitive data of 10.000 individuals. Data
exporters were also required to submit the contract with the foreign data recipient to CAC for
scrutiny. While CAC did provide standard contractual clauses for SMEs, these rules constitute
formidable barriers to data trading.
For decades, China has imposed foreign investment and ownership limitations in a whole range
of business activities, including media production and dissemination. To bypass these restrictions
and access foreign capital markets, Chinese companies would set up a “variable interest entity”
(VIE), a legally dubious construction where an offshore holding company essentially controlled
a domestic company through contractual means. Over 200 Chinese companies have listed on
foreign stock exchanges, predominantly in the US, through such a structure. The Chinese
government has maintained a considerable degree of constructive ambiguity on this structure,
recognising the importance of overseas capital for domestic growth79. In recent years, however,
concerns have grown about the possible influence or access to data that foreign owners and
regulators might gain 80 , particularly through new legislation such as the Holding Foreign
Companies Accountable Act (HFCAA)81. The matter came to a head when Didi listed on the New
York Stock Exchange against the instructions of CAC. The latter rapidly revised regulations
concerning cybersecurity review, a mandate it holds under the Cybersecurity Law, in order to
enable it to review foreign IPOs of Chinese companies holding data similar to those covered
under the data export regulations82. This not only turned CAC into a de facto securities regulator,
it also caused concerns about the continued ability of Chinese companies to maintain their VIE
structures. To alleviate those concerns, the China Securities Regulatory Commission issued draft
regulations requiring companies to file with them when planning overseas IPOs. The NDRC’s
2021 revision of “Negative List” foreign investment regulations also explicitly included Chinese
75
Sheehan and Du 2022; Wang 2021
76
B18; B22; B37.
77
B33.
78
Xie 2022.
79
Chen 2021.
80
B10
81
Bu 2021.
82
B11; B35.
While most of the rectification aimed to remedy perceived discrete problems or risks, it has also
served to embed the platform economy in a new, digitally-centred and future-oriented industrial
policy. In contrast to the previous focus on GDP growth, the “high-quality development”
paradigm differentiates different kinds of economic activities, some of which are deemed far
preferable over others. The core of this paradigm is enhancing the manufacturing sector through
the development and industrialization of “deep technology” and strategic emerging technologies
including artificial intelligence, blockchain, cloud computing, robotics and corporate software.
It not only intends to limit the relative growth of the financial sector, it also assesses the consumer-
facing activities of platforms as of limited utility as they do not contribute necessarily to the
profound levels of innovation the leadership pursues. Liu Shijin, for instance, stated that the
digital transformation of the economy meant shifting from consumption to production, and that
the true value of artificial intelligence lies in providing informative and valuable data to enhance
productivity, not merely to market products to customers85. To this end, the rectification included
several specific measures. The new anti-monopoly regulations, for instance, contained limitations
against “killer acquisitions”, where established incumbents purchase start-up challengers to
forestall competition, negatively impacting technological innovation and wider adoption.
Cybersecurity and data protection auditing and reporting requirements generate income streams
for the cybersecurity industry, allowing the industry to grow and consolidating overall
cybersecurity readiness nationwide86.
This supporting role of the platform sector was made clear in a number of high-level documents
that form part of the 14th Five-Year Plan cycle, addressing informatization generally, the digital
economy as well as the digital transformation of government87. A more detailed plan was issued
for the fintech sector88. A Politburo collective study session was devoted to the digital economy
as these plans were drafted, further underscoring its political priority 89 . Within these plans,
platform companies have important roles to play as contractors for governmental cloud systems
and databases, drivers in the exploitation of data – named a production factor by the State Council
in 2020, the digitization of existing agricultural, manufacturing and transportation services, as
well as the delivery of online social services such as healthcare and education. A new
Interministerial Joint Conference for the Digital Economy was also established under the
leadership of the NDRC, CAC and MIIT, in order to coordinate policy and regulation in the
future 90 . A 2022 CAICT report divides objectives in the digital economy in “digital
industrialization”, the popularization of primarily digital technology goods and services, and
“industrial digitalization”, using digital technologies to enhance the efficiency and productivity
83
B31; B32; B34.
84
Goodman 2022.
85
Sina 2022.
86
C02.
87
C01; C05; C07; C08.
88
C09.
89
A12.
90
A18.
