Jason Wang used to be eager to talk publicly about the successful Beijing-based tech startup he founded in the mid-2010s and now runs as CEO. For good reason.
Wang, who’s going by a pseudonym, is the developer of a globally competitive consumer tech product. Founding his company in China in the mid-2010s during the country’s tech boom, he felt like he could build an empire almost overnight. Wang took advantage of the country’s unrivaled supply chain infrastructure, 1-billion-plus customer base, flush venture capital funding, and ultra-loose regulatory controls to build a tech startup months quicker and with a superior product than if he had launched the same company in the U.S. Silicon Valley was beginning to feel stale in comparison.
“Everything moved a lot faster in China,” says Wang.
And during China’s tech boom, one man—Jack Ma—was at the head of the pack. More so than his U.S. peers Mark Zuckerberg, Jeff Bezos, or Steve Jobs, the founder and CEO of e-commerce giant Alibaba assumed a larger-than-life persona in Chinese culture. His rags-to-riches story embodied the country’s economic rise and inspired a generation of Chinese entrepreneurs. His success convinced founders like Wang that China’s tech prowess was every bit as strong as Silicon Valley’s and that they could lead the next technological breakthrough. “I realized that it could be us,” Wang says.
Ma basked in his fame and power—once performing a Michael Jackson dance routine in front of 40,000 Alibaba employees—and flaunted his unique ability to shape regulation in his favor.
That was then. Wang says the environment for tech entrepreneurs like him has completely changed since late 2020, when the government effectively silenced Ma and launched a sweeping regulatory crackdown against the tech sector. Two years into the overhaul, China has implemented a swath of new antitrust regulations aimed at reining in the power of China’s tech industry and its high-profile CEOs. The campaign wiped out over $1.5 trillion in value from the country’s largest tech firms and billions from chief executives’ personal net worth.
Wang declines to share his real name or identifying details about his company with Fortune to speak freely about China’s tech crackdown. He walks on eggshells when posting on social media or talking with the press, wary that a misplaced comment could draw the ire of regulators.
“The government does not tell us where the line is… They are not very transparent about what they’re thinking.” he says. “I am cautious about what I say. We don’t want to end up having issues like [Ma did].”
The Chinese CEOs now operating in this altered reality are nothing like Ma. China’s celebrity chief executives are gone; the reticent CEOs now in their place are reshaping the role and leading with caution, technical skills, and—above all else—loyalty to the state.
The rockstar era
When Ma founded Alibaba as a business-to-business platform connecting Chinese merchants with global buyers in 1999, China was only two decades into its transition from a Communist system to a more capitalist-oriented economy. At the time, China had not even joined the World Trade Organization, and certainly didn’t have the thriving scene for tech startups that Silicon Valley enjoyed during the dotcom boom.
But the lack of tech infrastructure in China gave someone like Ma the chance to shape the industry around his own charisma and ambition, says Rui Ma, China tech analyst and host of the Tech Buzz China podcast.
“China’s biggest, most visible success [Jack Ma] does not have an elite background. And he does not have a technical degree,” says Rui Ma. “China’s market was so undeveloped…you didn’t have to be a tech whiz to be successful.”
Ma, raised in a relatively poor family in Hangzhou, taught English early in his career before discovering the internet on a work trip to Seattle. Upon returning home, he founded China Pages, an online business directory that a state-owned company bought a year later. “I had never touched a keyboard before that. That’s why I call myself ‘blind man riding on the back of a blind tiger,'” Ma told Inc. in 2008. In 1999, Ma famously launched Alibaba from his apartment after convincing 18 friends to invest $60,000 to get the startup off the ground.
Alibaba became one of the world’s fastest-growing startups in the 2010s. It had 80 million users in 2009; it has nearly 1 billion today. Over that same period, its revenue increased from $535 million to $134 billion. In September 2014, Alibaba set the then record for the largest debut on the New York Stock Exchange, raising $25 billion at a $231 billion valuation. Going public instantly made Ma China’s richest man, with a net worth of over $20 billion. His fortune peaked in 2020 at over $60 billion.
