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ByteDance is finest identified for proudly owning TikTok — a hugely-popular video-sharing app that each enchants youngsters and terrifies lawmakers in equal measure.


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However this week, it emerged that the corporate has acquired a sequence of hospitals for a cool $1.5bn. TikTok is, successfully, now within the healthcare enterprise.

The media’s response to this improvement largely coalesced into two camps. The primary was certainly one of pure incredulity.

The second argued that ByteDance was merely following the likes of Amazon and Apple, each of which have invested in healthcare (and, significantly, frontline healthcare supply) over the previous two years.

The true purpose is probably going extra difficult. However first, we’ve to know how the Chinese language financial system works. Bear with me. I’ll make this mild.

Capital controls and firms

Should you’re studying this text, you’re most probably residing in a Western nation. In all probability the US, Canada, or the UK.

These nations, for all intents and functions, permit corporations and people to maneuver cash as they see match. Should you’re a New York billionaire and also you need to switch your total web price to a checking account in Geneva, you possibly can. There’s nothing stopping you.

China is totally different. It makes use of one thing referred to as Capital Controls to restrict the sum of money that flows in a foreign country. Each companies and people are restricted in how a lot they will ship abroad with out first gaining the consent of the federal government.

This coverage is partially chargeable for the Chinese language financial miracle, which noticed the nation just about eradicate excessive poverty and radically broaden its center class over only a few years.

Give it some thought. Should you’re a profitable Chinese language manufacturing facility proprietor, and the best approach to make investments your earnings is to spend domestically, that’s what you’ll do.

So, you’ll rent new employees and put money into new equipment. Productiveness and output improve, so that you repeat the cycle, rising quicker and stronger with each iteration.

Capital controls have additionally resulted in some real financial weirdness.

Till the federal government cracked down (and Xi Jinping’s coverage of “Zero COVID” made worldwide journey all however inconceivable), rich Chinese language people would purchase and promote high-value objects to maneuver their cash abroad.

This included virtually something. Artwork. Automobiles. Actual property. Should you can identify it, there was most likely somebody investing in it.

It’s additionally partially chargeable for China’s booming actual property market, which at the moment teeters getting ready to implosion. Since atypical Chinese language folks couldn’t make investments abroad simply, they purchased property.

Corporations like Evergrande raised tons of of billions from each native and overseas traders to fulfill this demand.  Big ghost cities containing tens of 1000’s of vacant funding properties now litter the Chinese language countryside.

I believe you recognize the place I’m going with this. It’s simpler for ByteDance to simply make investments its cash domestically. And that’s most likely what it did. Healthcare isn’t essentially the most thrilling sector, however it’s a necessary service. As bets go, it’s a secure one.

Too huge to jail?

There’s one other level price making. The Beijing authorities has, in recent times, made it abundantly clear that it received’t tolerate the unchecked development of the tech sector. It received’t allow tech CEOs to change into too highly effective.

Take Jack Ma, for instance. He’s the founding father of Alibaba. From humble beginnings, this firm is now among the many most dear on the earth.

In 2020, Alibaba’s monetary providers wing, the Ant Group, was set for an IPO that will worth the subsidiary at over $313 billion.

It might change into one of the crucial worthwhile corporations on the earth, with a market capitalization larger than Samsung or Coca-Cola.

After which it went terribly flawed. Jack Ma made statements that have been perceived as essential of the federal government, regulators, and the ruling Chinese language Communist Get together.

Inside a matter of days, the Ant Group’s blockbuster IPO was scuttled by regulators, and it confronted new restrictions on the way it operated.

Extra troublingly, Ma disappeared from public view. He has solely been seen twice in public since October 2020.

This despatched a message to the Chinese language tech sector. The federal government doesn’t need any private-sector rivals. It received’t tolerate any menace to its energy. And so, is it a shock that ByteDance has opted to put money into extra conventional areas?

Moreover, China’s tech sector faces threats from abroad. TikTok is a superb instance. President Trump tried to ban it, and pressure ByteDance to divest its US property. The FCC equally needs Google and Apple to take away it from their US app shops.

Tech is a world house. Corporations depend on trans-national provide chains and buyer bases. Governments can simply disrupt this, as Huawei can attest to. In contrast, healthcare carries much less danger, and is more durable to sanction.


So, no. I don’t assume it’s bizarre that ByteDance purchased a hospital chain. Once you consider all the weather — the specter of overseas sanctions, rising home distrust of the tech sector, and the long-established capital controls — it is sensible.

And I’d wager my backside reminbi that we’ll see related acquisitions within the months and years to return.