China's Tech Truce

The country's technology giants are finding out how to operate within Xi's tacit rules

- Joshua Brustein and Anne VanderMey

In China, 2022 was the year Big Tech changed. Succumbing to a government crackdown and a pandemic that refused to go away, the country’s leading internet conglomerates, Alibaba Group Holding Ltd. and Tencent Holdings Ltd., experienced their first-ever quarterly revenue drops and cut jobs by the thousands.

The humbling turn resulted from an explicit strategy by the Chinese government and marked the start of a new era in the way China’s tech industry operates. President Xi Jinping has proved willing to sacrifice economic growth and other priorities in exchange for control. For two years, his government squeezed tech giants it once celebrated, while leaving them uncertain about what to expect next.

Now Xi and China’s huge tech sector seem to have struck an uncomfortable truce. The Communist Party has let go of its campaign of sudden, severe crackdowns in favor of an effort to inject more clarity about what it considers to be good corporate citizenship. In exchange for this predictability, Alibaba, Tencent and other companies have made peace with sedate growth, aligning themselves with Xi’s agenda to curtail tech monopolies and promote what he describes as common prosperity. The decade-long internet gold rush is over.

“Xi Jinping has tamed the wild horses of the private sector,” says Ming Xia, a political science professor at the City University of New York. “But the problem is that he did such big damage with his policy that the confidence of some entrepreneurs and foreign investors is already destroyed.”