Didi’s Tumble Is Another Sign of the Great Decoupling

Welcome to Foreign Policy’s China Brief.

The highlights this week: Chinese regulators retaliate after the ride-hailing app Didi launches a U.S. IPO, a Japanese official walks back comments suggesting support for Taiwan, and WeChat forces some LGBT groups off its platform.

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China has cracked down on the ride-hailing app Didi Chuxing following the company’s decision to launch an initial public offering (IPO) on the New York Stock Exchange last week despite warnings from Chinese regulators. The moves caused Didi’s stock to plunge when trading reopened Tuesday, and there were also wider falls in Chinese technology stocks.

As I argued Tuesday, Didi appears to have betted on authorities’ embarrassment to take any action against the company. That was a mistake.

The Didi app, which has 377 million active users in China, has been pulled from app stores, although existing users can still access it. Alipay and WeChat Pay, which share a dual monopoly of online payments, also halted access to Didi from their services on Wednesday. It’s unclear if authorities ordered them to do so or if they were trying to get out ahead of the situation—especially since Alibaba, Alipay’s parent firm, faces severe pressure from regulators itself.

The moves against Didi in part reflect the increasing desire of the Chinese Communist Party (CCP) to rein in big technology firms. The tech giants haven’t ever offered any meaningful opposition to the party, but national leadership is uncomfortable with any monopoly on power or influence that isn’t under its direct control. More reasonably, it is also wary of the risks of a sprawling sector with a poor record on privacy protection and financial responsibility.

The Chinese tech sector has had a good run of relative freedom to grow and experiment, with some tremendous results. As CCP apparatchiks are put in place at key firms and innovation becomes politically riskier, that era may be over.

China’s anti-Didi action also signals further economic decoupling from the United States. U.S. listings were once prestige moves for Chinese firms, tacitly encouraged by the authorities since Western business and financial sectors were among Beijing’s biggest boosters and apologists for decades. But that’s no longer the case. After the Didi crackdown, China’s State Council announced that it would look into further regulation of overseas IPOs; authorities targeted two other firms; and a regulatory commission said it planned to close a loophole allowing Chinese tech companies to launch U.S. IPOs.

Data is one of Beijing’s major underlying concerns: Chinese firms gather enormous amounts every day, which the government sees as a security and an economic risk if companies are exposed to foreign laws and regulations. China has tightened its own data regulations, including restrictions on sending so-called core data—a deliberately vague term—overseas.

The range of information considered politically sensitive has also been expanded under President Xi Jinping, and the use of open-source information by researchers to expose state efforts including genocidal population control policies in Xinjiang and the occupation of part of Bhutan may have contributed.

Japan backs Taiwan. In a Monday speech, Japanese Deputy Prime Minister Taro Aso referred to a potential Chinese invasion of Taiwan as a “survival-threatening situation” for Japan, in which the island of Okinawa could be next. Aso’s language refers to one of the conditions necessary for Japan to deploy its military under its postwar Peace Constitution. Aso has slightly walked back the comments, but they reflect strong concerns about Chinese aggression.

While the modern Chinese government has never formally claimed Okinawa, Chinese nationalists sometimes cite the relationship of the Ryukyu Kingdom—the Okinawan state annexed by Japan in the late 19th century—to the Ming and Qing empires as evidence that Okinawa should be Chinese territory. Japan also has long-standing ties with Taiwan, which fell under Japanese rule as a so-called model colony from 1895 until 1945.

Kurt Campbell, the Indo-Pacific coordinator for the U.S. National Security Council, reasserted U.S. warnings to China over an invasion of Taiwan this week. Campbell, one of the leading figures in the Biden administration on China, also said the peaceful coexistence of the United States and China would be a “enormously difficult” challenge for two generations.

LGBT groups shuttered. WeChat, China’s most ubiquitous app, has forced student LGBT groups off its platform. Amid the crackdown on civil society under Xi, this is a blow to a community that had managed to carve out a relatively successful space. The move follows the indefinite suspension of the long-standing Shanghai Pride festival last year. Young Chinese are often supportive of LGBT rights, and other censorship attempts three years ago met mass pushback.

Although Chinese authorities have not embraced homophobia as other authoritarian states have done, a growing sense of nationalist patriarchy has accompanied the Xi era, both from the state and online. Chinese nationalists increasingly portray LGBT rights as a foreign ideology—a narrative activists have countered by pointing to periods of LGBT tolerance throughout Chinese history.

Xi’s idiomatic aggression. At a speech for the 100th anniversary of the founding of the Chinese Communist Party last week, Xi said anyone opposing China “will crack their heads and spill blood on the great wall of steel built from the flesh and blood of 1.4 billion Chinese people.” Or, in another translation, he said they would “find themselves on a collision course with a great wall of steel forged by over 1.4 billion Chinese people.”

The varied interpretations of the phrase highlight the difficulty of translating national rhetoric cloaked in militaristic language—its meaning is not necessarily literal. This particular phrase, which was singled out for praise by Chinese state media, was clearly meant as a rallying cry; the bloody metaphor, while not literal, was deliberately extreme.

Read FP’s coverage of the CCP’s 100th anniversary here.

Space race squabble. A public scandal has tarnished China’s space race successes—as well as served as a rare example of accountability in the age of censorship. A video of Zhang Tao, the chair and party secretary of China Aerospace Investment Holdings, beating up two scientists—Wu Meirong, 85, and Wang Jinnian, 55—went viral over the weekend. Zhang’s firm is owned by a state-run company that plays a major part in China’s space program.

Zhang assaulted the scientists after they refused to sponsor him for the International Academy of Astronautics, a prestigious Stockholm-based scientific group. (Zhang does not have much of a scientific record, and overseas Chinese media—often unreliable—suggest he owes his position to being the nephew of Zhang Youxia, a senior general from a powerful family.)

It took weeks for Zhang to be arrested, and the viral video seems to have increased the pressure on authorities. Officials caught on tape behaving badly were a relatively common occurrence in the 2000s, but that has become less frequent due to tightening censorship in the 2010s.

Permanently No. 2. Is China’s economy ever actually going to overtake the United States’? If it continues to grow at the same rates, the answer is yes—even with lower per capita income and higher resource burdens. But that increasingly looks like a big if, especially with looming demographic challenges. In a country where exaggeration of GDP is the norm, the actual size of the Chinese economy remains uncertain. Nevertheless, China’s economy has proved surprisingly resilient despite previous disaster warnings.

In Bloomberg, Eric Zhu and Tom Orlik have an excellent take on the subject.

Crypto crackdown escalates. After shutting down Bitcoin miners nationwide, Chinese regulators are now targeting virtual currency traders. Beijing was always hostile to cryptocurrencies, due to their role in money laundering, but the potential for profit and utility to the rich gave them just enough space to keep operating until this year. As of July, the Chinese crackdown had caused Bitcoin mining capacity to fall by 50 percent, as judged by power usage.

“China’s Former 1-Child Policy Continues To Haunt Families” by Emily Feng, NPR

China’s recent liberalization of family planning policies would once have been a relief for many women who wanted multiple kids, at least among the Han majority. In an era where the costs of child-rearing have risen sharply, though, few women have taken up the opportunity—despite government pressure.

And for those women who defied the family planning authorities and paid the price in the past, there is little hope of compensation or apology from the government, as NPR’s Emily Feng traces in a sensitive and humane story.