(Bloomberg) — China’s technology industry is already recovering from Beijing’s sweeping crackdown, with founders and investors adjusting to the new reality, according to one prominent venture capital investor.
“The Chinese entrepreneurs, they have a ‘You can’t kill me attitude’ toward the government, and toward anybody,” said Gary Rieschel, founding managing partner of Qiming Venture Partners, in an interview at Bloomberg’s New Economy Forum in Singapore. “They’re fiercely competitive, the energy is phenomenal. All you can do is pick the best entrepreneurs.”
Xi Jinping’s administration kicked off a broad crackdown on the industry last year, first targeting the e-commerce empire of Alibaba Group Holding Ltd. and then expanding to giants such as Tencent Holdings Ltd. Beijing pursued tech monopolies that exert broad power over their sectors, but also set social priorities, including the elimination of for-profit online tutoring and the reduction of game time for minors to three hours a week.
Investors did briefly curtail their bets on technology companies after the crackdown, but they have since recovered, Rieschel said.
“The Chinese government now has made it very clear there are some things you don’t want to invest in, because you don’t want to have the questions about dual-use technology, you don’t want to have the pressure from the U.S and from China for different reasons,” he said. “It certainly has guided the investments to areas that we feel are safe.”
Overall, he said Beijing’s crackdown is likely to have long-term benefits for the sector because it will loosen the hold of giants like Alibaba, Tencent, Baidu Inc. and JD.com Inc.
“The regulatory changes have largely been positive for the startup infrastructure,” he said. “Effectively, Alibaba, Tencent, Baidu, JD.com had created monopolies. So the fact that the government intervened to break some of that apart is over time going to be good for those companies.”
Governments around the world are wrestling with the extensive power of technology giants, he said. In the U.S., for example, Apple Inc., Amazon.com Inc. and Meta Platforms Inc.’s Facebook have all drawn scrutiny.
“At the government level, none of the systems in the world — whether it’s the U.S., China, Singapore, it doesn’t matter — none of our systems are prepared to deal with the tsunami of technology coming at them,” Rieschel said. “It’s a hard thing for humans to think about restructuring entire systems, but that’s what it’s going to take to get through the next 10 or 20 years, and I think there’s going to be a lot of anxiety about that across the world.”
Although Chinese entrepreneurs may have found their footing, he thinks the Beijing government will be “nervous” in 2022.
“Forget what you thought you knew,” he said of the changes ahead.
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