China’s platform economy is further characterized by a state-directed form of financialization (Jia and Winseck, 2018). Despite the legacy of the 2021 regulatory crackdown, China’s platforms still enjoy high valuations. To the consternation of some American politicians, US investors have been and remain major financiers of China’s digital technology firms (see Table 4), while US IPOs remain the goal of many Chinese platforms. China’s highly open investment regime has enabled US investors (especially institutions) to take major stakes in these firms (Shen, 2020).
Despite their nominal private and global ownership, Chinese platforms also remain to a considerable degree under the effective control of China’s partystate. Foreign investment into restricted sectors like telecoms is channelled through Variable Interest Entity (VIE) structures, where overseas investors hold shares in offshore shell companies rather than direct equity in the Chinese operating firms. VIE structures bypass foreign ownership prohibitions but operate in a legal grey area within China. Crucially, they grant foreigners limited voting rights, concentrating control with domestic founders and investors. The party-state maintains decisive leverage through regulation, licensing, embedded Party influence, and the ever-present threat of enforcement actions – helping to ensuring platforms align with state objectives regardless of their ownership structure (Chen, 2022).
Government guidance funds (GGFs), which deploy a mixture of state and private capital towards strategic goals, are another important tool. GGFs (including the prominent state-operated China Internet Investment Fund) controlled over \$1.5 trillion in capital in 2021 (Wei et al., 2023). Capital steered by government guidance funds is deployed overwhelmingly to the technology sector. While a majority is invested in hardware development (especially semiconductor components), at least 17% is invested in software and computer services-based projects. Thanks to enormous investments in technology startups from GGFs, platform giants, and private (domestic and international) investors, China now rivals the United States in its share of global unicorn firms (unlisted startups valued at over \$1 bn). In 2023, China produced 56 unicorns, second only to the US 70. Over one-third of Chinese startups were spun out of state-owned enterprises (Hurun, 2024).
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Reinventing Capitalism