Chinese technology groups are hiring former regulators to defend themselves against Beijing actions

A growing number of Chinese technology companies have hired former government officials as part of an effort to focus on intensifying repression actions in the sector.

While it is not uncommon for officials in the U.S. and Europe to move between government and the private sector, this was unheard of in China until recently.

But such moves in a career with a “revolving door” are becoming more common as Xi has strengthened the Communist Party’s grip on the world’s second-largest economy.

Alibaba, an e-commerce group founded by billionaire Jack Ma, is a prominent recruit of former bureaucrats. Ma, China’s most famous entrepreneur, has largely disappeared from the public eye after criticizing regulators in October and was state-owned. Authorities made a planned initial public offering of Ant Group, a sister company of Alibaba’s financial technology, for $ 37 billion, next month.

Public records reviewed by the Financial Times show that China’s largest Internet groups, including Tencent, ByteDance and Meituan, have hired dozens of former officials, from antitrust regulators to judicial judges. This has raised questions about how far the Xi administration can go to rein in companies.

One of the most prominent bureaucrats challenged by the private sector is Cui Shufeng, a former deputy director in the antitrust office of the Ministry of Commerce, who has led Alibaba’s competition policy research since 2019.

Just days before Chinese competition regulators Alibabi imposed a record fine, Cui told government officials they should not be too harsh on the company.

Authorities “should not regulate internet platforms to the same standard [as other industries] since there is a lot of competition in e-commerce, ”Cui told a group of senior Chinese lawmakers and government advisers on April 1, according to a copy of his remark seen by the FT.

Cui’s former regulatory colleagues announced on April 10 that Alibabi had imposed a record $ 18.2 billion ($ 2.8 billion) for non-competitive behavior – a penalty the company said “sincerely accepted.”

The punishment could have been much higher. It was found to be 4 percent of Alibaba’s domestic revenue for 2019, compared to a potential maximum of 10 percent of that year’s total revenue, or RMB 51 billion. the amount was equivalent to 8 percent of the income of the American chip manufacturer in China.

“The sentence is good news for Alibaba because the investigation ended earlier than expected and the sentence was less than expected,” Chen Long and Guo Shan of Plenum, a Beijing-based consulting firm, wrote in a research note.

There is no evidence that Cui’s speech influenced the regulator’s decision.

Shares of Alibaba rose 6.5 percent in Hong Kong and 10 percent in New York on the first day of trading after the announcement of the deal. Neither Alibaba nor Cui responded to a request for comment.

Even if Alibaba, Ant and Ma face additional regulatory oversight, deep-pocket private groups are sure to remain a popular destination for low-paid Chinese officials.

“This phenomenon is very popular in the Chinese business community,” said Zeren Li, a doctoral candidate at Duke University who specializes in government and business relations in China. According to a study conducted by Li, Chinese listed companies had more than 4,800 executives and board directors with government work experience in 2019. That’s compared to 99 two decades ago.

For Chinese bureaucrats, career change rewards are great. A number of former officials told the FT that their salaries had increased three to six times after joining private sector employers.

“When I worked for the government, I couldn’t afford to rent an apartment near the office,” said a technical director who previously worked at the regulatory agency and asked not to be identified. “Now I have no problem buying a home near one of the best schools in the state.”

Nie Huihua, a professor of economics at Renmin University in Beijing, warned that little is being revealed about what exactly former officials are doing for private employers. “It could lead to rent demands and a loss of confidence in the regulatory system,” he said.

A senior lawyer in Tencent, based in Shenzhen, he served as a judge at Nanshan District Court in the southern city for 14 years. Between 2018 and 2020, Tencent won nearly 94 percent of cases in court, according to the China Judgins Online database. In the same period, Tencent received about 50 percent of cases in Beijing.

“You can’t help but think if the difference is related to Tencent’s [hires]”Said a lawyer who has worked on cases against the group, although there is no evidence of misconduct. Tencent declined to comment.

Some analysts said the long delays in enforcing many provisions of China’s 2008 antitrust law are partly due to lobbying by former regulators representing corporate interests.

Beijing has introduced measures in recent years in an effort to limit the influence of former civil servants. They included requiring former officials to wait two to three years before joining the private sector if they did so while in government.

But analysts say regulations are vague and lack proper transparency requirements.

“The government could have trouble suppressing monopolies when dominant technology companies are employed by officials who are friends or former colleagues of regulators,” said Liu Xu, a researcher at Tsinghua University in Beijing.

Additional reporting by Ryan McMorrow, Xinning Liu and Nian Liu of Beijing and Tom Mitchell of Singapore

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