Big Tech stands to gain from China’s plan

China’s grand plan to expand domestic consumer demand for the coming 13 years is set to give the country’s internet platforms a shot in the arm, as technology becomes increasingly central to Chinese society and the daily lives of its citizens.

The 22,000-character strategic report, jointly published on Wednesday by the central leadership of the Chinese Communist Party and the country’s cabinet, devoted many paragraphs to “new types of consumption” and pledged support for internet-enabled services, a sector mostly controlled by Big Tech companies.

E-commerce, for instance, is dominated by Alibaba Group Holding – owner of the South China Morning Post – along with JD.com and Pinduoduo, while the on-demand delivery services sector is led by Meituan. Tencent Holdings, ByteDance and Kuaishou Technology, meanwhile, hold a tight grip on huge swathes of China’s online entertainment market, which includes video gaming and short videos.

According to the new official document, China aims to encourage the development of online entertainment and healthcare, and support autonomous driving and autonomous delivery services.

Development in live-streaming e-commerce and the sharing economy, encompassing transport, accommodation and travel, will also be encouraged, the document said. In China, Didi Chuxing, which was fined US$1.2 billion by Beijing in July over data violations, remains the largest player in the ride-hailing market.

Even online learning services, which have suffered from a crackdown against private tutoring for schoolchildren since last summer, received friendly mention in the guideline.

The wording chosen this time by Chinese policymakers, after a fall of more than US$1 trillion in market value due to a regulatory clampdown on the country’s Big Tech firm for over a year since late 2020, shows that authorities recognise the role of the internet industry in boosting consumer spending, analysts said.

Support for new consumption bodes well for sectors such as consumer electronics, video gaming and virtual reality, according to a research note by analysts at Xian-based Western Securities.

The measures will help further diversify the growth of internet platforms and pave the way for the digital economy to play a bigger role in China’s overall economy, said Li Zhi, head of the Institute for Intelligence at market researcher Analysys International.

“Digitisation will lead to the full embrace of more demand for personalised consumer services and will boost consumption,” said Li. “The development of ‘internet plus social services’ and ‘internet plus entertainment’ will further push platform economies to diversify to meet digital consumer demand.”

This is not the first time that Beijing has tried to boost domestic demand to shore up the economy. In 1998, then-Chinese Premier Zhu Rongji shocked his countrymen by calling on them to spend more, in a society that traditionally regards frugality and saving up as virtues. The move unleashed a wave of spending, which along with the privatisation of housing, helped propel China’s rapid economic ascent after the Asian financial crisis in the late 1990s.

In contrast, when the global financial crisis hit in 2008, Zhu’s successor Wen Jiabao chose to roll out a massive round of fiscal stimulus through spending by local governments and the state sector, which left a long trail of debts.

This time around, Beijing has hand-picked new consumption, digitisation of traditional industries, and the development of new types of infrastructure as key areas to steer the economy forward.

“Consumption has become the main driver for our country’s economic growth,” the plan read. “By integrating the optimisation and upgrade of resident consumption with modern technology and production methods, China – the consumer market with the greatest potential in the world – will continue to grow.”

Boosting internet services could create employment opportunities for the younger generation, at a time when youth joblessness is especially acute: a survey in July showed that one out of five people aged 16 to 24 in China were out of jobs.

It also marks the latest in a string of reassurances from the state regarding its view of the Chinese tech industry.

He Lifeng, minister of the National Development and Reform Commission, delivered a digital economy development report in October, describing China’s digital economy as having “infinite possibilities” and potential for huge growth.

He’s speech came after President Xi Jinping said during the 20th party congress earlier that month that China would speed up its “digital economy” to promote integration between “real” and “digital” sectors. South China Morning Post