China has set out a five-year plan to strengthen regulatory control over the country’s key industries. The blueprint underscores the Communist Party’s aim to continue its crackdown on China’s tech industry and introduce governance based on Confucian values, making for a kind of Neo-Confucianist authority.

The Central Committee of the Communist Party and the State Council released the “Implementation Outline for the Construction of a Government under the Rule of Law” on Wednesday, highlighting the “need to construct a government under the rule of law”.

The document indicated that the Chinese Communist Party (CCP) would draft new laws touching upon various industries, including national security, technological innovation, healthcare and the education sectors, as well as areas involving foreigners.

The announcement highlights that Beijing’s regulatory push regarding cybersecurity, data management, antitrust, social media and other issues will persist through the year.

According to Michael Orme, senior analyst at GlobalData and China specialist, nothing is surprising about the 5-year blueprint, which calls for “a deeply and broadly regulated economy to meet ‘the growing need for a better life for the Chinese people.”

Implications for the tech industry

Among the tech-related plans are the promotion of technological innovation, using digital technology to widen channels for public participation in law making, artificial intelligence (AI) and big data-backed government decision-making and improving law enforcement using information technology.

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By GlobalData

The document also outlines plans for an electronic identity authentication system and the use of electronic certificates and seals – in part to promote the optimisation and coordination of government functions.

In addition, it calls for reviews of antitrust laws and research on China’s digital economy in areas such as AI, big data and cloud computing.

“Of course, max tech self-sufficiency and supremacy is front and centre of the whole blueprint,” points out Orme. “In new materials, data fitting, AI, quantum, genomics and space, China’s right up there and not as far behind in semiconductors as consensus has it.”

This highlights China’s plan to control its ever-growing tech industry while simultaneously paving the way for technological self-sufficiency by 2035.

The blueprint follows a series of regulatory moves that stunned investors. Last month, Beijing made it clear that it would closely watch any tech company planning to list in the US. Shortly after the New York initial public offering of Didi Chuxing, China’s dominant ride-hailing app, regulators forced Chinese app stores to take down the platform citing data security issues.

More recently, the CCP intensified its crackdown on China’s edtech industry. Last month, regulators introduced a new policy designed to ease the pressure on school children and to boost birth rates by reducing living costs in China’s top tier cities.

This news led to a panic selloff of Chinese stock in Asia as investors realised that Beijing’s crackdown could effectively bar any industry from selling shares to the public, accepting foreign capital or even turning a profit.

Ecommerce behemoth, Alibaba, was also slapped with a $2.8bn antitrust fine which caused the company to lose $5.47bn yuan ($847.5m) in its fourth quarter of 2020. Moreover, the company is now facing pressure from below as it finds itself in the national spotlight due to a sexual assault scandal that rocked the nation, galvanised by social media.

The dual pressure from the government and citizens indicates that the “too big to fail” era for tech companies is coming to an end.

Back to Confucian values

China’s latest push also includes attempts to “clean up the internet”. The document further stipulates the need to bring back traditional values and “President Xi Jinping’s thoughts on socialism with Chinese characteristics for a new era”.

This includes the CCP’s latest attempt to rein in China’s chaotic online culture and fan circles – known in Chinese as fan quan. These informal virtual communities centred around the worshipping of idols have been another headache for the Chinese government.

The Cyberspace Administration of China (CAC), the country’s internet watchdog, has removed 150,000 pieces of harmful content online and punished more than 4,000 accounts related to fan clubs as of last week, the South China Morning Post reported.

The CAC’s latest move comes amid a wide-reaching upgrade to the country’s internet services regulations as Beijing tightens its grip on the country’s internet sector.

Moreover, the government is adamant about preventing the “disorderly expansion of capital”, as mentioned during a CCP meeting in December 2020. As a result, Beijing aims to introduce an internet culture based on Chinese values as an alternative to the Western model.

“It’s not reverting to Maoism but is trying to engineer a new Confucian imbued market-Leninism,” as Orme believes, pointing to an interesting, if perhaps not surprising, future ahead for China.