Analysis: political undercurrents cannot be ignored as Zhang Yiming stands down to ‘daydream’
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First published on Fri 21 May 2021 07.00 EDT
In the latest retreat by a leading figure in China’s booming tech sector, the chief executive of TikTok’s parent company has said he will step down to focus on long-term strategy, saying he prefers “reading and daydreaming” to the challenge of running a multinational firm.
Zhang Yiming, the 38-year-old boss of Bytedance, set out the reasons for the move in an unusually candid memo addressed to the company’s staff. “The truth is, I lack some of the skills that make an ideal manager,” he confessed.
The timing may simply be linked to the needs of his fast-growing company as it prepares for an initial public offering that is expected to value the group at between $250bn and $400bn. But it comes at a time of growing international suspicion about China’s activities abroad, and unpredictability in domestic politics.
Liang Rubo, with whom Zhang shared a dorm at Nankai University near Beijing before they co-founded Bytedance, will take the helm of the group, whose revenues doubled to $35bn last year. It was not immediately clear whether Zhang would stay on as chair after Thursday’s announcement.
Founded in 2012, Bytedance is China’s first truly global internet company, with 60,000 staff in 30 countries. The firm has a series of popular products including Douyin, the Chinese version of TikTok, the aggregation app Today’s Headlines and the productivity app Lark, which has cloud storage, chat and calendar functions.
Internationally, though, it is TikTok that has put Zhang in the limelight. The video app now has a global user base of more than 800 million, and in the last few years it has helped producers such as the lip-synching comedian Sarah Cooper and the dancer Charli D’Amelio find stardom.
The politics behind TikTok
Like his US counterparts Mark Zuckerberg and Steve Jobs, on whose personal styles many of China’s new wave of tech entrepreneurs have modelled themselves, Zhang’s global tech dream started small.
In a video tour of Bytedance’s first office in a residential neighbourhood in Beijing, he reflected on the company’s humble start. “The meeting room was only about 5 square metres,” Zhang recalled. “A new employee left after two days, probably because he thought we as a startup were way too small.”
But unlike their US peers, Chinese entrepreneurs often must devote significant time and energy to navigating sudden domestic regulatory changes. In the last few years as geopolitical tensions between China and the west have intensified, an increasing number of them – Zhang included – have been reluctantly caught in the middle.
Last year Donald Trump made a series of demands of Zhang’s TikTok over national security concerns, including calling for its US operations be sold to an American company. The firm has insisted it would never provide user data to the Chinese government.
Even Zuckerberg, who once praised China’s vast market and expressed fondness for the country, has warned Washington of a perceived danger to American businesses.
In China, nationalists closely monitored Zhang’s every word. Some called him a traitor, a coward and an American apologist, and demanded he stand up to Trump. He wrote to his staff last year telling them to ignore the onslaught.
Zhang has for years had an uncomfortable relationship with Chinese authorities. In the spring of 2018, Bytedance was ordered to suspend Today’s Headlines, one of its most popular products. As is customary for Chinese public figures who are summoned by the regulators, Zhang made an official apology, admitting his company had taken “the wrong path”.
‘Red flag’ or normal practice?
Brock Silvers, the chief investment officer at Hong Kong-based Kaiyuan Capital, told the US TV network CNN: “Zhang was a young software engineer without significant business experience when he suddenly found himself running a massive company in rapidly shifting markets while operating in an extremely complex regulatory and political environment. Founders suddenly abandoning their celestial perches may well signal a significant red flag to public markets.”
Zhang’s resignation has inevitably led analysts to draw comparisons to Alibaba’s high-profile founder, Jack Ma, whose fintech firm Ant Group bowed to political pressure and suspended its IPO last year. Once a towering figure, Ma has hardly been seen in public since he criticised China’s powerful state regulators and banks in a speech in Shanghai in October last year.
Also last year another Chinese internet rising star, Colin Huang, the founder of the e-commerce platform Pinduoduo, stepped down from his CEO job. Eight months later he relinquished his chairmanship of the company. Pinduoduo said Huang wanted to “pursue research in the food and life sciences”.
Duncan Clark, a veteran China tech investor and author of a book on Alibaba, said: “It is a very dynamic time in China. Nothing is set in stone for big tech. Regulators are becoming more assertive in their approach. For entrepreneurs like Zhang Yiming, humility and low profile seem to be a key strategy.”
Clark believes handing the reins to a top manager pre-IPO also makes sound business sense. There are plenty of precedents in Silicon Valley. Google’s founders Larry Page and Sergey Brin relied on Eric Schmidt to turn their search engine into an advertising powerhouse, and Jobs had Tim Cook to build his international supply chain at Apple.
But the political undercurrents cannot be ignored. Last month Bytedance was among 34 tech companies summoned by regulators and told to undergo “complete rectification” and to “heed the warning” of Alibaba.
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