On Monday, a private school founded by Alibaba’s partners published an article online about a visit there by Jack Ma, who spoke about the challenges ChatGPT poses to education.
The news spread quickly across social media, accompanied by some cheers. Mainstream international news outlets framed the story like this: Jack Ma has returned to China.
So why is it so important whether a person returns to their home country?
It’s because everyone sees it as a signal, or rather, one of many signals.
Signals after the crackdown
At the end of 2020, the Central Economic Work Conference (CEWC) proposed strengthening anti-monopoly efforts and preventing the disorderly expansion of capital.
Over the next year, various policies and regulations were released to combat unfair competition and monopolies. Huang Yiping of the National School of Development at Peking University called 2021 “the year of strong regulation” for the internet platform economy.
After nearly two years of rectification, at the end of 2022, the CEWC proposed rapidly developing the digital economy, normalizing supervision, and supporting platform enterprises in leading economic development, job creation and global competition.
The difference between the two statements is like night and day.
On Dec. 18, the newly promoted Zhejiang Provincial Party Secretary Yi Lianhong paid a visit to Alibaba to convey the work conference’s message. The visit was widely reported by the media, which viewed it as a change of attitude.
On Jan. 16, ride-hailing firm Didi announced that it had obtained approval from regulators to resume new user registration. Foreign media like The Wall Street Journal saw it as another a sign that Beijing was easing its grip on its internet companies.
On March 5, the Government Work Report reiterated plans to support sustainable development of the platform economy and its role in driving employment and entrepreneurship, expanding the consumer market and innovating production models.
And then, Ma returned.
The benefits of the platform economy
Let’s take a look at the advantages that the platform economy brings: Leading economic development, job creation, global competition and entrepreneurship and consumption.
1. Economic development
The European Union publishes the Industrial R&D Investment Scoreboard every year, which lists the top 2,500 companies in the world in terms of research and development (R&D) investment.
In the latest report, R&D investment of Chinese mainland companies in 2021 accounted for 17.9% of the global total, surpassing the entire EU, which accounted for 17.6%. Of the top Chinese firms, two are internet platform companies: Alibaba ranked 17th and Tencent ranked 18th.
Apart from providing on-demand services such as food delivery and entertainment, these companies have actually made immense investments in areas such as cloud services, modern logistics, and supply chain finance, driving innovation and leading development.
2. Job creation
By the end of 2021, around 200 million people in China are engaged flexible employment through the platform economy.
The number of merchants on e-commerce sites Taobao and Tmall has exceeded 10 million, and the number of merchants born in the 1990s and 2000s has topped 4 million. According to a survey by Tsinghua University’s School of Economics and Management, one of every 80 people between the ages of 18 and 30 in China is a seller on Taobao.
Meanwhile, the number of food delivery couriers is about 13 million. A 2018 report released by Meituan shows that 77% of its riders are from rural areas, while a 2020 Ele.me report said its platform has provided nearly 300,000 jobs to people from the country’s designated list of poor regions.
By the end of 2021, there were nearly 140 million livestreaming accounts in China, driving the employment of tens of millions. According to a report published by the State Information Center, the platform economy created jobs for about 84 million people in 2020, a 7.7% increase from a year ago. Amid a high unemployment rate among China’s youth, the platform economy has actually played a role as a “job reservoir” and “social stabilizer.”
3. Global competition
In 2020, there were two Chinese firms among the top 10 global companies by market value — Alibaba and Tencent.
We’ve moved from the “copy-to-China” phase and entered the “copy-from-China” phase. When Elon Musk bought Twitter, he wanted to try to emulate Weibo and even WeChat.
In 2022, TikTok was named world’s fastest-growing brand by Brand Finance. In 2021, Gartner evaluated the core technical capabilities in cloud computing, comparing six companies: Amazon, Alibaba Cloud, Microsoft, Google, Oracle, and IBM. Alibaba Cloud scored the highest in four of the assessments.
And Baidu is taking on the AI competition brought on by ChatGPT.
These platform companies are the main players in China’s participation in international competition.
4. Entrepreneurship and consumption
Mou Hui, born in the 1990s, is from Enshi, Central China’s Hubei province. Four years ago, her family’s small business was on the verge of bankruptcy. She chose to start a business while taking care of her child and sold products through livestreaming. She successfully promoted more than 50 kinds of agricultural products from her hometown and achieved economic independence.
We’ve seen many similar stories in recent years. E-commerce and livestreaming gave many from China’s rural areas a chance to change their lives.
What exactly has the platform economy changed?
The channel structure between supply and demand.
When some people criticize the platform economy for taking businesses away from traditional channels like shopping malls and supermarkets, they may not have realized that these channels had actually restricted supply and demand. Before the platform economy, channel costs were very expensive.
From an economic perspective, the essence of the platform economy is a two-sided market. They are not buyers or sellers, but rather they provide buyers to sellers and vice versa, and attract more buyers and sellers through economies of scale. Corresponding goods can be physical products, services, content, or experiences.
The larger the scale, the more inclusive it is. But the larger the scale, the harder it is to resist the temptation of monopoly.
This brings a series of regulatory challenges: how to avoid monopoly while developing economies of scale, how to avoid bad practices while improving data analysis, how to increase job security while providing flexible employment, and more.
Such development and regulatory problems can only be solved in practice. We look forward to what normalized regulation will look like.
We see some hope in 2023. We also don’t expect 2023 to be easy. Our confidence at this moment is similar to a candle in the wilderness, flickering but never going out. A few harsh words could cause the flame to flicker, but news of one person coming home could also make it burn brighter.
Wu Xiaobo is a financial writer and visiting scholar at Harvard University.
This article has been edited for length and clarity.
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