Contrary to the common narrative of a stifling 'crackdown,' Joe Tsai argues China's increased tech regulation established a 'new normal' that is better for business. By clarifying the 'red lines' around monopoly and privacy, the government created a more predictable environment, which is preferable to the previous era of unchecked, chaotic competition.
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In China, mayors and governors are promoted based on their ability to meet national priorities. As AI safety becomes a central government goal, these local leaders are now incentivized to create experimental zones and novel regulatory approaches, driving bottom-up policy innovation that can later be adopted nationally.
Top Chinese officials use the metaphor "if the braking system isn't under control, you can't really step on the accelerator with confidence." This reflects a core belief that robust safety measures enable, rather than hinder, the aggressive development and deployment of powerful AI systems, viewing the two as synergistic.
A surge in IPOs and M&A isn't driven by pro-business policies, but by a reduction in policy uncertainty. With a clearer, albeit more interventionist, landscape, companies have the confidence to execute major strategic plans they had previously postponed.
The Democratic party's focus on antitrust, according to Warren, is not anti-business but fundamentally pro-market. By preventing monopolies, it fosters a competitive environment where companies are forced to continually innovate to succeed, unlike giants who grow complacent and raise prices.
When facing government pressure for deals that border on state capitalism, a single CEO gains little by taking a principled stand. Resisting alone will likely lead to their company being punished while competitors comply. The pragmatic move is to play along to ensure long-term survival, despite potential negative effects for the broader economy.
Instead of crippling China, aggressive US sanctions and tech restrictions are having the opposite effect. They have forced China to accelerate its own domestic R&D and manufacturing for advanced technologies like microchips. This is creating a more powerful and self-sufficient competitor that will not be reliant on the West.
In response to deflation and eroding profits from hyper-competition, the Chinese government's "anti-evolution" policy is a deliberate strategy to force consolidation, reduce overcapacity, and restore pricing power, thereby boosting corporate return on equity.
China's campaign against "evolution" (excessive competition) is not a broad economic stimulus. It specifically benefits sectors like EV batteries, steel, and cement where state control or rapid market consolidation can restore pricing power and profitability.
The government is no longer just a regulator but is becoming a financial partner and stakeholder in the tech industry. Actions like taking a cut of specific chip sales represent a major "fork in the road," indicating a new era of public-private relationships where government actively participates in financial outcomes.
Contrary to the Western perception of a monolithic state-run system, China fosters intense competition among its provinces. Provincial leaders are incentivized to outperform each other, leading to massive, parallel innovation in industries like EVs and solar, creating a brutally efficient ecosystem.
