Imagine you’re running a marathon. You’ve led the whole race. But a strong runner is coming up on your right. The finish line approaches.
Suddenly, there is a loud “crack.” The other runner has been shot in the head. You win.
This is essentially what has happened to the Chinese tech sector in recent months. The Chinese government has cracked down on major companies like Alibaba, Didi Chuxing, and Meituan. It has also regulated its substantial ed tech sector out of existence.
China used to be the US’s leading competition in technology. Now it looks like an also-ran.
Leaders of Alibaba and Didi angering Xi Jinping is one reason for the crackdown. Another appears to be China’s desire to refocus from software to hardware. The Party seems to think microchips, batteries and advanced materials are critical to economic leadership, while consumer software is a distraction.
One problem: semiconductors and most other manufacturing industries are a lot less profitable than software companies like Alibaba or Didi. And all of China’s net job growth since 2012 has been in services, not manufacturing.
Even with that growth, well educated Chinese youth often struggle to find decent jobs. Severely curtailing one of the most vibrant sectors of the economy will only make it worse.
China has lost sight of what those microchips and batteries are supposed to do: run software! They are not ends in themselves.
What’s more, the threat of sudden crackdowns will make it harder for all Chinese companies to raise money and grow. Maybe the hammer is landing on tech now, but investors will wonder, “Who’s next?”
More on China:
HOW CHINA’S TECH INDUSTRY DIES
CHINA’S TECH ELITE IS RUNNING SCARED
CHINA IS CRUSHING ONE OF ITS MOST INNOVATIVE COMPANIES
Photo: “Vice President Xi Jinping” by nznationalparty is licensed under CC BY-NC-ND 2.0
If you found this post interesting, please share it on Twitter/Reddit/etc. using the buttons at the bottom of the page. This helps more people find the blog!
Save Money on Stuff I Use:
Amazon Business American Express Card
You already shop on Amazon. Why not save $100?
If you’re approved for this card, you get a $100 Amazon gift card. You also get up to 5% back on Amazon and Whole Foods purchases, 2% on restaurants/gas stations/cell phone bills, and 1% everywhere else.
Best of all: No fee!
This platform lets me diversify my real estate investments so I’m not too exposed to any one market. I’ve invested since 2018 and returns have been good so far. More on Fundrise in this post.
If you decide to invest in Fundrise, you can use this link to get your management fees waived for 90 days. With their 1% management fee, this could save you $250 on a $100,000 account.
The only place I buy vitamins and supplements. I recently placed an order and received it in less than 48 hours with free shipping! I compared the prices and they were lower than Amazon. I also love how they test a lot of the vitamins so that you know you’re getting what the label says. This isn’t always the case with supplements.
Use this link to save 5%!
My wife and I have gotten organic produce shipped to our house by Misfits for over a year. It’s never once disappointed me. Every fruit and vegetable is super fresh and packed with flavor. I thought radishes were cold, tasteless little lumps at salad bars until I tried theirs! They’re peppery, colorful and crunchy! I wrote a detailed review of Misfits here.
Use this link to sign up and you’ll save $10 on your first order.