Washington Lawyer - November/December 2024 - 33

WORTH READING
High Wire: How China
Regulates Big Tech and
Governs Its Economy
Angela Huyue Zhang
Oxford University Press, 2024
Review by Don Allen Resnikoff
I
n High Wire, Angela Zhang writes
about Chinese regulatory law
from the unique perspective of a
person deeply versed in business
regulation both in China and the
United States. She offers key
insights for U.S. companies currently
doing business or interested
in doing business in China - and
negotiating the country's difficult
bureaucracy.
But for many readers, the most striking aspect
of Zhang's book is its focus on how antitrust,
financial, and other business regulations affect
the economic rivalry between China and the
United States and, consequently, U.S. consumers.
Tariffs that punish Chinese sellers, for example,
also raise the price of consumer goods
in the United States even on items that pose
little threat to national security or economic
strength, such as cheap bicycles and coffee
makers.
Zhang's 2021 book, Chinese Antitrust Exceptionalism:
How the Rise of China Challenges Global
Regulation, was interesting for similar reasons,
although how China regulates big tech and
manages its economy has since changed. For
years Chinese regulatory authorities adopted a
tolerant stance toward big tech entrepreneurs,
with the goal of cultivating these business titans
to outperform their foreign rivals. That tolerant
approach has been reversed. In recent
years the Chinese government has unleashed a
seemingly unrelenting blizzard of regulatory
measures against Chinese tech firms such as
Alibaba involving antitrust concerns, financial
controls, and labor.
The consequence of this harsh treatment is a
weakened big tech industry. From 2021 to 2022,
the total investment capital in the Chinese internet
industry plummeted by an astonishing
80 percent, from $49 billion to $10 billion. Simultaneously,
the total market capitalization of
Chinese internet companies shrank from $2.5
trillion at its 2020 peak to $1.4 trillion in 2022.
As Zhang explains, the increased regulatory
scrutiny and compliance costs not only caused
financial losses but also stifled innovation and
investment.
High Wire examines China's regulatory crackdown
on tech businesses in the context of its
evolving regulatory structure. Zhang describes
China's government as hierarchical, but she
does not proffer a simplistic view of President
Xi Jinping's role at the top of the hierarchy. Instead,
she focuses the reader on the practical
complexity of Xi's reliance on an array of bureaucratic
agencies, which ostensibly function
in a similar way as their U.S. counterparts in
areas such as antitrust enforcement and financial
regulation. But the Chinese agencies tend
to not follow regular legal procedures in the
manner of their U.S. analogues - priority is
given to political goals, including deference to
higher government authority and protection of
national security.
Zhang argues that when regulatory agencies
are focused on carrying out political goals in
an increasingly hierarchical system, the result is
extreme inefficiency from several sources. The
top leaders often lack the technical expertise to
make good judgments for industries on product
development, and the chain of communication
between these leaders and local bureaucrats
is often imperfect. And because local
bureaucrats fear offending those at the top and
lack full knowledge of their leaders' wishes,
they tend to vacillate between inaction and
overreaction. The outcome, Zhang writes, is an
unstable and fragile economic system.
Zhang's description of China's increasingly autocratic
and hierarchical system is more circumspect
than my summary may suggest. She cites
specific actions by regulatory agencies against
particular companies, and she is respectful of
the Chinese government's rationale for the
crackdown on big tech in line with President
Xi's " common prosperity " campaign against income
inequality. The idea of the campaign is
that too great an income gap has developed
between important businesspeople and ordinary
citizens, and that gap should be rectified.
I interviewed Zhang for the D.C. Bar's Brief Encounters
podcast in July 2024, around the same
time the Communist Party of China held its
third plenum, a
four-day meeting
in which its leaders
set the direction
of China's
economic policy.
Asked whether
Chinese leaders
were likely to
heed her advice
and take steps to
moderate China's
regulatory actions,
Zhang was less
circumspect than
I expected. She expressed pessimism about
future encouragement of private enterprise, in
part because the Chinese government is focused
on political concerns, including its economic
equality campaign, national security,
and rivalry with the United States. She did note
that the bureaucratic agencies have recently
become hesitant to act in the face of the recent
economic downturn.
There are additional important points to be taken
from Zhang's latest book. One is that even
as the Chinese government becomes more
autocratic and hostilities increase between the
United States and China concerning intellectual
property theft, national security, and other
issues, it continues to make sense for the two
governments to find common ground on trade
issues whenever possible.
Another point is that antitrust and financial regulation
operates differently in the United States,
China, and other parts of the world. Regulatory
ideas that may seem sacrosanct here, like respect
for procedural due process, may not be
so important in other countries.
A further takeaway is that lessons learned in
China's regulation enforcement may have application
outside of China, such as that limits
may exist regarding the ability of high-level
politicians to intelligently and efficiently direct
production decisions of industries and for government
agencies to be efficient.
Don Allen Resnikoff is a D.C. lawyer whose public
service includes 20 years as an antitrust litigator
with the Antitrust Division of the U.S. Department
of Justice and service as senior assistant attorney
general with the D.C. Office of the Attorney General,
where he specialized in affirmative antitrust
litigation.
NOVEMBER/DECEMBER 2024 * WASHINGTON LAWYER 33
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