Ma and other early entrepreneurs like Robin Li, cofounder of search engine Baidu, and Pony Ma, founder of social media giant Tencent, became some of the country’s biggest celebrities, as tens of millions of admirers on social media venerated them and their enormous wealth. A vast fan base referred to Ma as “Teacher Ma” as a sign of respect and a nod to his humble beginnings. Ma also came to symbolize the innovative spirit and entrepreneurial ambition of China’s entire tech industry, with Chinese media in the mid-2010s referring to the “era of Ma Yun” (Ma’s Chinese name) to describe the rise of the sector.
“During the rock star CEO era, the shelves of bookstores were full of biographies of tech CEOs. That’s all anybody wanted to read about,” says Kendra Schaefer, head of tech policy research at Trivium China. “It was a real matter of national pride for China, that the country had these kind of innovative champions.”
During Ma’s rise, Alibaba, Tencent, Baidu, and other internet giants were largely left to their own devices, with the important exception that the companies supported central government efforts to censor politically sensitive material on China’s closed-off internet.
“Because of China’s very lax regulatory approach, which was much more laissez-faire than you saw in the U.S., the Chinese platform economy became really concentrated… Alibaba and Tencent literally became the duopoly in China,” says Angela Zhang, a law professor at the University of Hong Kong and author of the book Chinese Antitrust Exceptionalism.
When regulators did try to crack down, Ma thwarted their efforts.
In 2014, China’s central bank ordered Alibaba and Tencent to disable QR codes payments over data security concerns. But China’s central government didn’t enforce the ban, which Martin Chorzempa, a senior fellow at the Peterson Institute for International Economics, attributes to Ma’s sway.
“He was effectively able, through his influence above the central bank, to block the government from implementing the regulation… This was a raw showing of power that I don’t think even a Silicon Valley company has managed,” says Chorzempa.
Ma appeared to delight in his power over government regulators. “When a tiger follows you, you can run much faster than you thought,” he bragged to Bloomberg in 2017 about dodging government regulation.
Eventually, the tiger caught up.
The King’s speech
In late 2020, Ma was preparing to spin Alibaba’s fintech affiliate Ant Group off in a $37 billion IPO, which at the time would have been the world’s largest-ever debut. But on Oct. 24, 2020, weeks before the blockbuster listing, Ma gave a now infamous speech at the Bund Finance Summit in Shanghai in which he compared China’s state-owned banks to pawn shops and blamed Chinese regulators for stifling innovation. “The game in the future is about innovation, not just regulatory skills,” he said in the speech, according to reports.
Ma’s speech and Ant’s record IPO coincided with the government’s early scrutiny of major tech platforms, triggering a “domino effect” that cascaded into an all-out regulatory storm, says Kai von Carnap, a tech analyst at the Mercator Institute for China Studies.
“The Jack Ma speech was a black swan event,” says Zhang. “China’s government really wanted to discipline him and his whole business empire. But then the whole bureaucracy was mobilized and everybody became a target.”
On Nov. 3, 2020, Chinese regulators suspended Ant’s IPO. Seven days later, the government released new antimonopoly rules for the entire tech sector that ultimately banned common (and profitable) industry practices, such as forcing vendors to sell exclusively on one platform, namely Tencent or Alibaba. A month later, regulators opened an antitrust investigation into Alibaba that culminated in a $2.75 billion fine for alleged monopolistic practices. Late last year, Alibaba pledged $15.5 billion to support the government’s “Common Prosperity” campaign to redistribute wealth to poorer and rural populations, which analysts say was an attempt by Alibaba to align itself with the government.
Ma all but disappeared from public view, stoking rumors that he was being detained. He has made only a handful of public appearances in the past two years, periodically showing up on his yacht off the coast of Spain or in video appearances for charity events.
Beijing’s crackdown on China’s wider tech sector has continued. The government has issued billions in fines to major tech firms. It virtually wiped out the entire online education sector and is enforcing strict new antitrust rules to police behavior of platform companies, protect user data, and ensure competitiveness.
The enforcement actions have wiped out over $1.5 trillion in value from Chinese tech stocks. Alibaba alone has lost 75% of its market capitalization since its peak valuation of $838 billion in October 2020. Tencent’s market cap has shrunk 62% from a February 2021 peak of $916 billion. The fortunes of Alibaba’s Jack Ma and Pony Ma’s Tencent, meanwhile, have halved since the end of 2020; the CEOs have lost a combined $75 billion, according to Bloomberg.
