Shanghai – The government’s commitment to tightening regulations, losing billions of dollars in foreign stock prices, and even tougher Chinese tech giants looks like a lasting attack on innovation and businesses by Big Brother.
But there are reasons why increasingly strict crackdowns are shrugging, mainly from Chinese consumers. It is widely seen as needed.
In China, chaotic online lending and powerful platforms are squeezing merchants and accusing them of misusing consumer data. This reflects global concerns about Big Tech, which Facebook, Google and others are scrutinizing at home and abroad.
“In China, we’ll soon be the Communist Party, but if the UK government does this, people will probably be fine,” said Jeffrey Tauson, head of research at Asia Tech Strategy.
“These actions look very rational.”
Companies such as e-commerce giants Alibaba and JD.com, along with messaging and gaming giant Tencent, are one of the most valuable companies in the world, China’s digital lifestyle growth and the United States’ major players. We are celebrating the government’s ban on our competitors.
But they are victims of their own success.
The problem was last October when Alibaba co-founder Jack Ma committed a mortal sin of publicly criticizing Chinese regulators for increasingly disastrous warnings about his company’s financial arm, Ant Group. It was open to the public.
Ant Group’s Alipay platform was ubiquitous in China and was used to buy everything from meals to ride-hailing services, groceries and travel tickets.
Slow regulatory oversight has allowed Ant to expand into mortgages, wealth management and even insurance. Tencent’s fintech profile is also rising.
As a result, they have become “very powerful actors who can push regulatory limits without considering systemic risk,” the Eurasia Group consultancy said in a research note.
These ambitions clashed with Beijing’s long-standing campaign to clear its chaotic financial system from the accumulation of dangerous debt.
According to the Institute of International Finance, China’s debt surged to 335% of GDP by the end of 2020. The lower levels before were already raising concerns for the International Monetary Fund.
The official response to Ma’s anomalous explosion was uncompromising: Ant’s record $ 35 billion Hong Kong-Shanghai IPO was abruptly suspended, Ma disappeared from public for weeks, and a regulatory screw Was tightened.
China is expected to force Ant and Tencent to carry out bank-like lending operations, resulting in tighter scrutiny and financial liability that FinTech leaders have largely avoided. ..
“They need to meet the capital requirements and set up a financial holding company. They cannot escape it,” said Ke Yan, lead analyst at DZT Research.
The Wall Street Journal reported last week that Alibaba is shedding a wide range of media assets, including the possibility of selling Hong Kong’s South China Morning Post.
The turmoil has cut the stock value of Chinese tech companies by billions of dollars.
Scale is important in China’s crackdown.
Over 20% of US retail spending is online, but China is projected to exceed 50% this year. China’s leading platforms boast hundreds of millions of users, amplifying industry concentration and data privacy concerns.
The extraordinary explosion of horses was seen by many as a direct Big Tech challenge to Communist Party authority and influence.
However, Ke said: “I don’t think (the crackdown) was caused by Jack Ma. It was planned for a long time.”
Concerns about the growing influence of technology are not unique to China.
“Most of the world’s major governments are focusing on this issue differently than they were two years ago. Everyone seems to think Big Tech has become too powerful,” Towson said.
Such crackdowns are not uncommon in China.
The economy has changed so rapidly in recent decades that regulators often catch up and ultimately need analysts, despite delayed attempts to address the problems that arise. Make a headline by saying clamp down.
“This is a very” Chinese “approach. “Let’s do it without hindering innovation. We’ll step in a little later,” added Towson, adding that China is “naturally concerned” about FinTech’s growth rate.
Many Chinese web users say the crackdown should have come sooner. As the use of facial recognition and other advanced technologies expands in China, consumers are increasingly expressing privacy concerns.
More measures may come. Xi Jinping president last week, called for strict monitoring to prevent the online monopoly and financial turmoil.
This could “destroy the walled gardens built by Alibaba and Tencent,” and the Eurasia Group “will be a more equal place of competition for SMEs and offer better options for consumers.” Said.
Ant’s final IPO is expected to be significantly reduced, but China’s move is “unlikely to substantially change the competitive environment and potential growth” in these important sectors. Group CLSA states in a research report.
“Regulatory risk is exaggerated,” he added.
“It may take some time for the dust to settle,” Ke said, adding that “there is still significant growth behind these companies.”
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