In China, tech barons look like ashes

Between the end of June and the beginning of August, the twenty entrepreneurs at the origin of the main Chinese technology groups saw their fortunes melt. They collectively lost 87 billion dollars (79.4 billion francs). Most affected are Colin Huang, the head of e-commerce site Pinduoduo, who sold $15.6 billion, or a third of his fortune, and Pony Ma, the originator of Tencent, who lost more than $12 billion, or 22% of its assets.

This berezina is due to the offensive launched by Beijing against big tech companies since November 2020. Alibaba was the first to suffer the effects, with the suspension of the listing on the stock exchange of its financial arm Ant Group, followed by a fine of 18 billion of yuan (2.5 billion francs). In late June, Didi, which dominates 90% of China’s on-demand taxi market, was placed under investigation after raising $4.4 billion on the New York Stock Exchange. Then, in July, Beijing dealt the final blow to the tutoring industry, banning it from making a profit.

Read too: Beijing asserts its power against Tencent, Alibaba, Didi and other tech giants

coordinated attack

“This coordinated onslaught scared off investors, which caused the shares of these companies to plummet – sometimes nearly 90% – and therefore the fortunes of their founders, who often own a large chunk of them,” explains Rupert Hoogewerf, who created the Hurun Report, a ranking of Chinese billionaires. In total, Beijing’s offensive wiped out more than a trillion dollars of valuation from Chinese tech companies.

“Until recently, the Chinese government had little intervention in the technology sector, with growth at all costs being the watchword, notes Rui Ma, a consultant specializing in Chinese technology. This has given rise to a series of extremely powerful oligopolies.” Alibaba and Tencent in the mobile payments industry. Meituan and He delivered meals to me. Alibaba, Pinduoduo and JD. com in which of online commerce.

These companies were run by billionaires with rock star status, whose fortunes exploded along with the stratospheric growth in the number of their users. “The pandemic, which has proven to be hugely profitable for e-commerce, meal delivery and online tutoring businesses, has further increased this phenomenon,” says Rupert Hoogewerf. The country now has more than 1,000 billionaires, double the number five years ago.

Read too: Didi Chuxing, the Chinese Uber, wanted to go faster than Beijing

encourage competition

This did not go unnoticed in power circles. “The government wants to end the monopolistic practices of these large technological groups, in the hope of creating a more competitive environment”, underlines Rui Ma. He also fears social instability. “These companies have caused a lot of social problems and the population is outraged at their leaders,” she said.

In recent months, Chinese media has widely circulated the stories of poorly paid meal delivery men, such as this man who set himself on fire because he had not been paid for several weeks. Or employees of e-commerce companies subject to the draconian law of 996, that is, six working days a week from 9 am to 9 pm, like this young woman who died of exhaustion on Pinduoduo.

Lie down to avoid problems

Aware of being in Beijing’s crosshairs, Chinese tech barons are multiplying gestures of goodwill. In July, Lei Jun, chairman of smartphone maker Xiaomi, donated 2 billion francs in shares to two charitable foundations. In May, Wang Xing, founder of Meituan, dedicated 2.1 billion francs of his personal fortune to educational and scientific research projects.

“Some of these entrepreneurs, like Zhang Yiming, founder of ByteDance [le groupe qui possède Tik Tok, ndlr]completely relinquished their position at the head of the company”, specifies Rebecca Fannin, author of China’s Tech Titans. Colin Huang increased his shares in Pinduoduo from 43% to 29%, which saved him from becoming China’s richest man. In March, he left the company he had founded six years earlier to focus on developing the rural economy, a government goal.

“Most of these billionaires are smart, slips Rupert Hoogewerf. They know they need to keep quiet to stay out of trouble.” Those who refuse to do so pay the price, like Jack Ma, who publicly denounced the authorities a week before the Ant Group attack, or Wang Xing, who saw Meituan lose. $26 billion in market value in May after publishing a poem criticizing the authoritarian leanings of China’s first emperor, a thinly veiled critique of Xi Jinping.

Read too: Alibaba shares fall after suspension of Ant IPO

Relief in the ambush

But the next generation of star entrepreneurs is already emerging. Robin Zeng, founder of lithium battery maker CATL, saw his fortune double in the space of six months to $43.7 billion, more than Jack Ma’s.

“There are also new billionaires in the electric vehicle and biotechnology sector, two areas Beijing wants to promote,” notes Rupert Hoogewerf. Last year, Zhong Shanshan, owner of the beverage company Nongfu Spring, dethroned Pony Ma to become China’s richest man, with a fortune of $68.8 billion.

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