It hardly bears repeating that 2021 was a rough year for China’s platform companies. The firehose of new regulations and rolling crackdowns on everything from data security to overseas listings cost Chinese shares—including those of Didi, Meituan, Pinduoduo, JD.com, Tencent, and ByteDance—42% of their cumulative value in the U.S. and Hong Kong.
Not so long ago, China held up its homegrown tech heroes as evidence that its modern socialist market economy was innovative enough to give Silicon Valley a run for its money. What changed? Beijing’s definition of innovation. Social networks and food-delivery apps no longer qualify as innovative in a world where U.S. sanctions threaten to place China in a potentially crippling chokehold. While the platforms spent last year breathing into a paper bag, makers of critical infrastructure—like 5G giant Huawei, video surveillance maker Hikvision, battery manufacturer CATL and drone maker DJI—largely escaped the regulatory squeeze.
Beijing’s new focus will reshape China’s tech sector as venture capitalists pivot toward the companies now in favor. But it will also reshape platform companies as they scramble to align their corporate missions with national strategic goals. In fact, this process has already begun.