Thread by @ruima

What is China thinking when it comes to regulating its consumer internet companies? 2 main things:
1) must not go against national strategic objectives
2) sustainable / real profit or social benefit, not just capital gains

Pretty simple.

National strategic objectives:
Mitigate / solve demographic crisis
Keep manufacturing onshore & continue to upgrade as this is a matter of national security
Stable economic growth

Basically, balance for long term over maximizing short term

Real benefits over gains from playing games with capital:
Monopolies are bad. Throwing capital at a sector to get to monopoly status is very bad (ie crazy subsidies). Using other shady methods also very bad.

After school tutoring sector messed with both of these and was hit hardest. Others ie CGB just asked to stop market distorting subsidies. So … don’t freak out indiscriminately … they’re not the same.

ie what if I just do something simple like sell clothes online? Prob Ok, maybe really welcomed if you’re upgrading China’s manufacturing making it more efficient. If all you’re doing is throwing subsidies at ppl & disrupting market tho, probably less fine. Assess case by case.

Either way, working on solutions to help upgrade China’s real economy, esp manufacturing, will be a huge opportunity. No worries, everyone’s been working on it, it’s called industrial internet (Tencent talks about it a ton but so do many others).

Btw I’m not at all saying that the rules are gonna be right. But do understand the intent. What you prob need to first decide is if you can understand this framework. If you can’t, maybe don’t stick around. If you can, then you can start assessing risks.

BTW this isn’t personal opinion, it’s what the government has been saying pretty consistently. Here’s a summary of a recent talk by Huang Qifan I wrote for @TechBuzzChina Insiders. Join us if you want more.

insider.techbuzzchina.com/c/policies-and…

PS: Bc I get asked this a lot, the regulations are most definitely NOT to force folks to do deep tech. First of all, that's not really how fundamental innovation works? You don't just make autonomous driving engineers out of frontend web developers w subsidies / mandate?

Second of all, that's not even China's strategy. Again, referencing the Huang speech above AND the Semiconductor Fund actions (below), it's about scaling up existing tech, taking the Internet (that common thing!) and applying it to traditional industries.

insider.techbuzzchina.com/c/deep-and-eme…

The reality of China is that it's not there yet, there are many low hanging fruits to be picked still just upgrading traditional businesses by single digits %s.

Is it happening? Yes, is it way much slower than just throwing $ at anxious parents for AST? Yes. Get it now? 🙃

Oh. My. God. If you think what I said above was Chinese govt is trying to kill off 2C businesses so to make everyone invest / work in military and / or deeptech then honestly I have no words for you.

Please Google translate what Eric Li, a well known VC who is also very politically plugged in and a very vocal nationalist, said about China tech investment in Nov 2020, based on reading Qiushi, the CCP journal, as published in a nationalist outlet:
guancha.cn/LiShiMo/2020_1…

He's a pretty good interpreter of what the government wants in tech. ibaibu.com is one of the examples he gives of the types of companies that China needs to invest in. It's a B2B textile trading e-commerce platform. Another is welding robots.

2C is not dead, the platforms that have been created in the last few years allowed for domestic brands to rise up, which is something the govt wants, bc increasing domestic consumption is also a national strategic objective, remember?