The “purge” of Chinese technology giants

China Central Television CCTV reported that earlier this week, in a meeting with the Coordination Committee and Senior Financial Adviser, President Xi Jinping ordered regulators to strengthen monitoring of internet companies, eliminate monopolies, promote fair competition and prevent massive investments. CCTV also reported, Internet companies need to strengthen data security and financial activities need to be monitored according to regulations.

Strong measures

According to Bloomberg, strong assertions from the top leader show that Beijing is preparing a campaign to control the influence of the largest and most powerful private corporations. Among these are Alibaba Group Holding Ltd. by Jack Ma and its subsidiary Ant Group.

Ant Group, “darling” of Jack Ma is in the sights of the Chinese authorities

The term “platform companies” mentioned by Chinese authorities applies to many of the Internet and mobile giants that service hundreds of millions of people in a billion-population country. From ride-hailing giant Didi Chuxing to delivery giant Meituan or leading e-commerce names like JD.com Inc, Pinduoduo Inc. are all known as foundation firms.

“Some foundation companies are developing in non-standardized ways and this poses a risk. There is a need to accelerate the completion of laws to regulate the underlying economy, in order to promptly fill the gaps. and loophole, “CCTV quoted from the meeting.

Previously, the Bloomberg newspaper also reported that the government watchdog was paying attention to Tencent’s financial empire worth more than 100 billion dollars after suspending the IPO and asking Ant Group – the company “pet “Jack Ma’s must be reformed.

As was the case with Ant, it is likely that Tencent will have to comply with a request to set up a financial company to manage banking, insurance, and payment services. These will be two precedents to force other fintech companies to comply with stricter regulations.

Bloomberg reports that such a move will mark a new step in the campaign to curb the influence of technology tycoons after strong measures with Ant Group last year.

After Alibaba, Tencent may be the next tech giant to comply with stricter regulatory policies from Chinese officials.

Tencent lost more than $ 65 billion in value after the news emerged, although its shares recovered slightly on Tuesday.

The fundamentals are dominating the market

Tencent’s WeChat super app now offers almost everything users need from chat to booking and payments. Many companies have voiced Tencent unfair competition in which the prominent is ByteDance.

Earlier this year, ByteDance sued the Shenzhen-based giant for blocking access to content from the Douyin platform – Tik Tok’s twin app in China. Tencent later called out to the accusations as unfounded and malicious.

Chinese officials seem to be concerned that the tech giants’ platforms are taking over a wide range of markets

In the e-commerce sector, the trio of Alibaba, JD.com and Pinduoduo are making up a growing share of Chinese consumer spending. Research firm eMarketer estimates that online sales in the country will surpass 50% of the country’s total retail sales this year. China was the first country in the world to witness the dominance of an online business.

The influence of e-commerce giants has attracted the attention of the anti-dynamic watchdog. The new antitrust regulations are aimed at mandatory monopoly agreements, dumping or algorithms that favor new customers over old customers.

A variety of names that have emerged in recent years are likely to be subject to the scrutiny of the authorities. Typically, the news aggregator Toutiao and Tik Tok Chinese version – Douyin of ByteDance; food delivery platform Meituan with Alibaba rival Ele.me; Didi Chuxing in the ride-hailing segment after acquiring Uber China ‘s business.

The ride-hailing giant Didi is also expected to be subject to closer scrutiny by the regulator

“It wouldn’t be a good thing if you dominate the market right now, especially in fintech and areas essential to everyday life like e-commerce, group buying. The current market has a downside while it appeals to investors in the past, “said Ke Yan, analyst at DZT Research, Singapore.

Mr. Xi Jinping in the meeting on 2 emphasized that the development of China’s economy is at an important stage. The Chinese leader further affirmed that it is necessary to focus on the long-term, handle weaknesses, thereby creating an innovative environment to promote healthy and sustainable development of the underlying economy. Monday’s speech is the first time Xi has specifically mentioned the underlying economy, although he has previously emphasized the importance of abolishing monopolies.

China’s efforts to regulate domestic internet giants coincide with global scrutiny of the industry. Governments from the US, Australia to the European Union have repeatedly taken measures to prevent the monopoly of technology giants like Facebook, Twitter, or Google.