All Alibaba and TikTok Chinoiserie

Whether it's promoting private enterprise or protecting state-owned companies, Le Monde writes, Beijing is working hard to create national champions. An activism that sometimes turns out to be very useful internationally.

In 2013, China, whose major cities are choking on pollution, is launching a subsidy program to encourage the sale of electric cars. All Chinese and foreign manufacturers can take advantage of it. On one condition, however, the regulation specifies, in 2015: that they equip their vehicles with batteries made in China. Four years later, China's industry leader, CATL, has become the world leader in battery manufacturing. As the largest automotive market in the world and with a rich industrial fabric, China had the ingredients to create an industrial champion.

State intervention in batteries is a textbook case. Since the country's economic opening in the 1980s, the authorities have not ceased to engage massively in the economy to promote private enterprise or protect state-owned enterprises, even if that meant excluding foreign competition or forcing mergers in sectors with overcapacity. Today the country can boast of having created dozens of industrial champions in fields ranging from oil to telecommunications, from railways to solar collectors.

While the private sector has spawned the biggest names overseas, such as Huawei and Alibaba, China's top-of-the-line are still state-owned enterprises. Inherited from the days when the economy was wholly government-controlled, these large corporations still dominate strategic sectors such as energy, steel, railways and banking today. Beyond the economy, they play an important social role, employ millions of people and often adopt a counter-cyclical approach: they invest in times of crisis at the behest of the state to revive the economy.

In April 2020, Chinese President Xi Jinping celebrated victory over the Covid-19 pandemic by congratulating them on their contribution. State-owned enterprises have proven their worth " in both virus control and industrial production, " the leader said. Despite promises of reforms aimed at giving more space to market mechanisms, their weight in the Chinese economy has increased since the beginning of Xi's presidency in 2013. " They form the economic and political foundation of the Chinese socialist system and are one of the main pillars of the Communist Party's power. They need to be built bigger, stronger and better, ”he said in April 2020.

What is the recipe for Chinese industrial success? A mixture of privileges and more or less direct support. " This includes a policy to protect the internal market and technology transfers in joint ventures, as well as preferential access to the Chinese market, for example for public procurement, " explains Agatha Kratz, Chinese economy specialist and associate director of the Rhodium Group, an American research center. “ This also involves direct financial support, through grants, but above all through access to capital and low-cost inputs (electricity, land, but also R&D and innovation). Finally, it includes international financial and political support for the conquest of third markets. "

Chinese success is written. In the five-year plans for the national economy, first of all, which give primacy to state-owned enterprises. Secondly, in the diplomatic and economic project of the " New Silk Roads ". Renamed " Road and Belt Initiative ", it aims to develop infrastructure and trade in order to better connect China to the rest of the world, especially in Asia and up to Europe. It provides overseas opportunities for China's construction and railroad giants and overcapacity industries such as steel. Finally, there is the Made in China 2025 project, which sets clear market share targets for Chinese companies in the sectors of the future (semiconductors, aviation) at the expense of foreign companies, and encourages technology transfer, much to the chagrin of the Europeans and Americans, who cry out for favoritism.

At the same time, China is tightening its control over its private sector champions. Alibaba, the leader of online commerce, which dominates the Chinese Internet with Tencent, the mastodon of social networks and video games, had a bitter experience in the fall of 2020. The IPO of its financial subsidiary, Ant Financial, was canceled a few days in advance of the schedule. Jack Ma, its founder, had accused the Chinese regulator of having " a pawnbroker mentality " because he opposed certain practices of the start-up, which grants funds to its customers without demanding guarantees, but analyzing their solvency on the basis of its big data.

Not content with having canceled Ant's IPO , which should have been the largest in history, the banking regulator has imposed stricter rules on the industry. Jack Ma hasn't appeared in public since his provocative late-October speech. " In China, the dividing line between public and private is becoming increasingly blurred, " says Fraser Howie, an expert on the Chinese financial system. “ All are dogs on a leash. The leash may be longer or shorter, but the party holds it, ”adds the co-author of Red Capitalism. The Fragile Financial Foundation of China's Extraordinary Rise ("Red Capitalism. The Fragile Financial Base of China's Extraordinary Emergency", 2010, untranslated). The success of the private sector is allowed, provided that the activities go in the sense of the interest of the Communist Party and of Chinese power.

Nonetheless, party support can be cumbersome, especially outside the country. Faced with the growing power of Chinese companies, more and more states are equipping themselves with tools to protect themselves from foreign investment, more or less explicitly aimed at the Middle Kingdom. In October 2020, the European Union's foreign investment control mechanism entered into force, while India and Australia, whose diplomatic relations with Beijing are at the limit, have adopted measures that limit Chinese investments.

Huawei, a world leader in telecommunications, has been banned from developing the 5G network in many countries, which fear handing over the keys to essential networks to the Chinese Communist Party through the company.

The short video application TikTok, the flagship of the Chinese start-up ByteDance, was the subject of the same distrust in the United States as well, when the Trump administration tried to force a sale to American tech companies. Amid negotiations and appeals, the sale was postponed and China retaliated by banning the sale of TikTok's algorithms. But the fate of the first Chinese nugget to conquer Western smartphones remains suspended in the evolution of Sino-US relations.