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The backstory: In 2020, the Chinese government launched a crackdown on several sectors, including the big tech industry. With this, regulators were looking closer into various companies, with some of them getting in trouble for violations ranging from privacy concerns to monopolistic behavior. This had a big impact on China’s big tech sector, causing a combined market value loss of US$1.1 trillion, according to Refinitiv data.
The crackdown even led to the cancellation of Ant Group's highly-anticipated initial public offering (IPO). Ant Group, China's largest fintech company, had planned an IPO worth US$37 billion, which would have been the largest one in history at the time. Also in response to the situation, Alibaba, the parent company of Ant Group and China's biggest e-commerce company, underwent a restructuring process, dividing itself into six different business units.
More recently: The Chinese government has recently been taking steps like urging banks to provide loan relief to developers, with the aim of supporting the property market. President Xi Jinping has also been pushing for a greater opening of the economy, emphasizing foreign cooperation in trade and investment. Basically, it looks like the government is exploring different ways to boost the economy.
Last week, the People's Bank of China (PBOC) put penalties on some Chinese tech companies, including Ant Group, which was fined 7.123 billion yuan (US$984 million), while its subsidiary, Alipay, had to pay 3.06 billion yuan (US$423.7 million). Another tech giant, Tencent's Tenpay, was fined 2.99 billion yuan (US$414 million). But the good news is that these fines signaled that the regulatory crackdown was coming to an end.
The development: On Wednesday, Chinese Premier Li Qiang met with execs from major Chinese tech giants like Alibaba and ByteDance. These meetings suggest that Beijing is moving past the crackdown on the tech industry and toward a period of “normalized management.”
During the meeting, reps from Meituan (the food delivery platform) and Xiaohongshu (sort of like China's own Instagram) also got a chance to speak up. Meanwhile, JD.com and PDD Holdings submitted written speeches. Li stressed the importance of internet firms and referred to them as "trailblazers of the era." He urged local governments to provide more support to these companies and encouraged them to boost the economy with innovation. And to make things easier for those companies, he promised to create a fair business environment and cut down on compliance costs.
"We hope that the majority of platform enterprises will look forward with firm confidence ... continue to promote innovation and breakthroughs, better empower the real economy," said Premier Li Qiang at Wednesday's meeting, according to state media. "Governments at all levels should endeavor to create a fair and competitive market environment and improve policies on investment access.”.
"A sound development of the platform economy is very significant to investors too. Prudent development of platform firms is important to investors' long-term valuation," said Zhou Hao, an economist at Guotai Junan International.
“In building a new development pattern and promoting structural opening up, key areas of foreign exchange and cooperation such as investment, trade and financial innovation should be focused on,” said Chinese President Xi Jinping quoted by CCTV in a meeting earlier this week.