China’s young tech blood looks to AI, crypto in the post-crackdown era | Business and economics

Taipei, Taiwan – Justin Sun’s biggest lesson from his mentor, Alibaba Group founder Jack Ma, was how to use shared values ​​to scale up a company quickly and manage ever-larger numbers of employees.

“We learned a lot from Alibaba and Jack Ma about trying to adapt our business,” Sun, the founder of global cryptocurrency network Tron, told Al Jazeera in a recent interview.

Sun, 32, and Ma, 58, represent different generations of Chinese entrepreneurs. But they have both navigated choppy regulatory waters amid a years-long campaign by the Chinese government to roll back the influence of its tech giants.

Ma, once the poster child for China’s entrepreneurship-driven economic growth, saw the initial public offering of Ant Group – which at $37 billion would have been the world’s largest – abruptly canceled by Chinese regulators in November 2020, marking the start of a broad regulatory crackdown that ushered in new rules for everything from financing to cyber security.

Sun, who established a relationship with Ma at the Alibaba founder’s elite business school in Hangzhou, completed the company’s initial coin offering (ICO) in 2017, raising $70 million, just days before China banned such fundraising and shut down all local cryptocurrency exchanges.

Since then, Beijing has sought to reassure firms that it intends to ease its grip on tech firms as it seeks to revive the economy following the end of its crippling “zero-COVID” strategy.

Guo Shuqing, a senior central bank official and financial regulator, said in January that the technological onslaught – which has wiped about $1 trillion off the market capitalization of the sector – was “basically” over and private firms would be encouraged to “come strong in leading economic growth, create more jobs and compete globally’.

Around the same time, Beijing allowed ride-hailing app Didi back onto app stores, ending 19 months of regulatory purgatory, during which the company was fined $1.2 billion and forced to delist from the New York Stock Exchange after just six months. monthly run.

Still, questions remain about the extent to which Chinese entrepreneurs’ confidence has been eroded by the crackdown — and how younger generations might want to reshape the tech industry. There is also uncertainty as to whether the impact is really in the past. In February, Bao Fan, one of China’s best-known investment bankers, was reported unreachable by his company, joining a long list of prominent Chinese businessmen who have apparently disappeared into China’s opaque legal system.

Sun declined to discuss Beijing’s crackdown and his expectations for regulatory policy directly, but like a growing number of Chinese entrepreneurs, he runs his business from Singapore. He has also given up his Chinese citizenship in favor of a Grenadian passport, which he says makes international travel easier. In 2019, Chinese business publication Caixin reported that Sun was being investigated by Chinese authorities and had been banned from leaving the country, claims he has dismissed as false.

“I always wanted to be a global citizen,” said Sun, who was Grenada’s official representative to the World Trade Organization (WTO).

“That is why in the last 10 years I have been to 100 countries in the world. And I also think that the success of cryptocurrencies is related to globalization.”

Sun sees a divide between his and Ma’s generation based on the fields they operate in: While the older generation achieved success in fields such as e-commerce, real estate and finance, Sun’s peers focus on newer fields such as artificial intelligence (AI) learning and cryptocurrencies . These newer fields offer more potential for growth, Sun said, compared to areas Ma’s generation focused on that are already mature.

“Real estate, e-commerce, the traditional industries, have become full of competition and they have reached the limits of growing their business in the future, but I think for blockchain, AI, these days (the potential) is limitless.” he said.

Last week, the US Securities and Exchange Commission announced civil charges against Sun and three of his companies for alleged fraud and market manipulation. Eight celebrities, including actress Lindsay Lohan and rapper Akon, were charged with promoting Sun’s cryptocurrencies without disclosing that they had been paid to do so.

Sun’s public representative directed inquiries about the case to a Twitter post in which the crypto entrepreneur said the allegations “lacked merit” and that the SEC’s framework for crypto was underdeveloped.

