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China's Internet - the art of the state

The best way for tech companies to thrive in China is to make themselves useful to the state

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QR codes for Alipay and WeChat Pay at a pork stall in China; with their mobile payment platforms, Alibaba and Tencent have built sprawling ecosystems in which vast amounts of commercial activity now take place.

Beijing

IT was 2000, and then US president Bill Clinton was upbeat. The Internet, he said, was opening up the world.

"There's no question China has been trying to crack down on the Internet," he said. "Good luck. That's sort of like trying to nail Jell-O to the wall." The Internet would inevitably push China towards democracy, he said. How could any country control something so free-flowing and still hope to be technologically vibrant? Something would surely have to give.

He was wrong. Today, China has the world's only Internet companies that can match America's in ambition and reach.

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It is years ahead of the United States in replacing paper money with smartphone payments, turning tech giants into vital gatekeepers of the consumer economy.

And it is host to a supernova of creative expression - in short videos, podcasts, blogs and streaming TV - that ought to dispel any notions of Chinese culture as drearily conformist.

All this, on a patch of cyber space that is walled off from Facebook and Google, policed by tens of thousands of censors and subject to strict controls on how data is collected, stored and shared.

China's leaders like the Internet that they have created. And now, they want to direct the nation's talent and tech acumen towards an even loftier end: building an innovation-driven economy, one that produces world-leading companies.

Not long ago, Chinese tech firms were best known for copying Silicon Valley.

But the flow of inspiration now runs both ways. US social media executives look to Tencent and ByteDance for the latest tricks for keeping users glued to their phones.

Tencent's WeChat app, an all-in-one hub for socialising, playing games, paying bills, booking train tickets and more, paved the way for the increasingly feature-stuffed chat apps made by Facebook and Apple. Facebook recently took a page from TikTok, a Chinese service that is a sensation among Western tweens, by releasing its own highly similar app for creating goofy short videos.

If people in the West did not see this coming, it was because they mistook China's authoritarianism for hostility towards technology.

But in some ways, Chinese tech firms are less fettered than American ones. Witness the backlash against Big Data in the United States, the calls to break up giants such as Facebook and the anxiety about digital addiction. None of those are big problems for Chinese companies.

In China, there is pretty much only one rule, and it is simple: Do not undermine the state.

So titans such as Weibo and Baidu heed censorship orders. Unwanted beliefs and ideologies are kept out.

Beyond that, everything is fair game. Startups can achieve mammoth scale with astonishing speed; they can also crash brutally. Thanks to weak intellectual property protections, they can rip one another off with abandon - not great for rewarding innovation, but OK for consumers, who get lots of choices.

And the money just keeps flowing in.

In another advantage, old-school industries such as media, finance and health care have been dominated by lumbering state-run giants. That has allowed Internet champions such as Alibaba and Tencent to sew themselves into these businesses with ease.

With their mobile payment platforms, the two giants have built sprawling ecosystems in which vast amounts of commercial activity now take place. Little remains of daily life that has not been transformed. Shopping. Getting a loan. Renting a bike. Even going to the doctor.

This level of clout has not gone unnoticed by China's leaders. Never in the communist era have private entities wielded such influence over people's lives.

To keep tech in its place, the government is demanding stakes in companies and influence over management. Regulators have reprimanded online platforms for hosting content that they deem distasteful - too raunchy, too flirty, too creepy or just too weird.

That is why the best way for tech companies to thrive in China is to make themselves useful to the state. Nearly everyone in China uses WeChat, making the social network a great way for authorities to police what people say and do. SenseTime, whose facial recognition technology powers those fun filters in video apps, also sells software to law enforcement.

The risk for these companies is that the government demands more, sucking away resources that could be better spent chasing innovations or breaking into new markets.

In China, said Lance Noble of the research firm Gavekal Dragonomics, the government's support "can be a blessing and a curse." NYTIMES