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The ruling Communist Party is strengthening political control over China’s internet giants and exploiting their wealth to pay for its ambitions to reduce reliance on American and European technology.

Anti-monopoly and data security measures that began in late 2020 have rocked the industry. Investor nervousness has reduced the total market value of e-commerce platform Alibaba, gaming and social media operator Tencent, and other tech giants by more than $ 1.3 trillion.

The party says the fight against monopolies will be a priority until 2025. It says competition will help create jobs and raise living standards.

President Xi Jinping’s government looks likely to stay the course even if economic growth suffers, say businessmen, lawyers and economists.

“These companies are global leaders in their innovation sectors, yet the leadership is ready to crush them all,” said Mark Williams, chief economist for Asia at Capital Economics.

Chinese leaders do not want to re-impose direct control of the economy but want private sector companies to align with the ruling party’s plans, said Lester Ross, Beijing bureau chief at law firm WilmerHale.

“What worries them are the companies getting too big and too independent from the party,” Ross said.

Chinese internet companies are among the biggest global success stories of the past two decades. Alibaba is the largest e-commerce company, while Tencent operates the popular WeChat messaging service.

But the party plans focus on robots, chips and other hardware, so these companies are rushing to show their loyalty by pumping billions of dollars into them.

US restrictions on Chinese access to telecommunications and other technologies have not helped.

Alibaba has announced that it will invest $ 28 billion to develop operating system software, processor chips and network technology. The company has pledged $ 1 billion to support 100,000 developers and tech startups over the next three years.

Last year, Tencent pledged to invest $ 70 billion in digital infrastructure. Meituan, an e-commerce, delivery and services platform, has raised $ 10 billion to develop autonomous vehicles and robots.

Chinese officials recognize that the campaign comes at an economic cost but are unwilling to speak out, Tsang said. “Who is going to stand up and tell Xi Jinping, your policies are going to hurt China?”

Investors, many of whom are burned by the decline in tech stocks, are keeping their money on the sidelines. Tencent’s market cap of $ 575 billion is down $ 350 billion from its February high, a drop equal to more than the total value of Nike Inc. or Pfizer Inc.

CEO Masayoshi Son of Japanese group Softbank – one of Alibaba’s earliest investors – said on August 11 that he would postpone the new deals with China.

Softbank has invested $ 11 billion in ride-sharing service Didi Global, whose share price has fallen by a third since its U.S. stock exchange debut on July 30.

The crackdown began in November when Beijing ordered Ant Group, part of Alibaba’s online payment service Alipay, to postpone its stock market debuts in Hong Kong and Shanghai.

The company, which offers online savings and investing services, has been urged to scale back its plans and install bank-like systems to control borrowers and manage loan risks. Industry analysts have lowered forecasts of Ant’s expected market value.

Beijing is also using the crackdown to narrow China’s politically sensitive wealth gap by pushing tech giants to share their wealth with employees and consumers.

Didi, Meituan and other delivery and ride-sharing companies were ordered in May to reduce the fees charged to drivers and improve their benefits and safety.

Meituan CEO Wang Xing has pledged to donate $ 2.3 billion to environmental and social initiatives. Tencent’s Ma pledged $ 2 billion to charity.

Alibaba has pledged to spend 100 billion yuan ($ 15.5 billion) on job creation, rural development and other initiatives to support Xi’s “common prosperity” campaign.

Such income redistribution plans “are reminiscent of mass mobilization and populist strategies” of the 1950s and 1960s under then-leader Mao Zedong, Zhang wrote.

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