China tightens grip on emerging tech, spooking foreign investors

  • China seeks to extend the growing state influence over its technology sector into new manufacturing fields amid the threat of U.S. sanctions, leaving foreign investors spooked about government involvement in areas expected to drive the country’s economy.
  • Beijing’s stated pursuit of “self-reliance and self-improvement” in technology as a shield against Washington goes beyond its political crackdown in recent years intended to subdue hugely influential IT giants like Alibaba Group Holding.
  • China’s latest government work report calls for “building up our country’s strength and self-reliance in science and technology” with a “new system for mobilizing resources nationwide.” A reform proposal approved 10 Mar by the National People’s Congress creates a Communist Party-controlled committee to oversee science and technology policy.
  • The science proposal fits with other recent moves to bring public security and financial oversight under party control. Market players on the mainland see this shift in power from the Chinese state to the Communist Party as benefiting listed companies over the medium to long term.
  • However, foreign investors worry that excessive government interference will stifle innovation and sacrifice productivity improvement, one of the few sources of growth available as China’s population shrinks.

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