The Chinese government’s regulator crackdown has extended well beyond the confines of Big Tech. The question remains … as to what end. And perhaps: where it all ends.
With marquee names such as Ant Group, Tencent and a host of others, the goals — if that might be the word — seemed, and still seem, hinged on curbing at least some of the social reach of those companies. By tightening antitrust scrutiny on those companies, and by demanding that, for example, that Ant be held to stricter capital requirements, or that Didi be scrutinized over its data-related practices, seems at least an attempt to put guardrails around growth (particularly debt).
We’ve noted in this space, too, that the government has signaled at least some of its intent by taking (for now) small equity stakes in the very companies that it is monitoring more closely.
In recent weeks, we’ve seen the government’s focus widen to include insurance tech platforms, drilling down on marketing and pricing.
And more recently, as reported by CNBC, liquor companies are now feeling the brunt, too, as reports surfaced that the national market regulator has begun meeting with companies within that industry (including the distributors) amid volatile pricing.
The moves, ostensibly, are to protect consumers, to keep them from the vagaries of markets that develop (arguably) too quickly and do not have safeguards in place that cool down speculation. That may be the thinking behind, say, cutting down crypto as a market.
But the inquiries and investigations, the meetings and mandates are nearly doubtlessly going to have a chilling effect on investments, both from abroad and within the country itself. Didi, which went public in June, is now a busted initial public offering (IPO), as investigations came, basically in tandem with its listing. On one hand, the impact on Didi, and the screeching halt to Ant’s own IPO plans late last year signal a disenchantment on the part of the government towards firms’ intentions of listing on overseas exchanges — particularly (and especially) in the U.S.
A Wide Net
Given the broad swath the government is cutting across a variety of verticals, the signals are clear, too, that by reshaping compliance landscapes, the government is sending a message to overseas firms that may want to gain presence in China: The rules by which they’ll have to play are going to be more stringent. If that freezes U.S. companies out, so to speak, the runway becomes just a bit clearer for China’s economy, coming out of the pandemic, to grow through the efforts of home-grown firms in a country where more than a third of GDP is tied to digital activity (as estimated by the China Academy of Information and Communication Technology).
The crackdown may stretch farther and wider — and where the crosshairs will settle next will be anyone’s guess.