The rectification did not merely intend to create new substantive rules for platform business, but
also to remedy the relatively weak deterrent posed by the limited levels of punishment that
previous administrative regulations enabled, as well as the limited resources of enforcement
authorities. The new Personal Information Protection Law and the Anti-Monopoly Law enabled
fines calculated as a proportion of annual revenue, rather than (relatively low) lump sums. SAMR,
the newly-established but underresourced competition regulator, used the priority of the
rectification to establish a new anti-monopoly bureau94 and expand its capabilities both at the
central level and in key cities. Its Beijing branch, for instance, established an expert advisory
committee consisting of over 100 scholars and legal experts, to assist in case work95. SAMR’s first
major victim was Alibaba. In April 2021, it fined the company 18 billion RMB for having imposed
“pick one from two conditions” and other competition violations, equal to about 4% of its 2019
nationwide revenue96. Subsequently, it imposed successive rounds of fines for failing to disclose
acquisitions 97, as well as another multi-billion antitrust fine on Meituan98 . Both Alibaba and
Tencent also came under investigation for possible corruption cases, respectively in relation to
disgraced Hangzhou Party Secretary Zhou Jiangyong and failure to prevent money laundering99.
Other regulators not only looked at corporate conduct, but at core elements of corporate
governance. The PBoC ordered Ant Group to restructure, requiring it to sever the close
connections between its payment services and its credit and lending activities100. Many of its
formal links with Alibaba have been severed, and founder Jack Ma has reportedly moved to
relinquish control over its operations101. Ant has reportedly also been in protracted consultations
with Ant about the imposition of a fine in excess of 8 billion RMB for undisclosed regulatory
violations as part of a broader arrangement that would enable the company to revive its plans for
public listing102. While no major tax-related regulatory changes took place, taxation authorities
have taken part in enforcement-related meetings with companies and initiated campaigns against
tax evasion in online services. Taxation authorities fined celebrity livestreamer Viya 1.3 billion
RMB for tax evasion 103 , followed by smaller punishments for similar offences by other
influencers104. CAC put Didi under a cybersecurity review after the company had listed on the
New York Stock Exchange in defiance of CAC instructions. During this process, Didi was
91
CAICT 2022.
92
C11.
93
C13.
94
A14.
95
C10.
96
D01.
97
D04; D07; D09; D10; D14.
98
D06.
99
Yang 2022.
100
Yang and Potkin 2022; Zhu 2022.
101
Yang and Huang 2022.
102
Zhu 2022.
103
D08.
104
Global Times 2022.
In wider terms, the rectification created a situation in which both regulators and companies had
to learn to reconstruct relationships and work together again under profoundly changed
conditions. This not only occurred in punitive terms: authorities also organized several meetings
with businesses to communicate what was expected of them 107 and to “have a clearer
understanding of the development situation”108. This close coordination illustrates a noteworthy
characteristic of this rectification. In contrast to other regulatory areas, the number of major
players in the platform economy is quite small: the April 2021 meeting involved only 34
companies. To be sure, enforcement in some areas remains an issue. Most notably, the “996
work culture” has proved to be an intractable problem, as competitive problems and job
insecurity continue to push workers to overwork 109 . Even so, the long-standing problems of
bureaucratic fragmentation and limited local enforcement capability110 matter far less, as central
authorities can interact with this small number of businesses directly and consistently, without
having to navigate complex on-the-ground circumstances across the country, or the limitations
of “campaign-style” enforcement111.
This coordination would be necessary to restabilize the platform economy, as the increased
compliance requirements and costs resulting from the rectification coincided with further
economic headwinds for China’s platform companies. The arrival of the Omicron variant of the
COVID-19 pandemic in China resulted in strict lockdowns in large urban centres such as
Shanghai and Beijing, disrupting economic processes. The United States stepped up pressure on
Chinese digital companies, amongst others through the prospect of delisting them from US stock
exchanges under the HFCAA112. This resulted in severe volatility of digital companies’ stock
values. Alibaba, for instance, went from 304 USD in October 2020 to 81 USD in May 2022,
while Tencent halved in the same period. In total, Chinese tech companies lost over 2 trillion
USD in market capitalization113.
In response, senior authorities have sought to balance signalling that the goals of the rectification
would be fulfilled, and that the platform economy remained an important sector. At a meeting of
the State Council Financial Stability and Development Committee in March 2022, top economics
policymaker Liu He indicated that regulators must “complete the rectification work of large
platform companies through standardized, transparent, and predictable supervision” 114 . A
meeting of the Politburo, the month after, indicated that “rectifications for the platform economy
will be completed, regular supervision will be initiated and specific measures to support its
105
Shi, Horsley and Lu 2022.