Beijing’s efforts to put the technical setback in the rearview mirror appear to fit into a wider push to revitalize the economy, which grew just 3 percent last year, the second slowest rate in nearly 50 years. During its annual parliamentary session last month, China inaugurated a new prime minister — Li Qiang, the former party chief of financial powerhouse Shanghai — and reshuffled its top economic team.

Speaking about China’s response to Davos last week, Li aimed to reassure foreign business leaders, including Apple CEO Tim Cook, that the country would open up further.

On the same day, Ma, who has reportedly been living in Japan since last year, appeared in the eastern Chinese city of Hangzhou, where he visited a school he co-founded and gave a speech on the importance of AI.

Karman Lucero, a fellow at the Paul Tsai China Center at Yale University, said the influence of the “old guard” of business leaders at tech giants such as Alibaba, Baidu and Tencent is “probably gone, or at least greatly reduced compared to what it was before – as well as the culture they built, which was heavily influenced by Silicon Valley”.

“The key question is, what is [the new entrepreneurs] will build instead, and will it be successful in the way they want?” Lucero told Al Jazeera.

While experts and businesspeople say it’s too early to gauge the exact direction China’s tech scene will head after the crash, there have been some clues.

Beijing has repeatedly signaled that it wants companies to focus on sectors of strategic value to the state, such as semiconductors, artificial intelligence and advanced manufacturing, amid growing competition and hostility with the United States.

At the same time, officials have expressed cross-border disdain for the fields of established technology champions, such as social media, e-commerce and gaming – the so-called “platform economy”.

At the parliament meeting earlier this month, Tencent founder Pony Ma was conspicuously absent from the list of delegates, while Robin Li, head of search giant Baidu, William Lei Ding, founder of gaming group NetEase, and Wang Xiaochuan, head of online portal Sogou, were left out of a list over top advisers to the government.

Instead, the delegates’ list was stacked with representatives from AI and semiconductor firms, including Zhang Suxin, chairman of chipmaker Hua Hong Semiconductor, and Liu Qingfeng, chairman of AI group iFlytek.

The trend illustrated by Sun, Ma and other Chinese entrepreneurs moving their assets, businesses and families abroad is worrying for the “Chinese economic fiber”, said Joerg Wuttke, president of the EU Chamber of Commerce in China.

“These are the guys who have made a difference in the last 10-20 years in bringing China forward,” Wuttke told Al Jazeera. “[The crackdown] was an incredible headwind for Chinese entrepreneurs, and much remains to be done to regain the trust of these people.”

Still, not everything is smooth sailing for Chinese entrepreneurs when they first move abroad either.

Rui Ma, a California-based investor and adviser to technology companies, said Chinese tech entrepreneurs in the United States she consults often express concerns about being discriminated against and distrusted because of their identity, amid increasingly tense relations between Beijing and Washington.

“They feel very strongly pressured, not by Chinese politics, but by international politics and worry that they cannot do business in the international markets because they are judged unfairly” because of their identity, she told Al Jazeera.

In addition to operating in new areas of interest, Beijing also expects tech firms to “become better social actors,” Lucero said.

“It includes a mix of needs to treat workers better; need to do a better job of being open about how they handle consumer data; needs to do a better job of censoring information and controlling content that the party may find unfavorable.”

The key word is not repression but “compliance,” said Wang Huiyao, president of the Center for China and Globalization, a Beijing-based think tank. “There are some adjustments for the tech giants to reflect the new reality,” Wang told Al Jazeera.

From a broad policy perspective, Beijing wants its technology champions to play by the rules and support the government’s plan for “balanced, high-quality growth” in the coming decades, Wang said.

Central to that is President Xi Jinping’s “shared prosperity” campaign, intended to keep the wealth gap to a minimum, despite criticism that related policies stifle innovation.

Huang Weiping, professor of economics at Renmin University, put the expectations facing the industry in stark terms.

“If you dance to the main song, there will be no problem; on the contrary, if you break the main melody, it will obviously be a problem,” Huang told Al Jazeera.

“Let me say this much,” Huang added. “It wasn’t Jack Ma who made the era. It was the era who made Jack Ma.”