China’s consumers are turning against the homegrown Big Tech giants they once revered
In 2014, a group of college student in Beijing established Ofo, a bike-sharing start-up that let consumers scan QR codes to lease bikes for brief flights around cities, getting and dropping off the bikes anywhere they wanted.
The benefit and ease of dockless bike shares generated contending start-ups like Mobike and Bluegogo, with each brand name identified by the intense colors of its bikes. The bikes ended up being common on the streets and walkways of China’s greatest cities, and the start-ups drew in billions in financial investments, turning creators like Dai Wei, the CEO of Ofo, into celeb business owners.
However 4 years later on, a minimum of 5 Chinese bike-share start-ups had actually declared bankruptcy, and a Chinese court exposed in June 2019 that Ofo, the sector’s leader that was when valued at more than $2 billion, had “basically no assets” and was not able to pay the substantial financial obligations it owed to providers and consumers.
Register For Eastworld for weekly insight on what’s controling company in Asia, provided complimentary to your inbox.
Countless bike-share users, not able to recover the deposits they had actually paid as part of the programs, took their complaints to social networks. There, they implicated the business of squandering billions of dollars, cluttering city streets with clumps of unused two-wheelers, and stopping working to return their cash.
In one viral post, a user in China kept in mind that he just got a refund after impersonating an immigrant. The hashtag, “pretend to be foreign and Ofo refunds immediately,” drew in over 240 million views on China’s Twitter-like Weibo platform. Users declared the business was prioritizing its worldwide image over its regional client base.
Some users took their problems offline. In December 2018, numerous individuals bundled in thick winter season coats lined up outside Ofo’s office complex in Beijing to require their $14 deposits back from the beleaguered start-up. Some waited on hours just to leave with absolutely nothing however Ofo’s pledge that their deposits would be reimbursed within 3 days. Some got refunds, however others are still waiting. In February 2020, Ofo rebranded as a shopping app, using users a discount rate on brand-new purchases rather of a money refund for their deposits.
“It was pretty visibly embarrassing for everyone involved,” states Dev Lewis, a fellow at Hong Kong–based think tank Digital Asia Center.
Till then, the Chinese public had mainly glorified its nationwide tech champs and the billionaires they minted. Early tech success stories like Alibaba, the e-commerce giant that Jack Ma established in 1999, were the topic of nationwide pride, admired for showing to the world China’s financial and technological ascendance.
However as Chinese innovation progressed, so did its function in the lives of daily individuals. A handful of apps owned by an even smaller sized variety of business now moderate the most regular jobs in China, from consuming to going shopping to scheduling medical visits, making any accusation of abuse specifically individual for users. Outrage over the failure of Ofo and other bike-sharing unicorns was amongst the very first indicators that public belief towards homegrown innovation business was beginning to turn.
The golden age of Chinese tech
For many years, Jack Ma was the indisputable sign of China’s tech success, motivating legions with his individual tale of going from high school instructor to creator of 2 of China’s most popular tech companies: Alibaba and its sis business, the fintech titan Ant Group. He ended up being the poster young boy for the federal government’s project to stimulate domestic development. Beijing vowed in 2006 to make the nation “an innovative society” by 2020 and an international tech leader by 2050.
Today, tech giants like Alibaba and Tencent, which runs the billion-user “superapp” WeChat, have actually just increased their existence in individuals’s lives, each of them running platforms with user metrics that overshadow the populations of a lot of nations.
As China’s tech sector grew, individuals began describing the duration as “the era of Ma Yun,” utilizing Ma’s Chinese name.
The state-run Individuals’s Daily paper in 2013 ran an image gallery of Ma, with photos covering his youth to midlife and headlined, “Reform Era: ‘The Great Times’ for Ma Yun.” The piece happily detailed his increase from a Hangzhou young boy who “failed the college entrance exam twice” to ranking “as one of the world’s billionaires.”
6 years later on, that exact same paper released an editorial stating that “there is no so-called Ma Yun era, but only an era that has Ma Yun in it,” highlighting how some tech leviathans—and Ma in specific—had actually fallen from grace.
The bubble starts to burst
After the burst of China’s bike-sharing bubble in 2018, other scandals followed, solidifying some customers’ anti-tech belief.
Huge tech platforms like food shipment service Meituan, ride-hailer Didi, and online travel bureau Ctrip are implicated of assembling customer acquiring info and other information, and after that utilizing that information to charge greater rates to particular customers. The practice is so prevalent that it has actually made a name in China: “big-data backstabbing.”
In 2019, the Beijing Consumers Association discovered in a study that 88% of Chinese customers thought that online shopping platforms made use of user information to take full advantage of rates for consumers. Then today, the government-backed China Consumers Association implicated Chinese tech giants of wielding information to “bully” customers, and required more policy.
Meituan, which controls 90% of China’s food delivery market along with delivery app Ele.me, also came under particular fire in December for allegedly charging some customers double in delivery fees compared with others. A hashtag about the incident gained over 580 million views on Weibo, with one user commenting, “Where are the government regulations in this case?”
Public anger at tech platforms has extended beyond their treatment of customers to how the companies manage their employees.
On Monday, videos circulated on social media of Liu Jin, a delivery driver for Ele.me, setting himself on fire to protest thousands of renminbi in unpaid wages, renewing public anger at delivery platforms’ treatment of the drivers whose labor makes them so profitable.
In September 2020, China’s Renwu magazine published an investigative report on food delivery drivers that revealed that workers are subject to a strict algorithm that fines drivers for late deliveries and pressures them into reckless driving.
The article went viral, prompting Meituan and Ele.me to relax delivery time targets for their drivers.
Weibo users weren’t impressed with the corporate response: The most-upvoted comment on Ele.me’s public statement said drivers would use the extra time to pick up more orders instead of driving more safely, and it implicated the company of “treating the symptom, not the cause.”
