China’s government started a sweeping crackdown on its most powerful tech companies a year ago and is planning to ease off the regulatory clampdown this month. According to a South China Morning Post (SCMP) article, China’s top regulators of internet industries have arranged this week or next week with the country’s big tech giants, including Alibaba, Tencent, Meituan, and ByteDance; and President Xi is expected to attend and chair the event.
Following the SCMP article, many analysts in China and overseas predict the symposium is a signal to give Chinese big techs bigger roles in boosting the country’s slowing economy. This assumption is widely accepted as China’s economy grew by 4.8% in the first quarter of 2022, falling behind the government’s annual goal of 5.5%, according to BBC News. Mark Schaub, a lawyer specializing in foreign investment, said the 4.8% growth rate is consistent with the current situation. The Chinese authorities’ anticipation, however, it has yet to reflect the impact cast by the lockdowns of Shanghai and other cities.
In this case, China has taken several actions, including the reduction of most banks’ reserve requirement ratio by 0.25 percentage points from 25 April. Announced on 27 April, Shenzhen is set to issue 500 million yuan (US$75 million) of consumer coupons to Jingdong and Meituan. Thus, easing off the regulatory storm over tech companies may be the next step to saving the national economy that has been threatened by the pandemic.
Some western publications, such as the Wall Street Journal, say the symposium may be the government’s attempt to account for 1% of the companies’ stock shares instead of speeding up the economy. According to these analysts, China’s government has managed to own 1% of stock shares of some internet companies such as ByteDance and Sina Weibo. With the government acting as an investor and shareholder, the governors can play a role in the coordination of the companies, while tech giants can keep better pace with the changing policies to avoid relevant risks.
Chinese regulators have flipped the script, going from a regulatory firestorm on Big Tech to once again boosting the sector to provide a larger role in boosting China’s slowing economy. However, the speculations seem to put the Chinese authorities in the position of a temperamental regulator who unexpectedly decides to reassure the tech giants within the changeable market.
According to our own analysts at Tech Tech China, the investigations of Big Tech companies regarding the violation of China’s anti-monopoly, national security, and cybersecurity laws have come to an end. Regulators will not want to keep the internet and tech industries at a standstill with endless antitrust probes and other uncertainties. Hence, the symposium, to which only a few tech firms are invited, is more likely to be an opportunity for sincere and direct conversations between the regulators and the companies. In this case, these tech giants can learn how to grow steadily in compliance with the laws in a tougher regulatory environment.
Apart from cooperating with the authorities and regulators during a regulatory crackdown, Chinese tech players must adapt to the upgraded laws and regulations with plans to improve their development in the future. Companies will need to build their comprehensive examination and investigation systems with the help of credit bureau and risk evaluation professionals to better manage the development strategies and ensure a long-term expansion.
Looking forward to the upcoming symposium, China’s tech gold rush that was said to be over may be rebuffed once again with enhanced capacities for developing within a more regulated environment that allows for regeneration and economic growth.