106
D02; D03.
107
Wang 2021.
108
A15.
109
Lu 2022.
110
See, for instance, Chen 2016.
111
Van Rooij 2016.
112
Posner 2022.
113
Economist 2022.
114
Xinhua 2022b.
Apart from compliance with the new regulations, platform companies have sought to mollify
authorities through both rhetoric and measures intended to signal their good citizenship. At one
of the consultation meetings organized by the CAC and other regulators, for instance, senior
corporate officers paid homage to the Party-state’s efforts in regulating the online sphere and
committed to closer cooperation. Tencent founder Pony Ma, for instance, stated he felt the
“concern and care” authorities have for the development of the digital economy, and promised
“Tencent will continue to respond to the needs of the country and the times.” Alibaba CEO Zhang
Yong affirmed that “regulation makes for healthier development” and pledged Alibaba would
better serve users and on-platform SMEs 123 . After the April 2021 consultation meeting, the
participating businesses all submitted letters of commitment on rules-compliant conduct to
SAMR124. Businesses also put their money where their mouth was. Alibaba and Tencent both
pledged 100 billion RMB to corporate “common prosperity funds”125, with other companies and
founders announcing further contributions. These initiatives would, amongst others, invest in
connectivity for poorer regions, support SMEs and the agricultural sector, improve the wellbeing
of gig workers, mitigate urban-rural inequality and enhance social services, particularly for
vulnerable groups. Alibaba also supported a local “common prosperity pilot zone” in its home
province of Zhejiang. Didi created a union for its drivers126, while JD.com announced it would
extend social security and health benefits to Deppon, a courier it acquired, establish a “housing
security fund” to help staff purchase homes, and cut top-level salaries by 10 to 20 per cent, all
measures clearly aligning with the “common prosperity” drive127. Businesses in the educational
sector, who saw their entire income stream dry up, had to resort to other ways to remain afloat.
New Oriental, the largest edtech company, pivoted to livestreaming, attracting customers by
making its videos educational128. To forestall stricter regulation, 30 tech companies established a
115
A17.
116
Ye 2022.
117
Huang 2022.
118
Hu et al. 2022.
119
Zhang 2022.
120
Zhai 2022.
121
Caixin 2022.
122
Xinhua 2022c.
123
CAC 2022.
124
A08.
125
Yuan and Jia 2021; TechNode 2021.
126
Bloomberg 2021.
127
Cailianshe 2022.
128
Lee 2022.
Conclusion
The rectification of China’s platform economy is a complex phenomenon that defies explanation
in monocausal or reductionist terms. It finds itself at the junction of a range of interlaced
substantive policy streams, some of which are continuations of longer-lasting practices, some of
which are more novel. Content regulations and the shaming of specific cultural phenomena, for
instance, are the latest iterations of forms of media control developed in the 1990s, but data-
related legislation or rules on foreign listing have no direct precedent. Some are tangentially
related to the functioning of the platform economy, others strike at its heart. The initiatives on
child protection are manifestations of a much more general policy trend, while rules on fintech
and algorithm-driven business models will have a profound impact on tech firms’ operations. It
involves multiple administrative bodies and authorities, each with different priorities and agendas.
Although the six categories of regulatory intervention outlined above each have their own
coherent logic, in combination, they add up to form a comprehensive new framework for the
way in which the Chinese government related to private companies, and in which it intends to
steer economic policy. This framework contains several regulatory-technical components. First,
it seeks to ensure that companies internalise costs and negative externalities that they had
previously palmed off onto other stakeholders, thus giving them greater incentives to reduce those
costs or, at the very least, tying to ensure no-one else is left holding the proverbial bag. Second,
it symbolizes a normalization of the platform sector, where big technology companies no longer
enjoy a halo effect that allows them to avoid the normal laws of regulatory gravity. Whether it is
fintech businesses needing to meet the same capitalization requirements as banks, or exceptional
working conditions in the gig economy no longer being tolerated, platforms will now be subject
to largely similar rules as the traditional companies they compete with or have displaced.
Furthermore, the framework has strong moral overtones. In short, now the platform sector has
matured and these companies hold significant market share as well as great profits, Beijing
expects them to act as good corporate citizens. In this view, reflected most of all in the discourse
surrounding “main responsibility”, companies are not just vehicles to generate profits for
shareholders, but impactful participants embedded in a larger ecosystem. It is incumbent upon
them that they contribute to its sustainability and continued flourishing.
