China should curb tech monopolies to ensure growth - PBOC advisor

Bloomberg reports that an advisor to China’s central bank said that Beijing should strengthen efforts to control the expansion of technology companies because the development of internet platforms leads to a “winner takes all” dynamic, which increases inequality and slows economic growth.

“The new technological revolution with more prominent properties of increasing returns will inevitably produce an unprecedented tendency toward monopoly,” Cai Fang, a member of the People’s Bank of China’s monetary policy committee, said.

Cai’s comments are the latest indication that policy makers in Beijing intend to continue a campaign to rein in tech giants such as Alibaba Group Holding Ltd. and Tencent Holdings Ltd., which has rocked equity markets this year. 

Now that China has achieved middle-income status, future growth needs to come from productivity gains rather than increasing investment, Cai said. That requires more government action to increase competition between companies and prevent monopolies rather than relying on markets, he added.

Cai said internet companies were more prone to monopoly as they tend to be larger and have stronger barriers to entry due to their control over data. 

“There is a new phenomenon of ‘winner takes all’,” he said. “Therefore, starting from the necessity of promoting competition and innovation and protecting consumer rights, the task of preventing and breaking monopolies should not be taken lightly.”