China roundup: games are opium, algorithms need scrutiny

Hello and welcome back to the TechCrunch China recap, a recap of recent events shaping the Chinese tech landscape and what they mean for people in the rest of the world.

The question for the tech news cycle in China these days has become: Who is Beijing’s next target? Regulatory crackdowns are common in China’s tech industry, but the breadth of recent measures has been unprecedented. No major tech giant is exempt, and everyone is being attacked from a slightly different angle, but Beijing’s message is clear: Tech companies must align with Beijing’s interests and goals.

Education restrictions hit the tech giants

The government’s motivation is not always ideological. It could lead to policies that control the rebellious private tutoring sector in hopes of easing pressure on students and parents. Recent requests from Beijing have strictly limited after-school tutoring, though they also sparked a wave of sympathy for public school teachers who work in lucrative tutoring centers to make up for their meager salaries.

The effects of the education crackdown are also seeping into Internet companies. For the past several years, ByteDance had been aggressively building an online education business through a wave of hiring and acquisitions, in part to diversify an ad-based video business. His plan appears to be in shambles as he reportedly plans lay off staff in your education department after the recent crackdown.

The restrictions are also affecting US companies. Duolingo, the language learning app, was removed from various app stores in China. While it is not immediately clear whether the action was the result of any policy changes, the government recently, along with its restrictions on after-school programs, excluded foreign curricula in K-9 schools.

Games are opium

It could be difficult to read the minds of top leaders because their messages could come through various government departments or state-affiliated media outlets, with different weights.

This week, Tencent is in the sights of the authorities. Approximately $ 60 billion of its market capitalization was deleted after the Economic Information Daily, an economic newspaper overseen by China’s main state news agency Xinhua, published an article (which was shortly withdrawn) describing video games as “spiritual opium” and citing the title role. played by Tencent in the industry. Shares of NetEase, Tencent’s smaller rival, were also battered.

This is certainly not the first time that Tencent and the gaming industry in general have been criticized by the government for its impact on underage players. Tencent has been working to appease the authorities by introducing protections for young players, for example by adjusting age controls several times.

Tencent, which has a sprawling online empire of social media, payments and music in addition to games, has also vowed to “do [more social] good ā€¯through their products. And following the recent opinion piece in the state newspaper, Tencent more restricted the amount of time and money children can spend playing games. But after all, the company still relies heavily on addictive gameplay mechanics that entice players to open loot boxes.

China roundup games are opium algorithms need scrutiny

Tencent stock prices for the past six months. Image credits: Google Finance

Fix algorithms

The other field of tech companies feeling the pressure is those that rely on machine learning algorithms to deliver content. The Propaganda Department of the Communist Party of China, the country’s public expression watchdog, along with several other government bodies, issued a advisory to “strengthen the study and guidance of online algorithms and carry out monitoring of algorithmic recommendations.”

The government’s goal is to assert greater control over how algorithmic black boxes affect the information people receive. Shares of Kuaishou, TikTok’s archrival in China, plunged on the news. Since its successful initial public offering in February, Kuaishou’s share price has fallen. up to 70%. Meanwhile, the Beijing-based short video firm is shutting down one of its overseas apps called Zynn, which has caused controversy over plagiarism. But its overseas user base is also growing rapidly, crystallizing into one billion monthly users worldwide recently.

End of “two-choose-one”

The week is not over. On Friday morning, The Wall Street Journal reported that the country’s antitrust regulator is preparing to fine Meituan, China’s main food delivery platform, $ 1 billion for allegedly abusing its dominance of the market. In 2020, Meituan earned 114.8 billion yuan or $ 17.7 billion in revenue.

Until recently, forcing vendors to take sides had been common practice in China’s e-commerce world. Alibaba did so by prohibiting sellers from listing on rival platforms, a practice that resulted in an antitrust fine of $ 2.75 billion in April. We’ll see where the government will act as it continues to curb the power of its tech favorites.

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