As the net worths of China’s tech founders have shrunk, so have their profiles; they’ve either stayed out of the spotlight or renounced their positions altogether. Su Hua, CEO of short-form video giant Kuaishou; Richard Liu, CEO of e-commerce firm JD.com; Kuai Jiaqi, CEO of delivery platform Dada Nexus; Colin Huang, CEO of e-commerce company Pinduoduo; and several others have all stepped down from their chief executive roles in the last two years.
Each CEO had his own reason to leave, but Zhang says their departures can't be separated from the government’s shifting attitude toward internet companies and their leaders; it went from encouraging and nurturing to openly hostile almost overnight, she says.
“The era is over for big rock star CEOs," says von Carnap.
The next generation of CEOs
Beijing’s outright crackdown has remade the typical Chinese CEO, as have the government’s priorities going forward.
Beijing is favoring "deep tech" industries like semiconductor manufacturing and artificial intelligence, while pushing aside "platform" internet companies. China’s government touted its preference for deep tech over consumer tech in its 14th five-year plan in 2021. The economic road map stressed China’s need to rapidly develop chipmaking and other deep tech manufacturing capacities, while omitting any mention of consumer-facing tech.
Beijing’s stated preference has chilled fundraising for consumer-tech companies. In the second quarter of this year, venture capital funding for Chinese internet startups fell to an eight-year low.
“I think the Chinese internet is done. I don't see sensible opportunities for consumer internet-based investments,” says a Beijing-based venture capital investor who asked to remain anonymous to speak freely about China's government.
Meanwhile, prominent investors like billionaire Neil Shen of Sequoia China have followed the government's lead in redirecting funds from consumer tech to deep tech.
“The party line is that entrepreneurs and tech companies need to innovate with a sense of mission, with a sense of national mission. The state has priorities, and private capital follows,” says Schaefer.
The shift towards deep tech has changed the criteria for being a CEO. Chief executives today are far more likely to be engineering Ph.D.s than former English teachers, says Rui Ma. “There's less appreciation for people like [Jack Ma] and more appreciation for people who have really serious technical chops,” she says.
The shift towards deep tech will also slow the pace of innovation compared to internet companies and subsequently cap just how high CEOs and their businesses can fly. “I'm skeptical about China’s ability to have short-term results with such an intense pivot compared to what they had before," says Chorzempa.
Gains in deep tech are just more difficult to come by and take longer to manifest. With semiconductors, for instance, China has spent over three decades and hundreds of billions of dollars trying to wean itself off of foreign-made chips to little avail. Last year, China spent $432 billion on semiconductor imports, equivalent to what it spent importing crude oil and grain. "If you're doing semiconductors, you're talking about many-year product cycle leads with huge investment in fixed facilities. Whereas the software space had the ability with very few people to immediately scale up to serve a billion people and make a ton of revenue,” Chorzempa says.
Beijing’s moves have made the prospect of becoming a tech CEO less appealing. Entrepreneurs are wary of taking risks under Beijing's increasingly watchful eye, says the Beijing-based VC investor.
Rui Ma is optimistic that the entrepreneurial spirit that fueled China’s tech boom can still thrive after the tech crackdown given the relative success of those who’ve so far escaped Beijing’s crosshairs.
“[Beijing’s crackdown] didn't kill people's entrepreneurial fervor. It just made it clear that there were lanes that you should be going into,” she says.
She pointed to Robin Zeng, CEO of battery maker CATL, as a model for the new type of Chinese CEO that has emerged from Beijing’s crackdown relatively unscathed. Zeng, a physics Ph.D., rarely gives public interviews and, over two decades, has quietly grown CATL into the world’s largest electric vehicle battery maker through a maniacal focus on technical details. “That is the sort of entrepreneur that you can tell that the government is pushing everyone to be… and more and more people are starting to think that is the type of entrepreneur that deserves their respect," Rui Ma says.
But he has also hedged against a potential crackdown on his own sector by focusing more on markets outside China, and he lives in constant fear that regulators could one day target his company. Wang says that the tech crackdown has not otherwise changed his plans for building his startup, even as it’s made him more cautious in his public appearances. Behind the scenes, he and his firm try to stay in constant communication with government officials to ensure they don't land on Beijing’s list.
"At some point it could be you. Without explanation, the whole [company you have built] for five or 10 years could be shut down. I think that is too much," says Wang.
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