China has enacted a multifaceted crackdown on a wide range of industries since late 2020, leaving startups and decades-old companies alike operating in a new, uncertain environment and outperforming their stocks.
On Friday, Beijing signaled an easing of its stance on the once-idle tech sector as President Xi Jinping seeks to bolster the economy amid growth-impeding COVID-19 lockdowns. Here are the sectors that have faced regulatory pressure:
PLATFORM ECONOMY The category includes China’s tech giants like 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 released rules tightening oversight over the algorithms they use to target users, ordering them to open their platforms to each other, and penalizing them for false advertising. Monopolistic behavior of such companies was also the focus.
Alibaba and Meituan were fined $2.75 billion and $527 million, respectively, last year for abusing their market dominance. Tencent was also fined and prevented from entering into exclusive music copyright agreements. Regulators have also accused such companies of exploiting their workers and drafted policies requiring food delivery platforms to guarantee minimum wages and rest periods.
GAMING COMPANIES Regulators have slashed the time that under-18s can gamble online to one hour on Fridays, weekends and holidays in response to growing concerns about gambling addiction over the past year, and have required companies like Tencent and NetEase to keep their update surveillance systems.
They also suspended the issuing of publishing licenses, which are key to monetizing games, for nine months, dealing a serious blow to gaming companies’ revenues and forcing some 14,000 companies from the sector out of business. While they lifted the freeze earlier this month, the industry’s scrutiny continued with a recent ban on live streaming of unauthorized video games.
ENTERTAINMENT Broadcasters have been ordered by authorities to shun artists with allegedly false political positions and feminine styles, to enforce strict salary caps on actors and guests, and to foster a “patriotic atmosphere” for the industry.
It marked the escalation of a campaign against what authorities have described as a “chaotic” celebrity fan culture. Platforms were banned from publishing favorite lists and the sale of memorabilia was regulated in August after a series of controversies involving performers. TECH COMPANIES WATCH IPOs
Regulators have stepped up their scrutiny of Chinese tech companies seeking overseas listings, requiring platform companies with data from more than 1 million users to undergo a security clearance before listing their shares overseas. China’s Securities and Exchange Commission has also proposed extending its offshore listings supervision to Chinese firms with VIE (Variable Interest Entity) structures.
VIEs have primarily been used by companies listing offshore, mostly in the United States, to circumvent Chinese regulations restricting foreign investment in sensitive industries such as media and telecoms. PRIVATE EDUCATION
Chinese authorities last year banned for-profit tutoring in school curriculum subjects to ease pressure on children and parents, prompting a spate of school closures and layoffs across the private education sector. New Oriental, one of China’s largest private education companies, laid off 60,000 employees and saw its operating revenue fall 80% after the new regulations took effect, its founder said in January.
ONLINE FINANCE In November, just before Ant Group Co Ltd was due to go public in what would have been a record share sale, banking regulators released bills calling for tighter controls on online lending, in which Ant played a big part.
The regulations set limits on inter-provincial online lending and limited lending to individuals. The following day, the People’s Bank of China halted Ant Group’s IPO. In April, regulators asked Ant to separate its payments business from its personal finance business.
RIDE-HAILING In June 2021, days after its IPO debut, the Cyberspace Administration of China (CAC) announced a cybersecurity investigation against Didi Chuxing, barring him from signing up new users and ordering app stores to remove 25 of his cellphones applications.
Sources had said the company had run afoul of Chinese regulators by pushing ahead with its $4.4 billion IPO. Authorities had asked it to suspend the listing while conducting a cybersecurity review of its data practices, they said. Didi, whose shares have fallen nearly 90% since going public, announced in December that it would delist the company in New York and seek 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 its high levels of debt over the past year has turned into a liquidity crisis for some major developers such as China Evergrande Group, leading to bond defaults and projects on hold. But since late last year it has taken steps to revive the refrigerated property sector. These included making it easier for large and state developers to raise capital, relaxing rules on escrow accounts for pre-sale funds, and allowing some local governments to lower mortgage rates and down payment ratios.
Analysts have suggested that the regulatory respite for the sector was likely due to regulators’ concerns about the knock-on effects on the broader economy.
(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)