China’s consumers are turning against the homegrown Big Tech giants they once revered
China is having its “techlash” moment.
In 2014, a group of university students in Beijing founded Ofo, a bike-sharing startup that let customers scan QR codes to rent bikes for short rides around cities, picking up and dropping off the bikes wherever they wished.
The convenience and ease of dockless bike shares spawned competing startups like Mobike and Bluegogo, with each brand distinguished by the bright colors of its bicycles. The bikes became ubiquitous on the streets and sidewalks of China’s biggest cities, and the startups attracted billions in investments, turning founders like Dai Wei, the CEO of Ofo, into celebrity entrepreneurs.
But four years later, at least five Chinese bike-share startups had gone bankrupt, and a Chinese court revealed in June 2019 that Ofo, the sector’s pioneer that was once valued at more than $2 billion, had “basically no assets” and was unable to pay the significant debts it owed to suppliers and customers.
Subscribe to Eastworld for weekly insight on what’s dominating business in Asia, delivered free to your inbox.
Millions of bike-share users, unable to recoup the deposits they had paid as part of the programs, took their grievances to social media. There, they accused the companies of wasting billions of dollars, littering city streets with clumps of unused two-wheelers, and failing to return their money.
In one viral post, a user in China noted that he only received a refund after posing as a foreigner. The hashtag, “pretend to be foreign and Ofo refunds immediately,” attracted over 240 million views on China’s Twitter-like Weibo platform. Users claimed the company was prioritizing its global image over its local customer base.
Some users took their complaints offline. In December 2018, hundreds of people bundled in thick winter coats lined up outside Ofo’s office building in Beijing to demand their $14 deposits back from the beleaguered startup. Some waited for hours only to leave with nothing but Ofo’s promise that their deposits would be refunded within three days. Some received refunds, but others are still waiting. In February 2020, Ofo rebranded as a shopping app, offering users a discount on new purchases instead of a cash refund for their deposits.
“It was pretty visibly embarrassing for everyone involved,” says Dev Lewis, a fellow at Hong Kong–based think tank Digital Asia Hub.
Until then, the Chinese public had mostly glorified its national tech champions and the billionaires they minted. Early tech success stories like Alibaba, the e-commerce giant that Jack Ma founded in 1999, were the subject of national pride, lauded for proving to the world China’s economic and technological ascendance.
But as Chinese technology blossomed, so did its role in the lives of everyday people. A handful of apps owned by an even smaller number of companies now mediate the most routine tasks in China, from eating to shopping to booking medical appointments, making any allegation of abuse especially personal for users. Outrage over the downfall of Ofo and other bike-sharing unicorns was among the first indications that public sentiment toward homegrown technology companies was starting to turn.
The golden era of Chinese tech
For years, Jack Ma was the unequivocal symbol of China’s tech success, inspiring legions with his personal tale of going from high school teacher to founder of two of China’s most prominent tech firms: Alibaba and its sister company, the fintech titan Ant Group. He became the poster boy for the government’s campaign to spur domestic innovation. Beijing pledged in 2006 to make the country “an innovative society” by 2020 and a global tech leader by 2050.
Today, tech giants like Alibaba and Tencent, which runs the billion-user “superapp” WeChat, have only increased their presence in people’s daily lives, each of them operating platforms with user metrics that dwarf the populations of most countries.
As China’s tech sector grew, people started referring to the period as “the era of Ma Yun,” using Ma’s Chinese name.
The state-run People’s Daily newspaper in 2013 ran a photo gallery of Ma, with pictures spanning his youth to middle age and headlined, “Reform Era: ‘The Great Times’ for Ma Yun.” The piece proudly detailed his rise from a Hangzhou boy who “failed the college entrance exam twice” to ranking “as one of the world’s billionaires.”
Six years later, that same paper published an editorial declaring that “there is no so-called Ma Yun era, but only an era that has Ma Yun in it,” underscoring how some tech behemoths—and Ma in particular—had fallen from grace.
The bubble begins to burst
After the burst of China’s bike-sharing bubble in 2018, other scandals followed, hardening some consumers’ anti-tech sentiment.
Big tech platforms like food delivery service Meituan, ride-hailer Didi, and online travel agency Ctrip are accused of compiling consumer purchasing information and other data, and then using that data to charge higher prices to certain consumers. The practice is so pervasive that it has earned a name in China: “big-data backstabbing.”
In 2019, the Beijing Consumers Association found in a survey that 88% of Chinese consumers believed that online shopping platforms exploited user data to maximize prices for customers. Then this week, the government-backed China Consumers Association accused Chinese tech giants of wielding data to “bully” consumers, and called for more regulation.
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 accused 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 backlash
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 data 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 consumers 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 second 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