For white-collar tech workers, meanwhile, China’s tech industry is notorious for its long working hours and high burnout rates. Tech founders like Jack Ma have endorsed controversial work tactics like “996”—working from 9 a.m. to 9 p.m., six days a week—saying such a schedule provides “the happiness and rewards of hard work.”
Recently, tech employees have become more vocal in their opposition to the 996 mindset imposed by executives. In 2019, Chinese web developers who worked for the e-commerce firms Youzan and JD.com created a GitHub page, 996.ICU, to protest the companies’ long hours.
The debate about overwork ignited again in January when e-commerce company Pinduoduo—whose founder Colin Huang became China’s second-richest man last year—confirmed that a 23-year-old Pinduoduo employee died on Dec. 29, collapsing after leaving work at 1:30 a.m. Less than two weeks later, another Pinduoduo employee, a male engineer who joined the company in July, died by suicide. Pinduoduo said it has set up psychological counseling services for all of its employees in the wake of these deaths.
After the first employee died, a Pinduoduo hashtag circulated on Weibo with more than 250 million views and thousands of users weighing in to criticize the tech firm’s work culture and wondering if the employee’s overtime hours had led to her death. After the second employee died, Pinduoduo, in a statement to Fortune, did not comment on the company’s work culture, but said it is doing “everything [it] can” to support the worker’s family and loved ones.
One Weibo user said the exploitation of workers was “the essence of 996.” Another user called it “ironic” that another popular Weibo search term was Pinduoduo founder Colin Huang’s net worth and added, “capitalists are bloodsuckers.”
The consumer dissatisfaction with tech giants dovetails with China’s growing wealth gap and an increasing lack of social mobility. China now has more billionaires than the U.S., but some 600 million people still live on less than $150 per month. Chinese regulators seem to be latching onto the blowback, seizing it as an opportunity to tighten the rules on tech firms and divert blame for China’s economic injustices away from Beijing.
“There are signs that the general public opinion and sentiment is now turning against tech companies,” says Lewis. “It’s sort of creating a window of opportunity that…the government can choose to ride if they want to, to drive home some regulations on the platforms.”
No one can attest to Beijing’s newfound regulatory mandate more than Jack Ma.
In October, the flamboyant billionaire delivered a searing speech in Shanghai, in which he criticized Chinese financial regulation as “outdated” and accused Chinese banks of running on a “pawnshop mentality.”
Days later, regulators halted the initial public offering of Ant Group, Ma’s fintech firm, on the eve of its $37 billion dual listing that promised to be the biggest IPO in corporate history. Officials said the company needed to comply with new regulatory requirements before it could list. Ant and Ma received little sympathy online after the IPO’s suspension. Weibo users largely sided with the regulators, calling the once revered Ma “an egotistical tech villain” who “thinks he’s above the law.”
There’s no new date for Ant’s IPO, and Ma has not been seen in public since his speech in Shanghai.
Much of the online anger focused on Ant’s lending service, which made up almost 40% of its revenue in the first half of 2020. Some users of Huabei, Ant’s credit line, told the Financial Times that the service’s pop-up promotions sometimes lead them to accidentally pay for items on credit without knowing it, and make it easy to fall into debt.
“People have gotten into thousands of dollars of debt [using Huabei],” Lewis says. “People have been very skeptical of Huabei and their business practices to urge people to borrow more and shop more.”
One Weibo comment with over 3,600 likes said Ant’s suspended IPO was a good thing because “loan sharks shouldn’t be listed” on the stock market.
Ant now faces a slew of new regulations on its lending business that it must comply with before it can complete its IPO. Last month, China’s central bank publicly criticized Ant and advised the company to focus on its original business, online payments, and work to fix problems in its other businesses like the credit service.
The Ant saga isn’t the end of China’s regulatory spree, much of which is centered on weakening the market monopolies that Chinese tech firms have crafted for themselves.
In mid-December, China’s market regulator fined Alibaba Group and a Tencent-backed online literature platform under an anti-monopoly law and began a probe into a merger between two Tencent-backed livestreaming game companies. The market watchdog warned that “the Internet industry is not outside the oversight of anti-monopoly law.”
On Dec. 30, the regulator clamped down on tech giants again, fining three e-commerce companies for pricing irregularities and explicitly saying the fines were in response to consumer complaints about unfair price hikes and fraudulent promotions.
This week, the regulator reiterated that anti-monopoly regulation is a priority in 2021.
China’s tech giants and their founders are “facing more oversight and questioning about their practices” now than in previous years, says Jeffrey Towson, a private equity investor and former management professor at Peking University in Beijing. “The large China tech companies are very influential, but they are also very accountable to consumers via the government.”
According to Lewis, China has not experienced a blowout tech controversy on the scale of the 2018 Facebook–Cambridge Analytica scandal, which delivered a harsh wake-up call to U.S. and European consumers about how their online information could be misused.
But concerns around Huabei, “big-data backstabbing,” 996 culture, and the online defense of regulators’ actions against Jack Ma and Ant are all signs that Chinese customers are growing wary of Big Tech.
“I think all these things are adding up to a much more regulated Chinese Internet ecosystem,” Lewis says. “This could be a point where we look back and say, this is when a lot of consumer demand and expectations of how tech should run starts to shift in a small way.”
More must-read stories from Fortune:
- Still waiting for your 2nd stimulus check? How to track down your money
- Trump to leave office with the worst jobs record since Herbert Hoover
- Women accounted for 100% of the 140,000 jobs shed by the U.S. economy in December
- “We will never concede”: How Donald Trump incited an attack on America
- Still waiting on your $300 unemployment benefit to start? What you need to know
Jobber Wiki author Frank Long included to this report.