There has been quite a lot of discussion about the Chinese digital reality. Almost everybody is aware that most of the Chinese online ad revenue share is occupied by either Tencent or Baidu.
The international commerce market is also largely dominated by companies like Alibaba, which creates the understanding that a monopoly of sorts is present in the country. However, it’s not like we can judge these Chinese enterprises based on our understanding of Western ideals.
Things like culture are one of the main key points that need to be focused on, but as a benefit of the doubt, let’s try and look at the operations of these companies as something similar to how they’d be dealt with in the Western world.
Examples of possible monopolies
Let’s take Tencent as an example for the gaming and telecommunications industries. Right now, the company is poised to take 13% of the global gaming market share, which already speaks volumes about the company’s market share in China alone.
It is currently considered that in terms of gaming, Tencent has around 60-70% of the Chinese market share. And when it comes to telecommunications all we need to do is consider WeChat, which is basically a necessity in China. With this one product, Tencent occupies around 40-50% of the market share thanks to foreign media also having a small breakthrough thanks to amended regulation.
But the question here is whether or not this needs to be regulated. Would the government consider artificially deflating the profit capabilities of some of their best-performing companies in order to open up opportunities for newer companies, or would they much rather keep these companies in their best shape as they drive more and more innovation as well as jobs for the local population?
We’ve already encountered similar “suggestions” in the Western world, where the government in both the United States and the European Union were considering to somehow fine Google for their alleged monopoly on the search “industry”.
The US could not find anything resembling the issue, while the EU fined the company for prioritizing platforms that were owned by Google. For example, the research showed that the company would first display their own products in the search arch, and only later display everything else, which was a clear breach of guidelines.
It’s hard to apply that example to industries like gaming and telecommunications, but the point is easily understood.
How monopolies can be dealt with
Naturally, it would not necessarily be within the interests of the Chinese government to artificially deflate their best-performing corporations in order to free up space for smaller companies. One such reason is that the Chinese market is a very attractive opportunity for foreigners, which would fill the gap immediately, thus lowering the opportunity for Chinese nationals.
The best way to do this is to conduct nation-wide research first, to determine if the local populace would be open to more options in various industries, or if they like this centralized style of doing business. Because in most cases, these large Chinese corporations are B2B aggregates for B2C businesses.
A great example of this would be the latest survey in Finland where, according to Сasinopånett EU, is a monopoly on the betting industry from the government itself. But we can just as easily draw a parallel between these two nations.
In Finland’s case, it’s within the interest of the population to have a privatized industry so that the market is based on competition, which is calculated through customer satisfaction and improved consumer spending.
In China’s case though, restricting a company like Alibaba within the ramifications of a maximum market share it could have, would lower its competence on the global market. However, restricting Tencent could indeed see more advantageous options appear for telecommunications.
The difficulty in concocting a universal law for every industry is that exceptions will have to be made for the advantage of the economy. This is mostly because China focuses a lot on export, therefore prioritizing its performance on the global markets, rather than the local one.
Should the universal law against monopoly be implemented, China’s GDP will most surely be damaged as these companies will start failing to perform well on a global level.
Is China full of monopolies?
The immediate answer would be that yes, the country has clear signs of monopolies in various industries. This is determined by how fast and effectively large corporations can “get rid” of competition by lowering prices to a point where other options aren’t even considered by the consumers.
In a sense, controlling the Chinese monopoly requires global laws, rather than local ones, which would require years of negotiation in itself.
Sources:
https://casinopånett.eu/nyheter/finnene-vil-ha-slutt-pa-landets-spillmonopol/
https://newzoo.com/insights/articles/supercell-acquisition-tencent-set-to-take-13-percent-of-the-games-market/