In more general terms, the rectification also attempts to resolve the tensions emanating from the
Leninist imperative to maintain a monopoly of political control and the drive of companies to
maximise individual profit, as well as the emergence of very wealthy, well-known and potentially
influential tech entrepreneurs. Moreover, it does so at the time where the Party has changed its
approach to its relationship with private companies of increasing strategic importance, and
shifted programmatic purposes. With the post-19th Party Congress move away from the centrality
of GDP growth and towards “common prosperity” and “high quality development”, embodied
in the ambitious technological goals of the 14th Five-Year Plan cycle, the leadership has
demonstrated its intention to act in a far more dirigiste manner to steer economic players into its
envisaged direction. The course correction this required of the platform economy, and the
accompanying dislocating interventions, contrast with the supportive environment encountered
by business in other areas of technology: venture capitalist funding for the digital industry reached
historic highs in the year 2021, the high point of the rectification.
With this new approach, China is embarking on an unprecedented experiment. The 14th Five-
Year Plans for the digital sector constitute a form of industrial policy not been elsewhere in the
129
Wen 2022.
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Appendix: Timeline
A: Events and important meetings
A07 12 April Meeting between Ant Group and financial regulators, who https://www.ft.com/content/5c14c1d1-
order restructuring bd9e-4654-9a12-93c4ac46792d
A08 13 April SAMR, CAC and State Taxation Administration hold meeting http://www.cac.gov.cn/2021-
with 34 tech companies, who issue letters of commitment 04/13/c_1619894556494868.htm;
on regulatory compliance https://www.samr.gov.cn/xw/zj/202104/
t20210413_327811.html;
http://www.cac.gov.cn/2021-
04/16/c_1620179180102903.htm;
https://www.samr.gov.cn/xw/zj/202104/
t20210415_327862.htm
A09 17 August 10th Meeting of the Central Committee for Financial and http://www.xinhuanet.com/english/202
Economic Affairs, focuses on common prosperity 1-08/18/c_1310133051.htm
A10 8 September Central Propaganda Department, NPPA, CAC and Ministry http://politics.people.com.cn/n1/2021/0
of Culture and Tourism hold meeting with Major gaming 909/c1001-32221841.html
companies
A11 9 September 9 September: MIIT administrative guidance meeting on http://www.news.cn/2021-
interoperability between platforms 09/14/c_1127858259.htm
2021
B03 7 February Guanyu pingtao jingji lingyu de State Council Anti- https://gkml.samr.gov.cn/nsjg/fldj/2
fanlongduan zhinan (Guidelines Monopoly 02102/t20210207_325967.html
concerning Anti-Monopoly in the Platform Committee
Economy Area)
B04 19 February Guanyu jinyibu guifan shangye yinhang CBIRC https://digichina.stanford.edu/work
hulianwang daikuan yewu de tongshi /chinese-banking-and-insurance-
supervisory-commission-notice-
concerning-further-standardizing-
commercial-banksinternet-
lending-operations/
B05 12 March Changjian leixing yidong hulianwang CAC, MIIT, Ministry http://www.cac.gov.cn/2021-
yingyong chengxu biyao geren xinxi of Public Security, 03/22/c_1617990997054277.htm
fanwei guiding (Provisions on the Scope of SAMR
Necessary Personal Information in
Common Types of Mobile Internet
Applications)
B06 13 April Guanyu fangfan NFT xiangguan jinrong China Internet http://www.zgjjbdw.com/phone.p
fengxian de changyi (Proposal concerning Finance Association, hp?s=/News/show/id/7293/lmid/10
Preventing NFT-Related Financial Risks) China Banking Sector
Association, China
Securities
Association
B07 23 April Wangluo zhibo yingxiao banfa (Online CAC, Ministry of http://www.cac.gov.cn/2021-
Livestreaming Marketing Management Public Security, 04/22/c_1620670982794847.htm
Rules (Trial) Ministry of
Commerce, Ministry
of Culture and
Tourism, State
Taxation
Administration,
SAMR, NRTA
B08 26 April Yidong hulianwang yingyong chengxu MIIT http://www.cac.gov.cn/2021-
geren xinxi baohu guanli zanxing guiding 04/26/c_1621018189707703.htm
(zhengqiu yijian gao) (Provisional
Regulations for Personal Information
Protection in Mobile Internet Applications
(Draft for Comment))
C: Policy documents:
Acknowledgements
This paper was funded by the Netherlands Organization for Scientific Research (NWO), project
016.Vidi.185.200