Is It Safe to Get Back in the Water?

It was only three years ago that Xi Jinping marched China’s proudest private companies—Alibaba (NYSE: BABA), Tencent (0700.HK), Didi (DIDIY), Meituan (3690.HK), the entire ed-tech industry—to the ideological woodshed. No warning, no due process, no gradual tightening. Just a demonstration of raw political power: the Party reminds you who owns the future.

Alibaba’s Ant Group had been hours from the largest IPO in world history. Jack Ma, China’s most charismatic entrepreneur, vanished from public life as if a stagehand had yanked him off with a shepherd’s crook. Tencent was fined for monopolistic sins previously considered virtues. Didi was ordered off American exchanges for exposing “data security”—as if Uber’s engineers were plotting the collapse of China from midtown Manhattan. And ed-tech? Beijing simply declared the sector socially corrosive and uninvestable, which is an elegant euphemism for “we killed it.”

At the Gilder Technology Report, we did not pretend to be braver than the market. We pulled our Chinese positions not because we wished to make a political point, but because Beijing made one for us. If the rules of the game can change overnight, then the game is no longer investment; it is court politics.

But politics has its own business cycle. China’s economy is faltering. Property is cracking. Youth unemployment is the kind of number that Chinese statisticians stop publishing when instructed to “maintain confidence.” And suddenly, the same platform companies once accused of decadent “disorderly expansion of capital” have been rediscovered as essential engines of “new productive forces.” Beijing now insists the tech rectification campaign is “basically complete,” which is a lovely phrase in Chinese bureaucratic dialect: “We’ve broken your legs, and now we expect you to walk.”

Jack Ma is allowed to appear in photographs. Tencent gets new gaming approvals. Ant Group pays its fines and resumes something approximating normal operations—normal, that is, inside the smaller political cage now built around it. Didi is permitted back on app stores under the watchful gaze of cyber-regulators who will never again let the company forget its place. And a few foreign investors, forgetting why they once fled, are wading back in, telling themselves: Surely Xi has learned his lesson. Surely Beijing will never again kneecap its best companies.

So, is it safe to get back in the water?

The shark may have gone deep, but it has not gone vegan.

China has dialed down the theatrics. Beijing now needs growth more than humiliation rituals. The big platform firms have been invited back to the adults’ table—though with ankle monitors. But what investors must understand is that the crackdowns of 2020–22 were not a mistake Beijing now regrets. They were an expression of the system’s logic.

The Party does not dislike private enterprise. It dislikes private influence. It dislikes independent cultural gravity. It dislikes platforms that control data flows, social narratives, capital formation, and—worst of all—the imaginations of young people. The United States worries when a tech company gets too powerful. China worries when a tech company gets too popular.

So yes, Beijing may refrain from smashing companies in broad daylight. But the deeper reality remains: China regulates by surprise, by signal, and by fiat, while the United States regulates by statute, procedure, and litigation. One regime irritates you. The other ambushes you.

A Chinese CEO can obey every written regulation and still be found guilty of violating an unwritten political mood. A U.S. CEO may face an FTC lawsuit, but at least he receives the courtesy of a docket number. In America, the worst-case scenario is losing in court. In China, the worst-case scenario is learning that court was never the venue.

And so, the question for investors is not:
Has Xi stopped cracking down?
but:
Has Xi ceded the authority to crack down whenever he pleases?

The answer, plainly, is no.

He cannot afford another round of trillion-dollar value destruction, but the Chinese Communist Party has made clear it will accept almost any consequence to avoid the rise of rival powers.

That does not mean all Chinese equities are radioactive. There are areas where Party objectives and market incentives temporarily align: hard tech, semiconductors, robotics, industrial AI, EV supply chains. These are engineering problems rather than cultural ones, and engineering problems do not obviously threaten the Party’s control. If we at the Gilder Technology Report dip a toe back into Chinese waters, it will be in sectors Beijing wants to succeed, not companies it fears will succeed.

The idea that China has “normalized,” that Xi has embraced regulatory predictability, that 2020–22 was an aberration rather than a precedent, is wishful thinking dressed in bargain multiples.

China will be investable again when the rules become rules instead of signals, when entrepreneurs can trust continuity more than political weather, and when minority shareholders are something more than convenient ballast.