Beginning with the suspension of Ant Group’s IPO in November of 2020, the State Administration of Market Regulation (“SAMR”), a market watchdog formed by the Chinese Communist Party (“CCP”) in 2018, has clamped down on some of China’s leading tech companies. Alibaba was fined a record $2.8B in early April, and 34 prominent tech firms were called in by regulators to address anti-competitive business practices. SAMR has gone on to fine almost all of them for failing to disclose mergers, signing exclusive contracts, misleading market tactics and other signs of capitalist “excess.” Companies fined included Tencent (music and gaming), Meituan (retail), Didi Global (ride hailing), Baidu (search), ByteDance (social media – owner of TikTok), JD (ecommerce) and New Oriental (education). Since then, they have gone to freeze the apps of Didi Global, freight logistics companies Full Truck Alliance and the recruiting platform Kanzhun for allegedly violating data security protocols. The motives of the CCP are unstated but clear: (1) they want to quell public discontent from those disenfranchised by the escalating costs of public education, housing, healthcare and transportation, (2) they wish to shape the path of national technology development to meet strategic goals such as data security, AI, and dominance in manufacturing and hardware – including semiconductors, batteries, the “industrial internet” and biotechnologies – and away from the consumer internet. In a few short months, Beijing has succeeded where Washington has failed: it has swiftly and ruthlessly brought its tech juggernauts in line with party policy. The best evidence of that was the announcement last week that Tencent’s popular WeChat platform would be voluntarily stopping the registration of new users while they upgraded security systems to comply with current “laws and regulations.” This has not been lost on the U.S., as the Washington Post article below brings into quick relief. China’s goals for tech regulation are not so far off from their American counterparts. Moreover, they appear to be keenly aware of the economic implications of this move, and have moved swiftly to ease their monetary policy to ensure this doesn’t derail their economic recovery. Our take is that China will continue to balance their regulatory agenda with their desire for economic stability, as they did with off-shore gambling in Macau back in 2018, and the market has quickly “priced in” this heightened regulatory risk into the shares of the Chinese tech giants. Alibaba, Tencent and Tiktok aren’t going away anytime soon, and the price you have to pay to access their future growth just got a bit cheaper.

https://urldefense.com/v3/__https://www.washingtonpost.com/politics/2021/07/28/technology-202-china-is-doing-what-us-cant-seem-regulate-its-tech-giants/__;!!PxNGlQK5RbneE5k!Gdabxa0ghcZ5HC5ubbVRBmBHti2PSYnVlRS2D_Gol2R8HS5tjMiT7zI0eaF7EBO2$
 

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