For decades, it felt like every product tag read “Made in China.” The country’s dominance of the global export manufacturing sector in the post-Mao era was staggering, filling homes the world over with cheaply assembled hats, lighters, and bobbleheads.
But as a country’s economy grows, so do labor costs. China’s phenomenal growth in recent decades was attributable in large part to its export manufacturing, propped up by a massive and low-paid labor force. And yet the country’s working-age population has been declining since 2012, while national wages have continued to sharply rise. Pair these increased labor costs with a weaker global demand for products since the 2008 financial crisis, and China’s firms have been finding it increasingly difficult to maintain the same production models that helped fuel the country’s growth beginning in the late 1970s. To steer clear from plunging into a middle-income trap—the peril of any developing nation—Beijing has focused on upgrading the country’s industries, and has seen notable successes in the tech sector.
Burgeoning Tech Industry
Say what you want about the Chinese Communist Party; they get results. Heavy investment into science and technology began in 1996 after a 1995-issued State Council development strategy, and high-tech enterprises popped up across the country. Future Chinese giants Tencent, Alibaba, and Baidu were founded in 1998, 1999, and 2000, respectively.
But after a decade, it was clear that the investment wasn’t translating into innovation. China’s tech sector, while massive, became best known for taking foreign technologies and redistributing them in the Chinese market, which had been largely closed off to foreign competition. In 2006, the State Council called for a reorganization of its tech portfolio, urgently stressing the need to let the free market work its magic by transitioning into a “firms-centered” innovation system.
That strategy has largely paid off. Although copycat technologies and intellectual property theft are far from eradicated in China, the country’s tech sector has surged forward. In 2014, Alibaba’s $25 billion listing on the New York Stock Exchange was the largest IPO in history; and in the 19 short years since its founding, the company has become a global leader in online financing, cloud computing, and e-commerce, capable of raking in $25.3 billion of sales on a single day.
Beijing Turns Tech Against Its Citizens
However, the rapid expansion of the country’s tech industry has also given rise to questions about data privacy. Take WeChat, for example: Tencent’s ubiquitous social media app, which was once criticized as a WhatsApp imitator, has become an “everything” platform, allowing users to pay their utilities, order taxis, leave restaurant reviews, buy plane tickets, and perform basically any other daily function in addition to its messaging service. The app’s wild popularity and convenience has allowed it to monopolize the market, and made it a necessary part of people’s lives.
Apps like WeChat incessantly collect user data, personalizing your every search result and recommendation. Although China has been a surveillance state since its founding 70 years ago, the internet’s diffusion has opened the door for Beijing into every Chinese household.
In public, nearly 180 million closed-circuit cameras that rely on facial recognition software and artificial intelligence developed by the country’s tech sector keep watch across the country. In private, network operators have been required since June to store all data on domestic servers—like that collected by WeChat—and hand it over on government request.
Now a new social credit rating system, which utilizes user data to determine eligibility for everything from bank loan lending to international travel, has begun taking effect. The Globe and Mail reported that Liu Hu, a prominent Chinese journalist known for his criticism of censorship in China, found himself blocked in recent months from the online systems used to purchase plane tickets, property, secure loans, or travel on the country’s high-speed trains.
At face value, China’s growing tech innovation offers us a glimpse into the conveniences the internet is likely to bring. Higher living standards make net users happy, and investing in tech allows Beijing to skirt a middle-income trap by upgrading its industries. But tech’s diffusion into every aspect of China’s citizens’ lives has made Beijing an almost omnipresent being, the ramifications of which become glaring through policies like the social credit system.
And all of this comes at a time when the Chinese are increasingly calling for online privacy. Ant Financial, a subsidiary of Alibaba, was forced to apologize last week after facing severe public backlash when it automatically registered net users into its social credit system. Although this was a rare rebuke in a country where people have grown complacent in allowing the government to sift through their personal correspondence, it could also be a signal that citizens will be unwilling to put up with such heavy-handedness from above. But sadly, sporadic public dissatisfaction is unlikely to have a significant impact on central policymaking.
