2021 Chinese tech predictions that were wrong — or surprising

Every year around this time, people predict where the tech industry is heading next, but it wouldn’t be fun if all of those thoughts turned out to be true. What was hyped and feared may not happen in the end, and what was overlooked may become the most shocking headline.

As 2021 wraps up, Protocol | China looked back at the predictions about China’s tech world that have proven to be wrong or news that has genuinely surprised us. From the overnight fall of China’s ed-tech industry to the crashing down of “996” work schedules, here are the six things no one expected at the beginning of 2021.

The end of the ed-tech industry

It may sound absurd now, but ed tech was one of the hottest Chinese sectors at the beginning of this year. Kai-Fu Lee, a well-known, Beijing-based VC investor, said at a Clubhouse event in February that he was mostly investing in two sectors: education and health care. After the first year of the pandemic forced the world to adopt remote learning, Chinese startups were ready to ride the wave. ByteDance decided to fully commit to the ed-tech sector and officially launched its ed-tech arm Dali in October 2020. Tencent, Alibaba and Baidu were pouring capital into tutoring startups, which became the biggest advertisers in China. Everything looked great.

But all those hopes were shattered by one policy document. On July 24, the Chinese government released “Opinions on Further Alleviating the Burden of Homework and After-School Tutoring for Students in Compulsory Education," which banned all forms of academic tutoring provided by private companies, including online tutoring, or ed tech. In the six months following, ed-tech startups and tutoring giants went through massive layoffs, sometimes cutting as much as 80% of their payroll. Some scrambled to pivot their businesses . The rollercoaster ride of the ed-tech boom took only one year from peak to bottom, and thousands of online tutors, in China and even in the United States , now find themselves facing job insecurity.

From the biggest overseas IPOs to ashes

Even though Alibaba affiliate Ant Group’s IPO was called off at the last minute in November 2020, going public overseas was still the ultimate goal — the coming-of-age sign for most Chinese tech startups. Some even raced to be the first company going public abroad in a specific sector, like community grocery buying . Ride-hailing giant DiDi’s long-rumored IPO in the U.S., the largest of its kind after Alibaba in 2014, could have been the confidence boost that everyone needed.

Everyone now knows the shit show it became. By rushing its New York Stock Exchange IPO despite regulators’ disapproval, DiDi eventually triggered Beijing to take down the app, put the company under a cybersecurity review and pressure it to delist .

The mess didn’t just impact DiDi, either. Soon, the release of several cybersecurity laws and regulations made it much more difficult for any tech company to list in foreign exchanges. Even VIE, the trusted and tested corporate structure that made it possible for Chinese companies to list overseas in the first place, was reported to be in danger . Besides DiDi, other tech companies like Ximalaya have proactively chosen to abandon their U.S. IPO plans and turn to Hong Kong instead. So long to the news-making, gigantic U.S. IPOs of Chinese companies.

The battle of the giants that never happened

Many people had high hopes for the Chinese community grocery shopping sector. After a year of accelerated growth because of the pandemic and China’s harsh lockdowns, so many startups had emerged and so many tech giants had entered the field that a grand battle seemed inevitable. In its 2021 China predictions , McKinsey called community grocery buying “the next major showdown between China’s internet giants." The feeling was echoed on both sides of the Pacific: A Chinese newspaper said the industry was “on the verge of a big war,” one that would be fought with an endless stream of VC investment, discounts and one-cent deals.

Except that never happened. The raging fire of antitrust investigations in China stopped tech companies from giving out huge subsidies to increase market share. The public was losing interest in it too, once going to the market became feasible and safe again. Even the leading players are now reported to be laying off employees, going bankrupt or retracting their expansion plans. It turns out, no one won the “major showdown” in the end.

The harshest restrictions on gaming — ever

The Chinese government was never known for being friendly to the video game industry , but its recent fondness for esports had most people thinking that might have changed. Still, nobody was expecting the harsh “three hours a week” gaming restrictions for minors, the most extreme policy ever of its kind, when it came out at the end of the summer.

“In mid-2020, authorities were already pushing that all games in the market would need to implement an anti-addiction SDK, and games that did not have one were asked to be pulled off from major app stores,” recalled Jingtong Zhu, publishing manager at a Shanghai-based video games company. “To push it even further in 2021 was very unexpected.”

What’s also unexpected? The positive feedback to the gaming restrictions from parents worldwide. “I was surprised most by the amount of popular support for the gaming restrictions on minors from folks outside of China,” Rui Ma, tech investor and analyst from Tech Buzz China, told Protocol. “I thought it would be more controversial, but in nearly every conversation I've had, that's been brought up as ‘the one I wish existed in my country.’”

Amazon souring on Chinese sellers

After years of courting Chinese third-party sellers, Amazon finally turned against them in 2021. At the beginning of this year, third-party sellers from China were going strong. They made up 75% of new sellers on Amazon in January, small giants were emerging in the cross-border ecommerce industry and analysts were forecasting another year of high-speed growth.

Then, in May, Amazon suspended Mpow, Aukey and a slew of other Chinese brands whose annual sales revenue were in the billions. Amazon said in September that it banned about 600 Chinese companies and 3,000 brands this year for abusing the review function. But Chinese sellers calculated a much bigger number, saying over 50,000 brands have been impacted. Whichever number is closer to the truth, it has caused a wide wave of panic in the Chinese cross-border ecommerce industry.

In the aftermath of suddenly falling out of favor with Amazon, some Chinese sellers are cashing out, selling their brands to the rising Amazon aggregating businesses . Other vendors are working to reduce their dependence on Amazon and build their own independent websites.

The end of '996'

Even though it was blatantly illegal, the “996” work schedule — 9 a.m. to 9 p.m., six days a week — has been deployed by Chinese tech companies for so long that employees forgot it could be overturned. That’s why when 996 came crashing down this year, after several overwork deaths and after China’s Supreme People's Court said the practice is “a serious violation” of labor laws, it still felt too good to be true.

As Protocol called it in July, it was the beginning of the end of the “Big Tech Overwork era.” Since then, tech companies like ByteDance, Tencent and Kuaishou have all announced they were getting rid of overtime schedules like 996 or "big/small week" (working an extra day every other week). The downfall of 996 became another sign that Chinese tech companies have moved past the phase of uncontrolled, high-speed growth. These massive companies are now forced to think about employee benefits more than products or growth. And those companies that persist with their 996 schedules? Employees are continuing to expose them, sometimes with simple shared spreadsheets .