Independent Online

Wednesday, May 18, 2022

Like us on FacebookFollow us on TwitterView weather by locationView market indicators

How China's regulatory crackdown has reshaped its tech, property sectors

A chef walks in the headquarter campus of Chinese e-commerce giant Alibaba Group in Hangzhou in eastern China's Zhejiang province. AP Photo/File

A chef walks in the headquarter campus of Chinese e-commerce giant Alibaba Group in Hangzhou in eastern China's Zhejiang province. AP Photo/File

Published Apr 29, 2022

Share

China has since late 2020 waged a multi-pronged crackdown on a broad range of industries, leaving startups and decades-old firms alike operating in a new, uncertain environment, and battering their shares.

On Friday, Beijing signalled an easing of its stance on the once-freewheeling tech sector as President Xi Jinping seeks to bolster the economy in the face of growth-sapping Covid-19 lockdowns.

Story continues below Advertisement

Here are the sectors that have faced regulatory pressure:

PLATFORM ECONOMY

The category includes China's tech giants such as Alibaba Group, Meituan and Tencent Holdings whose e-commerce to social media platforms register millions of users.

China accused them of mistreating users, and has since published rules tightening oversight of the algorithms they use to target users, ordered them to open their platforms to each other, and punished them for false advertising.

Monopolistic behaviour by such companies has also been a key focus.

Alibaba and Meituan were fined $2.75 billion and $527million respectively last year for abusing their dominant market positions. Tencent was also fined and barred from entering exclusive music copyright agreements.

Story continues below Advertisement

Regulators have also accused such companies of exploiting their workers, and have drafted guidelines requiring food delivery platforms to guarantee minimum pay and rest periods.

GAMING COMPANIES

Regulators slashed the amount of time those under 18 can spend playing games online to an hour on Fridays, weekends and holidays, in response to growing concern over gaming addiction last year, requiring companies such as Tencent and NetEase to upgrade their monitoring systems.

Story continues below Advertisement

They also stopped issuing publishing licenses, which are key to monetising games, for nine months, dealing a big blow to gaming firms' revenues and forcing some 14,000 companies related to the sector out of business over the period.

While they lifted the freeze earlier this month, scrutiny of the industry has continued with a recent ban on the live streaming of unauthorised video games.

ENTERTAINMENT

Story continues below Advertisement

Broadcasters were told by authorities to shun artists with what they called incorrect political positions and effeminate styles, to strictly enforce pay caps for actors and guests, and to cultivate a “patriotic atmosphere” for the industry.

It marked the expansion of a campaign against what authorities have described as a “chaotic” celebrity fan culture. Platforms have been banned from publishing popularity lists and sales of fan merchandise were regulated in August after a series of controversies involving performers.

TECH COMPANIES EYEING IPOs

Regulators have increased their oversight of Chinese tech firms seeking to list abroad, requiring platform companies with data on more than 1 million users to undergo a security review before listing their shares overseas.

China's securities watchdog has also proposed extending its oversight of offshore listings to Chinese firms with variable interest entity (VIE) structures.

VIEs had mostly been used by companies that list offshore, primarily in the United States, to skirt Chinese rules restricting foreign investment in sensitive industries such as media and telecommunications.

PRIVATE EDUCATION

Chinese authorities last year banned for-profit tutoring in subjects on the school curriculum in an effort to ease pressure on children and parents, leading to a wave of school closures and layoffs across the private education sector.

New Oriental, which had been one of China's largest private education firms, dismissed 60,000 employees and saw operating income plunge by 80% after the new rules came into effect, its founder said in January.

ONLINE FINANCE

In November, shortly before Ant Group Co Ltd was set to list in what would have been a record share sale, banking regulators issued draft rules calling for tighter control of online lending, in which Ant was a big player.

The regulations set limits on cross-provincial online loans and capped loans to individuals.

The following day, the People's Bank of China halted Ant Group's IPO. In April, the regulator called on Ant to separate its payment business from its personal finance business.

RIDE-HAILING

In June 2021, the Cyberspace Administration of China (CAC) announced a cybersecurity probe into Didi Chuxing days after it debuted on the New York Stock Exchange, barring it from signing up new users and ordering app stores to remove 25 of its mobile apps.

Sources had said that the company had ran afoul of Chinese regulators by pushing ahead with its $4.4 billion US IPO. Authorities had urged it to put the listing on hold while they conducted a cybersecurity review of its data practices, they said.

Didi, whose shares have fallen by almost 90% since it went public, said in December it would de-list in New York and pursue a listing in Hong Kong.

It has scheduled a shareholders meeting for May 23 to vote on the plan.

PROPERTY

Beijing's campaign to reduce high debt levels evolved into a liquidity crisis last year among some major developers such as China Evergrande Group, resulting in bond defaults and shelved projects.

But since the end of last year, it has taken steps to help revive the cooling property sector. Those included making it easier for large and state-owned developers to raise funds, relaxing rules on escrow accounts for pre-sale funds and allowing some local governments to cut mortgage rates and down-payment ratios.

Analysts have suggested that the regulatory respite for the sector was likely driven by regulators' concerns about the knock-on effects on the broader economy.

Reuters

Related Topics:

ChinaXi Jinping

Share