Clamping Down on ‘Spiritual Opium’

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You’d think the biggest story in tech to watch right now is the increasing power of the giant U.S. tech firms — and how to regulate them (regulation will come, at some point). But I can’t stop paying attention to what’s happening to China’s enormous tech industry and the entrepreneurial leaders who built it.

Maybe there are no real lessons in this story for Americans. No U.S. government — or any other democratic one — is inclined (or able) to do what the Chinese government is doing to rein in tech companies. And by “rein in” I mean this: The Chinese government appears to be taking control of significant parts of the industry.

Everyone who covers tech has long been aware that the Chinese tech phenoms — including Tencent, Alibaba, Huawei, JD.com, Baidu, Xiaomi and Lenovo — have worked with their government in ways that the big American tech companies have not done with the U.S. leadership.

But the power that the Chinese government has held over its tech firms has always been mostly implicit: No company made a big move without first considering how the Communist Party leadership would react.

But what was once implicit has become explicit. In the last several months, we’ve seen a laundry list of new regulations appear, beginning with the suspension of Ant Group’s I.P.O. at the end of last year.

(Ant, of course, was the brainchild of China’s most famous tech hero, Jack Ma, an energetic chatterbox of an entrepreneur — good luck trying to get a word in edgewise in an interview — who has essentially been silenced. Imagine a stifled Jeff Bezos and Elon Musk combined and you get the general idea.)

The Chinese government has aimed antimonopoly legislation at its powerful platform companies and has enacted stringent data and cybersecurity laws, along with high fines for violators. The government has also stopped companies from signing up users and cracked down on how money is raised abroad.

The leadership has also sought to limit the use of some tech by consumers. For example, companies have been forced to restrict the use of gaming apps by young people to a few hours a week and only on weekends. Strict regulations on celebrity fan clubs have been put in place.

The goal appears to be to reduce social unrest (or the potential for unrest) by targeting the addictive nature of tech, which was clear when Chinese state media called video gaming “spiritual opium.”

Some of the changes in China would be good in any country — privacy and data laws are much needed globally, especially in the United States. And who doesn’t agree that we all should put down our tech devices more often?

But the by-fiat nature of what China has done makes for an unstable situation. No surprise: These government moves have knocked a reported $1.5 trillion off the value of the Chinese companies because of uncertainty about what will come next.

Chinese regulators have sought to assuage those worried investors. One top Chinese official reportedly said at a recent gathering with Wall Street executives that the government still encouraged innovation and the tech sector in general.

Overall, that appears to be true, since the government has placed big bets across the map, like on artificial intelligence. So, too, in the genetic area, which is ripe for opportunity — and abuse.

In a “Sway” interview with me this week, the chief executive of 23andMe, Anne Wojcicki, underscored that the race with China is on: “There’s an information war that’s going on with respect to understanding the human genome. And China absolutely recognized that, and they want to win it. They are sprinting ahead,” she said.

“They have Beijing Genome Institute, they are sequencing huge numbers of people, they collect medical — I mean, they’re doing a lot. And so the U.S., frankly, is just behind.”

It remains to be seen if a stronger Chinese tech market will emerge from this increase in regulation, but the implications for what happens here in the United States are profound.

American tech leaders have long pointed to the expansion of Chinese tech companies as a reason to keep U.S. companies big. But if the Chinese tech companies are subject to such overwhelming regulation and end up still performing well, what excuse will the U.S. firms have?

Obviously, such regulation here needs to be done democratically, which favors the tech giants, since democracy is so slow-moving and disputatious. But, as I noted above, it’s inevitable, and China might be showing the path forward.

KARA SWISHER | COLUMNIST

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