China hasn’t destroyed the tech sector. It’s sharpened it
China has driven its technology industry off a cliff. The number of startups fell by 50,000 between the peak in 2018 and 2023, with this year on track to be even lower. The market capitalizations of the biggest tech companies, including Alibaba Group Holding Ltd. and Tencent Holdings Ltd., have shrunk to the tune of hundreds of billions, and pale in comparison to US peers.
There is no sign that the sector will ever rebound to what it was before a government crackdown that kicked off in late 2020, even as policymakers have signaled it’s over. Becoming a billionaire entrepreneur has become something to be feared, rather than celebrated.
It’s easy for US policymakers to see this with vindication and yet more evidence of a superior tech landscape at home. And from their vantage point, they are correct: President Xi Jinping strangled a generation of entrepreneurs who could have benefited consumers and made investors a lot of money.
But that doesn’t mean China’s innovation ecosystem is slowing. If anything, Xi has only sharpened its goal to focus on national clout and security in a way that could shift the global balance of power.
Beijing has given its tech industry something that Silicon Valley can only dream of: a mission. It may be easy for investors and free-market capitalists to scoff at the idea of innovation being driven by a purpose. But as the ongoing drama at OpenAI has laid bare — and as my colleague Parmy Olson has recently written — US tech entrepreneurs and workers alike have long been obsessed with this
