New era begins for China’s reined-in tech giants
- Beijing is ready to call it a day after a two-year crackdown on ‘new economy’ businesses, and the industry can expect support from now on
The tech giants and their so-called platform economy have been reined in. Their tycoons have been put in their place.
Two years after regulators launched a crackdown on “new economy” businesses, including their “Wild West” shadow banking, Beijing is ready to call it a day.
The importance of the industry has been reaffirmed; it can expect official support from now on. Official statements declare a readiness to normalise regulation, and encourage operators to “display their capabilities in bolstering growth, job creation and competitiveness”.
All that, though, has been done at an enormous cost. Roughly US$2 trillion in market capitalisation has been wiped out from the listed parents of the 13 platform companies between late 2020 and the start of this year.
Back then, platform enterprises – technological ecosystems that share data, traffic, user information with antitrust implications – had grown unruly as they expanded rapidly. Beijing rightly saw the need to bring them to heel, not only to protect the economy and consumers, but also to ensure sustainable growth.
There was a need to prevent what the Central Economic Work Conference last month called the “disorderly expansion of capital”. That has resulted, over two years, in an unprecedented regulatory crackdown on technology firms, ranging from content and data security to mergers and acquisition activity.
The crackdown roughly began with the abrupt foiling of Ant Group’s US$39.7 billion initial public offering in November 2020. Now, ratification work on 14 major Chinese tech platforms has been completed.
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Though unnamed, it’s widely believed they include such household names as Tencent, Meituan, Didi and Alibaba, which owns this newspaper.
Fintech, which sold itself as spurring growth, democratising borrowings and disrupting traditional banking services, threatened to usurp finance. But by building up hidden risks, it was contributing to the murky shadow banking sector.
Regulations have been imposed. Fintech companies from now on will be run like banks, with emphasis on risk-weighted capital, ceilings on leverage, and protection of personal data.
Meanwhile, the use, transfer and sharing of data especially across borders, has been ring-fenced with better protection and enforcement.
