Assessing China’s Platform Economy in 2022

When considering the developments brought about by the digital age, the rise of the platform economy is certainly among the most consequential. While fundamentally reshaping economic relationships, social engagement and business operations, digital platforms are now embedded within the very fabric of everyday life.

Nowhere is this transformation more apparent than in China, where a burgeoning economy and technological metamorphosis in recent decades have been underpinned by a cohort of sprawling and innovative tech giants such as Alibaba, Tencent and Baidu.

So much of the contemporary Chinese consumer experience is filtered through a universe of digital platforms. Need a lift? Request a cab using Didi. Got a burning question? Search the web via Baidu. Hungry? Place an order for meal delivery with Tencent-backed Meituan or Alibaba’s

These platforms have had profound ramifications on the country’s labor market. One state media report estimated that as of 2020, the number of workers in the domestic digital economy amounted to as many as 200 million.

As the platforms mature, algorithmic engines supporting this vast digital architecture have become more adept at anticipating consumer needs, and sleeker at organizing workforces. This has led to unforeseen challenges in ensuring data security and employment standards, and has also sparked regulators to pursue more advanced content control measures, casting uncertainty over the future direction of the country’s tech industry.

On the heels of another momentous year for Chinese tech, what is the current state of play in China’s platform economy?

The Platform Labor Market

The idea of a “platform economy” provides a useful lens for understanding the shifts that have taken place alongside the expansion of the internet. Simple definitions refer to the concept as the transfer of economic and social activity – which had previously been conducted primarily offline – into the digital realm.

Given the pervasive nature of China’s leading digital platforms, defining exactly what qualifies as “platform-based employment” can be a tricky task. While the above-mentioned Xinhua report put the total as high as 200 million, other studies adopting a more rigid classifications scale the figure back significantly.

Still, even these conservative estimates show that Chinese workers have adjusted to digital platforms relatively fast. One 2018 commentary suggested that about 15% of Chinese workers were employed by platforms, compared with 10% in the United States and less than 5% in the United Kingdom.

While figures and definitions can be quibbled with, one thing is certain: digitalization has drastically altered work in China.

“Similar to the discourse in many Western countries, platform work [in China] is seen as a new avenue to promote freedom and flexibility of work and a better way to match workers’ talents with market needs,” wrote a report issued in 2021 by the International Labour Organization (ILO).

One type of Chinese platform-based employment flagged in the ILO study, which has not developed in Western contexts, sees individuals participate in manufacturing or craft labor in personal workspaces, with supplies and finished products shipped through the mail. This physical labor is essentially the same as traditional industrial tasks, but it is mediated through a digital platform that sets the terms of the economic relationship at the outset. Employees in this situation have generally been classified as “self-employed,” meaning they risk missing out on social security benefits or certain legal protections that would have been provided in offline factory settings.

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Recent years, however, have seen more efforts at protecting Chinese workers from the adverse conditions brought about by the gig economy. Under the banner of an expansive “common prosperity” drive, major domestic internet firms were notified in September 2021 that they would be required to sign contracts with gig employees, potentially marking a landmark shift for platform-based work in China.

Despite the change in official posture, however, platforms will likely remain a key provider of employment in the country during the year ahead and beyond, albeit with more oversight and the formalization of economic relationships.

No more monopolies

Among the key elements of platform economies are network effects, phenomena whereby a service or product’s value increases with its overall number of users. Such situations invariably lead to the creation of market monopolies in the absence of targeted regulatory intervention.

China’s top tier of technology companies – particularly Alibaba and Tencent – have swelled to become true industry behemoths over the years, with each now encompassing a broad array of services and products spanning the country’s digital ecosystem. The period of unbridled growth long enjoyed by these companies, however, appears to be coming to a close.

In April of last year, Alibaba was hit with a major antitrust penalty requiring it to produce $2.8 billion for allegedly pursuing exclusionary practices on its e-commerce sites, thereby posing a threat to market competition. In October, food delivery platform Meituan received a fine of $530 million after it was accused of similar monopolistic practices. Early signs suggest the approach will carry into 2022.

On January 5, the state-backed Economic Daily released a widely circulated document entitled “The platform economy will be deeply integrated with the real economy.” While extolling the virtues of digital platforms in empowering local communities to boost their economic potential, it also called for further tightening: “Under the regulatory requirements of preventing the disorderly expansion of capital, anti-monopoly, data security and the protection of privacy, the internet industry has bid farewell to the stage of barbaric growth.”

Furthermore, a recent essay penned by President Xi and published in party theoretical journal Qiushi on Saturday calls for an end of perceived “unhealthy” development in the country, as well as for the prevention of “monopolies and the disorderly expansion of capital.”

It seems the winner-take-all dynamics of the past may soon be coming to an end. Put together with other recent efforts to reign in the gig economy and tame powerful algorithmic recommendation services, which had previously comprised the backbone of China’s platform economy, it’s fair to say a whole new ballgame is underway.